Transcript The Supply Management Handbook: Chapters 3 and 4

Procurement Service Provider
and Supply Chain Management
Training:
-Lesson 3: Innovation and Opportunity
-Lesson 4: The Three-to-Five Year Outlook
Source One Management Services, LLC
724 Fitzwatertown Road
Willow Grove, PA 19090
(215)-902-0200
www.sourceoneinc.com
Lesson 3 Introduction


A 1 percent reduction in the cost of purchased
materials is equivalent to a 12 to 18 percent rise
in sales growth
Several reasons why that reduction is possible

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New and better technology
More companies and countries from which to source
(globalization)
Increasingly sophisticated approaches to managing the
supply management function (Procurement Service
Providers such as Source One Management Services, LLC
for example)
Maturing and Scaling of
Procurement Technology

Procurement
Technologies can:
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Help curtail rogue spending
Work efficiently with wider
range of suppliers
Simplify the sourcing
process
Help actively manage total
costs
Free E-Commerce tools such as
www.WhyAbe.com provide Reverse
Auctions, RFx, and Supplier
Management
E-Sourcing Capabilities
Becoming more sophisticated and popular
 Have become more integral to eprocurement initiatives
 Specialized capabilities are evolving:

Facilitating easier interaction concerning
contract language
 Evaluating numerous variables on a large
scale

PLM and RFID Systems

RFID (Radio Frequency Identification
Systems)

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Provides real-time defective product data,
improves item tracking, aids suppliermanaged inventory processes
PLM (Product Life Cycle Management
Systems)

Manipulates the relationship between the
product life cycle and cost reduction
opportunity
Global Sourcing and Supply Management
Three major recent developments
in the evolution of global
sourcing:

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More companies pursuing
global supply base
Increase in number of
countries viewed as sourcing
candidates
Increase in quantity and
variety of available products
Why Alternate Supply Sources?
Worker Education
 Size of Domestic and Export Market
 Market Liberalization

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China’s admission into the WTO has assured
commitments to reduce high tariffs
Abundance of low-wage labor available

China’s average hourly manufacturing wage
is 60 cents an hour with a able workforce of
941 million
Global Sourcing Challenges
Identifying and establishing new supplier
relationships
 Less advanced IT systems and
information sharing
 More research and due diligence must be
done on overseas suppliers
 Incorporating local business culture into
negotiation strategy

Approaches to Global Sourcing
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
International Supply
Management Office
Local Joint Ventures


Work with in-country
enterprise to establish
presence
Trading Agent

“sourcing brokers”
Procurement Outsourcing

Cost reductions of 5 to 18
percent can result from an
organization’s ability to:
1.
2.
3.
4.
5.
6.
Drive contract compliance
Source effectively
Connect with a larger
supplier base
Operate more efficiently
Address complex services
spend
Leverage technology more
effectively
Procurement Service
Providers, such as
www.SourceOneInc.com
can supplement internal
procurement departments
without risk.
Government Sourcing Practices

Practice Cost Avoidance


Know the Market

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Manifest trust of the end users in the system
Improve Supplier Management


Cut through the Red Tape
Build Confidence in Strategic Supply Management


Be knowledgeable about what you’re sourcing
Overcome Legislative Burdens


Identify rogue spending and eliminate unnecessary cost adders
Monitor supplier performance and adherence to contract terms
Leverage Purchasing Power

NYCDOE as example of consolidating smaller spends to leverage
pricing with suppliers
Financial Services Practices

Optimize Sourcing
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Rebuild the Procure-to-Pay Model
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i.e. Legal fees, advertising, market research
Maximize Compliance

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Streamline processes
Increase Use of Electronic Tools
Apply Best Practices to Overlooked Spend Categories
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
Make intelligent and informed sourcing decisions
To realize optimum cost reduction and efficiency
Develop Shared Services Programs
Outsource Supply Management Functions

Complex strategies make outsourcing an attractive option
Chapter 4 Introduction

The Three-to-Five Year Outlook
CEO expectations for supply management
 CPO expectations for supply management
 How do we reach these goals?

CEO Expectations

Cost and Price Focus


Brand Focus

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Systems and software can only go so far
Global Commerce Dominates Competition


More than just the bottom line
How do we get our name out?
Technology Stagnation


Take advantage of opportunities and strive for 100% compliance
with initiatives
Forward-thinking companies will have an edge
Mass Industry Consolidation

More takeovers and buyouts
Critical Supply Management
Questions
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What business are we in?
What are the ways to go
to market?
What are the business
models we could use?
What supply chains make
sense in the given
business model
How can I synthesize
existing supply chains?
What next best practices
should we create for
competitive advantage?
Risk Management in Supply


Risk assessment and
management is
becoming
increasingly important
Shift in focus from
mitigation to
optimization

How can we use risk
analysis to our
advantage?
How Do We Prioritize Supply
Management?

Reach


Measurement


Make sure you’re getting the most out of suppliers while
remaining attuned to the market
Global Business


Think outside the box
Extracting Value


How well do you perform against your competitors?
Innovation


Build a better business case for supply management
Think worldwide to optimize sourcing practices
Diversity

Expand the horizons of your supply base
Types of Supply Chain Executives
Entrepreneurs
 Strategic Thinkers
 Results-Drivers
 Recruiters

Entrepreneurs
Broad thinkers
 Long-term focus on profitability and cost
management
 Business acumen and financial knowledge

Strategic Thinkers
Strong communication skills
 Knows when to develop new relationships
and rekindle old ones

Results-Drivers
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Defines, predicts,
measures, and tracks
benefits of supply
management
Markets and sells supply
management
Focuses on continuous
improvement
Possesses market
intelligence skills
Recruiters
Measures performance to recognize key
people
 Can identify right skills for any given
position
 Rotates team members to gather crossfunctional experience
 Brings out the best in others

In Closing…
Supply Management in the next 3-5 years
will focus on:
Creating value for customers
 Eliminating waste in processes
 Better defining connections between
processes, customers, and suppliers
 Working more collaboratively with suppliers

Resources for These Lessons:
Lesson 3: Innovation and Opportunity
Lesson 4: The Three-to-Five Year Outlook
The
Supply Management Handbook:
Seventh Edition: McGraw-Hill
Source
One Management Services, LLC
www.sourceoneinc.com