Transcript Slide 1

PMAP –
Purchasing Management
Association of Philadelphia
Tuesday
December 18, 2007
- Tuesday
Dinner Presentation
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The Buyer of the Future –
What Skills Will You Need?
Who Do You Gotta Be?
What Do You Need To Know?
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Presenter:
Marilyn Gettinger, C.P.M.
 New Directions Consulting Group
 908-709-0656
 [email protected]
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Topics For Tonight
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1. The Business World
2. Before Materials Management
3. Materials Management
4. On Our Way To Today
5. Supply Management
6. Supply Chain Management
7. The Global Supply Chain
8. The Organization of the Future
9. Knowledge and Skills
10. What Do We Need to Know, What Do We Need
To Do, What’s It Going to Take?
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A Little Background Music
The Business World Today?
 Global Challenges and Impacts?
 Our Competitive Environment?
 Drivers of Better, Faster,
Cheaper?
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Our Business World
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Global
Wide generational
spread
Continuous change
Greening of the
organization
Sustainability
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Social Responsibility
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Dow Jones
ISO 26000
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Regulatory demands
Lack of qualified staff
Greater risk
possibilities
Customer base
Supplier integration
Leadership
Innovation and
creativity
Outsourcing
Continual cost
reduction
opportunities
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Before Materials Management
CEO
Purchasing
Inventory
Transportation Warehousing
Production
Planning
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Before Materials Management
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Lack of communication between materials areas
Excess inventory
Functional focus
Duplication/redundancy
Conflicting goals
Lack of clear understanding of the impact of one
function on another
Competition for approval from CEO
Focus on what was best for the
function/department not the organization or the
smooth flow of materials or the ultimate customer
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Materials Management
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1. An integrated
 2. Functions
approach to
involved in the
managing materials
managing of
and the people and
materials are
resources that
integrated under
support the
one manager.
efficient use of
 Materials Manager
materials
 VP of Materials
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Materials Management
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3. Functions integrated
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Purchasing
Inventory Control and
Management
Transportation
Customer Service
Forecasting
Production Planning
and Control
Warehousing
including
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Receiving
Shipping
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4. All decisions
made based on
trade-offs
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Those decisions
that were best for
the organization
and the lowest
ultimate cost of
managing
materials
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Materials Management
CEO
FINANCE
Transportation
MARKETING
Purchasing
MATERIALS
MANAGEMENT
Production
Planning
Scheduling
QUALITY
Customer
Service
Inventory
SALES
Warehousing
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Materials Management
Reduction in inventory
 Improved communication
 Better decisions
 More focus on the management of
materials
 Reduced costs of production
 Positive impact on the bottom line
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Materials Management
Focus on managing materials at the
lowest ultimate cost
 Not yet end-customer focused
 Not integrated into other non-material
functions
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Materials Management
Focus on managing materials at the
lowest ultimate cost
 Not yet end-customer focused
 Not integrated into other non-material
functions
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On Our Way To Today
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Stockless Purchasing
 P-Cards
 VMI
 Consignment
 Group purchasing arrangements
 Contractual language
 E-Commerce
 Internal relationships
 Strategic sourcing
 Optimizing the supply base
 Tactical to strategic thinking
 Quality emphasis
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Supply Management
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The forecasting, planning, sourcing,
acquisition, storing, managing, and
disposing of materials used or for potential
use to support the organization’s
production, distribution, and customer
service.
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Institute For Supply Management (ISM)
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Formerly the National Association of Purchasing
Management (NAPM)
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Supply Chain Management
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The supply chain is a series of
organizations that jointly create value for
ultimate customers.
 Supply chain management is the proactive
management of supply chain links that are
critical to an organization’s operations.
 A systems approach to managing flows of
information, materials, and services from
raw materials suppliers through factories
and warehouses to the end-customer.
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The Internal Supply Chain
R&D
Engineering
Purchasing
Transportation
Finance
A cross-functional team focusing on the design,
implementation, and management of a series of
activities that provide the ultimate customer with what
they want.
The design and management of seamless, value-added
processes across departmental boundaries to meet the
real needs of the end customer.
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Moving Downstream
Customer
Marketing
Customer
Finance
The
Internal
Supply Chain
Ultimate
Customer
Customer
Production Distribution Customer
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Moving Upstream
Tier 3
Tier 3
Tier 3
Tier 2
Tier 2
Tier 3
Tier
1
SCM
Team
Tier 2
Tier 3
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The Total Global Supply Chain
Upstream partners Enterprise
partners
Downstream
The entire supply chain from cradle to grave including
returns management, transportation providers, and other
types of providers.
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Supply Chain Management
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SCM encompasses
all activities
associated with the
flow and
transformation of
goods from the raw
materials stage
through to end
users, as well as
the associated
information flows
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The networks, or
chains of suppliers,
producers, and
customers involved
in producing and
marketing
particular products.
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Supply Chain Objectives
Reduce or share risks
 Improve performance
 Reduce cycle time
 Reduce costs
 Improve customer service/satisfaction
 Generate new income
 Increase profits
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Supply Chain Management
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Includes systems management,
operations and assembly, purchasing,
production scheduling, order
processing, inventory management,
transportation, warehousing, and
customer service.
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AT EVERY TIER OF THE SUPPLY CHAIN
Supply Tiers
Internally
Customer Tiers
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Supply Chain Management
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Identify the processes necessary to meet
customer expectations
 Engineer SCM processes as the core of the
business
 Move from a silo to a team philosophy
 Integrate internal processes
 Define metrics
 Operate the internal supply chain
 Measure performance
 Integrate the internal supply chain with the supply
chains of other organizations
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The Global Supply Chain
Expands to include upstream
suppliers anywhere in the world
 Expands to include downstream
customers anywhere in the world
 Expands to an internal supply chain
that may produce in global sites
owned by the organization
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The Global Supply Chain
France
Raw Materials
China
Korea
Raw Materials
Canada
Transportation
United
States
Mexico
Brazil
Seamless, value-added
processes across
organizational /country
boundaries
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Global Sourcing
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The ability of an organization
anywhere in the world
To purchase materials anywhere in the
world
 To produce anywhere in the world
 To transport materials anywhere in the
world
 To store anywhere in the world
 To sell anywhere in the world
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Portfolio Management
An organization’s analysis and cost
structure for buying, producing,
transporting, storing, and selling their
products at various locations
including transportation costs
 A cost matrix implemented and
maintained so that decisions can
easily be made on how best to
manage the entire physical chain of
products in the face of potential or
real risk disruptions
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The Supply Chain Language
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Core competencies
Stakeholders
Enterprise
Downstream and upstream channel
members
Best tiering
Best shoring
Tier management
Off shoring
Low cost country sourcing
The bullwhip effect
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The Organization of the Future
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20th Century
 Stability and
predictability
 Size and scale
 Command and control
 Rigidity
 Rules and hierarchy
 Guarded information
 Vertical integration
 Domestic market
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21st Century
 Continuous
improvement
 Speed and
responsiveness
 Leadership for everyone
 Virtual organizations
 Information sharing
 Creativity and intuition
 Proactive
 Interdependence
 Collaborative advantage
 International focus
 Business models
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The New Rules
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1. Don’t play by the dominant rules of your
industry.
2. Get innovative or get dead.
3. Reexamine your organization for hidden
strategic assets, then leverage the heck out
of them.
4. Create a bias for speed and action in
your company.
5. Be proactive and experimental.
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The New Rules
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6. Break barriers.
7. Use all of your people, all of their skills, all of the
time.
8. Globalize your perspective and knowledge base.
9. Admit that the eco-industrial revolution is well
and truly upon us.
10. Turn organizational learning into a corporate
religion.
11. Develop strategic performance measurement
tools.
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From: The Eleven Commandments of 21st Century
Management
Matthew J. Kiernan
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Knowledge and Skills
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Materials Management
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All of the functions in the MM
area
Communication and conflict
management
Relationship management
Project management
Tactical manager
Strategic thinker
Human relations
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Supply Chain Professional
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Collaborative mindset
Team orientation
Facilitation of teams
Manager of diverse
relationships
Subject expert
Financial understanding
Risk manager
Trade-off manager
Global expert
Change management
End-to-end thinking
Total cost perspective
Revenue generator
Profit generator
Cultural expert
Technology understanding
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The Buyer of the Future
Cost
Managers
Relationship
Managers
Asset
Managers
Profit
Managers/
Generators
Risk
Managers
Revenue
Managers
Generators
Tradeoff
Managers
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The Supply Chain Professional
The Buyer of the Future
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Walking up and down the
organization’s internal and external
supply chains
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An understanding of how it all works
 Value to all relationships
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Supplier Relationship
Management
Moving from arms’ length to
partnerships, alliances, and
collaborations
 This includes divisions
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Customer Relationship
Management
Customer segmentation
 What do they need and want?
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Alignment
Successful global supply chains align
with business/organizational
strategies.
 Global supply chains are successful if
the cross-functional supply chain
team understands the mission, goals,
objectives, and challenges of the
organization.
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Global Supply Chain Analysis
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True internal costs
Total Landed Costs
 Unit Price
 +Inland transportation
 +Port fees
 +Export licensing
 +Export documentation
 +Maritime insurance
 +ocean/Air freight costs
 +Container screening
 +C-TPAT
 +Inspection
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+Customs duties
+Customs document
review
+Bonded warehousing
+Harbor fees
+Import documentation
+Customs Broker fees
+Port fees
+Import licensing
+Letters of Credit
+Special packaging
+Inland transportation
+Pipeline inventory
+Communication
+Travel
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Global Supply Chain Analysis
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Country Study Template
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Government
Infrastructure
Potential employee base
Laws and regulations
Raw materials
Transportation capabilities
Business culture
Country culture
Unions and other employment practices
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Emerging Markets
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Countries that are potential sources
of materials and outsourcing
opportunities
Viet Nam
 Latin America
 Cambodia
 Easter block nations
 Malaysia
 Scotland
 Ireland
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The Successful
Global Supply Chain
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All stakeholders are focused on the ultimate customer.
On-demand, real-time data as to exactly what is happening
anywhere in the supply chain available to all stakeholders
Total trust between channel members
A supply chain that produces just what and how much is needed,
when it is needed, and where it is needed
Metrics that align with business and supply chain priorities
Strategies are put before technology.
Risk management portfolio for the entire supply chain
Collaborative internal, supplier, and customer relationships
Flexibility built into the supply chain.
Inventory in the right format at the right location in the supply chain
An end-to-end focus by all channel members
A cross-functional supply chain mindset
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The Successful
Global Supply Chain - Adaptive
Pattern Recognition
Demand pattern
Supply bases
Technology cycle
Product life cycle
Preparedness
Market entrance capability
Supply network development
Product design flexibility
Look-ahead planning
Supply Chain Structure
Supply and manufacturing bases
Outsourcing relationships
Distribution channels
New markets and customers
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The Successful
Global Supply Chain - Agile
Information
Integration
Supplier
Integration
Efficient
Logistics
Responsiveness to uncertain demands,
Robust to unexpected external
disruptions
Design for
Postponement
Inventory/capacity
buffering
Contingency
planning
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The Successful
Global Supply Chain - Aligned
Dimension
Exchanges
Objectives
Information
alignment
Information
knowledge
Common
shared
Identity
alignment
Role, work,
Efficiency and
responsibility flexibility
Incentive
alignment
Accountability Equitable and
risks/
Overall
performance
cost/gains
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The Unsuccessful
Supply Chain
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Lack of understanding at all levels
Lack of senior management buy-in
Silo mentality
Too many measurements and focus on the
wrong measurements
Lack of alignment between business,
supply chain, and internal functions
Inventory held at every tier
Transactional activities
Lack of tier management
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Steps in Getting There
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1. The existing
organizational culture
2. Level of trust at all
levels and with
suppliers/customers
3. A change
management process
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Introduction of trust
A supply chain
awareness training
Steps in undoing
wrongs from the past
A champion for
change
A strategy for moving
the masses to supply
chain thinking
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Getting a Little Help
From Other Concepts
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Lean Thinking
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Value
Value stream
Value stream
mapping
Flow the value
stream
From push to pull
Continuous
Improvement
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Six Sigma
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A particular goal
of reducing
defects to near
zero
3.4 errors in a
million tries
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Six Sigma
Genuine focus on the customer
 Data and fact-driven management
 Process focus, management, and
improvement
 Proactive management
 Boundary-less collaboration
 Drive for perfection, tolerate failure
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The Principles of
Global Supply Chain Management
Risk Connectivity
Scalability identification
Leverage Collaboration
Visibility
Inventory
Supply Synchronization
Management
Knowledge
Management
Technology
Event
Risk
Management
Management
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The Principles of
Global Supply Chain Management
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Visibility
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The ability to see
activities throughout
the supply chain
virtually or nearvirtually
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Internet
Supply chain
software
Full integration of all
legacy and new
software programs
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Collaboration
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An integration of
planning and decision
making across
organizational
boundaries
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All stakeholders
understand their
roles in the supply
chain, business
processes,
expectations
Everyone is focused
on serving the
ultimate customer
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The Principles of
Global Supply Chain Management
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Connectivity
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Strategic, tactical,
and operational
connections
between all supply
chain
organizations
through open
communication,
technology, and
architecture of the
supply chains
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Scalability
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The ability to
develop a set of
supply chain
business
processes that
can be duplicated
with additional
customers and
third-party
relationships
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The Principles of
Global Supply Chain Management
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Leverage
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Core competency
focus
Leverage the core
competencies of
other organizations
Core customer focus
Customer
relationship
management
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Technology
 Customer relationship
management
 Supplier relationship
management
 ERP
 Demand/Supply
 RFID
 E-procurement
 Warehouse
management
 Collaborative software
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Sales and Operating
Collaborative Planning
Forecasting and
Replenishment
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The Principles of
Global Supply Chain Management
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Supply base
management
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A documented total
supplier program
Selection criteria
 Evaluation
 Management
 Development
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Revisions of criteria
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Security
Long-term growth
Electronic expansion
Revisions of
evaluation criteria
Performance
management
Tier sourcing
Tier management
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The Principles of
Global Supply Chain Management
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Synchronization
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Theory of constraints – the slowest link in
the supply chain will impact all other links
All links should produce exactly what is
needed at every level, at the right time, at
the right place, at the right volume, etc.
No inventory build-up anywhere in the supply
chain
Supply Chain Links
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The Principles of
Global Supply Chain Management
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Information/Knowledge Management
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What information is needed?
How will the organization get that information?
How will the organization get that information
virtually?
What systems and processes are in place to
move that information within the supply chain
quickly?
How quickly can the supply chain act on the
information
Product Information
Customer information
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Material Expert
Titanium Dioxide
 Soy oil
 Weather
 Viral outbreaks
 Cost of goods
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The Principles of
Global Supply Chain Management
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Risk Identification
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Internal
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Disruptions of internal operations
Business risks
Planning and control risks
Mitigation and contingency risks
External
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Demand
Supply
Environment
Business
Physical plant
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The Principles of
Global Supply Chain Management
1. Profile supply base
Identify each raw material or component
Identify strategic materials
Understand supplier’s organization
2. Assess vulnerability
Supply risks
Demand risks
Environmental risks
Process and plant risks
Business risks
 3. Evaluate implications
 4. Identify mitigation and contingency actions
 5. Complete cost/benefit analysis
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The Principles of
Global Supply Chain Management
Business Continuity Planning
Prevention
Awareness
Internal
External
Remediation
Plan
Measure
Identification
Impact
Assessment
Duration
Resources
Treatment
Execution
Monitoring
Knowledge
Management
Track results
Things gone wrong
Things gone right
Future Action list
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The Principles of
Global Supply Chain Management
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Portfolio Design
Multiple supply sources
 Multiple manufacturing locations
 Transportation modes
 Transportation channels
 Special conditions
 Costs for each possible source
 Create various supply chain scenarios
 System will provide total cost per
example
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The Principles of
Global Supply Chain Management
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Inventory Considerations
Postponement
 Reduction of inventory at every level of
the supply chain
 Forms of inventory
 Location of inventory within the supply
chain
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The Principles of
Global Supply Chain Management
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Event Management
 A supply chain event
 Any individual outcome or nonoutcome of a supply chain cycle,
 (sub) process, activity, or task
 Supply chain event management
 The application of statistical process
and technology identification and
control solutions to standard and nonstandard supply chain events
 Event category
 A logical grouping of supply chain
events
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The Hierarchy of the
Global Supply Chain Evolution
Full Network
connectivity
Total
Business System
Value Chain
Collaboration
External
Inter-Enterprise
Intra-Enterprise
Functional
Process Unit
Partner
Collaboration
Corporate
Excellence
Enterprise
Integration
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The State of the Union
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Impact of supply chain
management on cost
savings and revenue
improvement
 Up to 20%
Supply chain evolution in
various industries
Inter-enterprise
collaboration
Alignment of business
strategies and supply chain
strategy
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Challenges
 Software as the cure-all
 Customer satisfaction
and supply chain
competency
 Understanding
relationships between
business and
technology
 Importing/exporting
 Teamwork
 Vulnerability reviews
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Potential disruptions
International freight
movement
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Future Expectations
At the third level or higher on the
hierarchy model
 One to three points of new profit for a
typical three-year supply chain effort
 – longer initiatives the points increase
to five to eight
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The State of the Union
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Strategic sourcing
of direct materials
 Sales and
operations
planning
 Strategic sourcing
of indirect
materials
 Strategic inventory
planning
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Advanced planning
and scheduling
 Senior
management
commitment
 Metrics aligned to
supply chain
outcomes
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“It’s not enough to be busy…
the question is:
What are we busy about?”
Henry David Thoreau
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Now It’s Your Turn
What three new ideas did you gain
from this presentation that you want
to find out more about?
 What steps could you take to
implement some of these ideas?
 What do you want more information
on?
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Thank you
908-709-0656
 [email protected]
 For additional questions and answers
 New Directions Consulting Group

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