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  • Percorso di Eccellenza in PROJECT MANAGEMENT

    PORTFOLIO APPROACHESPORTFOLIO APPROACHES

    Guido MICHELI & Enrico CAGNO02.2399.405602.2399.4054

    Guido Micheli@PoliMI.itEnrico.Cagno@PoliMI.it

  • 2

    AgendaAgenda

    Date Object Tutorial Examples Teamwork

    Thursday 29/10Morning (4h) Project Procurement

    (focus point)

    Thursday 05/11

    Morning(4h) Portfolio Approaches +Afternoon (4h)

    Tuesday 17/11

    Morning(4h) Supplier Selection +Afternoon (4h) & Vendor Rating

    (hints)

    Wednesday 02/12

    Afternoon (4h) Project Work (follow-up)

    Guido JL Micheli LIUC - Portfolio Approaches

  • Guido JL Micheli LIUC - Portfolio Approaches 3

    Team WorkTeam Work

    + ResultsCommunication &Discussion

  • Guido JL Micheli LIUC - Portfolio Approaches 4

    Focusing available resources by means of Procurement Portfolio Approaches

  • The goalThe goal

    Focusing resources in order to use the most fitting tools/strategies/practices (BSR, Outsourcing, e-Procurement, )

    Guido JL Micheli 5LIUC - Portfolio Approaches

  • Focusing resourcesFocusing resources

    Focusing resources First: spending analysis (PARETO)

    Guido JL Micheli 6LIUC - Portfolio Approaches

    Low value what about risk?

    Val

    ue p

    er C

    lass

    Cum

    mulative %

    0%

    20%

    40%

    60%

    80%

    100%

    120%

    0

    100.000

    200.000

    300.000

    400.000

    500.000

    600.000

    700.000

    Total Value Accum Value

  • Focusing resources Overall TeamworkFocusing resources Overall Teamwork

    TeamworkGroups of 4/5 people ABC classification Items vs. classes of items Comments

    Guido JL Micheli 7LIUC - Portfolio Approaches

  • Earliest portfolio approachesEarliest portfolio approaches

    Earliest portfolio approaches Kraljic Matrix is the most common approach and it represents

    one of the first attempts at focusing the available resources on the actually demanding items.

    Key issues: Procurement must be considered as strategic Items to be procured have different levels of criticality (e.g.:

    screw vs. bridge crane) Resources (manpower - first of all -, time, money) are never

    enough thus it is vital to use them in the best way!

    Guido JL Micheli 8LIUC - Portfolio Approaches

  • KraljicKraljic

    The dimensions The dimensions identified by Kraljic to classify an item are:

    Importance for purchasing Purchase volume Added value

    Supply market complexity Descriptive complexity Specificity Supply market concentration Suppliers bargaining power

    Other Purchase Frequency (-) Environmental (-) / legal constraints (+) Level of innovation (+) Internal complexity (+)

    Is this description exhaustive?

    Guido JL Micheli 9LIUC - Portfolio Approaches

  • Kraljic - TeamworkKraljic - Teamwork

    Teamwork:Same groups of 4/5 people

    Each group must evaluate 36 practices (9 practices times 4 types) Green: very useful or recommended Yellow: modest impact, sometimes applicable Red: useless, not applicable or even dangerous (avoid)

    Comments

    30 minutes

    Discussion

    Guido JL Micheli 10LIUC - Portfolio Approaches

  • Bottleneck

    Parts standardizationRisk/Benefits sharing

    Supply base enlargement / Global sourcingVolumes consolidation

    Stressed NegotiationSuppliers development

    Partnership and collaborationLife cycle cost

    Multiple and Parallel sourcing

    Strategic

    Parts standardizationRisk/Benefits sharing

    Supply base enlargement / Global sourcingVolumes consolidation

    Stressed NegotiationSuppliers development

    Partnership and collaborationLife cycle cost

    Multiple and Parallel sourcing

    Non critical

    Parts standardizationRisk/Benefits sharing

    Supply base enlargement / Global sourcingVolumes consolidation

    Stressed NegotiationSuppliers development

    Partnership and collaborationLife cycle cost

    Multiple and Parallel sourcing

    Leverage

    Parts standardizationRisk/Benefits sharing

    Supply base enlargement / Global sourcingVolumes consolidation

    Stressed NegotiationSuppliers development

    Partnership and collaborationLife cycle cost

    Multiple and Parallel sourcing

    Importance for Purchasing

    Supp

    ly M

    arke

    t Com

    plex

    ity

    Low High

    Low

    High

    Kraljic - TeamworkKraljic - Teamwork

    Guido JL Micheli 11LIUC - Portfolio Approaches

  • Project-specific portfolio approachesProject-specific portfolio approaches

    A Project Procurement perspective

    PROCUREMENT

    PROCUREMENT MANAGEMENT (& SRM)

    MARKETINTERNAL

    SKILLS AND CAPABILITIES

    ITEM TO BE PROCURED

    ITEM PROCURED

    SS VR

    TIME-WINDOW

    Guido JL Micheli 12LIUC - Portfolio Approaches

  • A Project-specific portfolio approach: further dimensions A more exhaustive description includes several dimensions:

    Time availability. Nowadays completion time is getting shorter and shorter. It is necessary to distinguish the items that have to be procured in a hurry from those that dont have to be. This is a particularly important dimension when working for a project.

    Projects duration: from 36 to 24 monthsProcurement: critical items acquisition start BEFORE the

    project itself!!!!

    Project-specific portfolio approachesProject-specific portfolio approaches

    Reliability of the Supplier Critical path of the projectLong lead time acquisitions

    Guido JL Micheli 13LIUC - Portfolio Approaches

  • A Project-specific portfolio approach: further dimensions A more exhaustive description includes several dimensions:

    Quality request. This dimension concerns the required performances of the item to be purchased.

    Quality is a QUALIFIER!

    Plant performance

    Commissioning OK

    Project Success (ON TIME!!!!!)

    Project-specific portfolio approachesProject-specific portfolio approaches

    Guido JL Micheli 14LIUC - Portfolio Approaches

  • A Project-specific portfolio approach: further dimensions A more exhaustive description includes several dimensions:

    Reference level. It is about the obligation to select the suppliers within a number provided by the customer.

    Typical of the EPC: Emergent Countries National Governments as clients (Middle/Far-East)?

    Project-specific portfolio approachesProject-specific portfolio approaches

    Guido JL Micheli 15LIUC - Portfolio Approaches

  • A Project-specific portfolio approach A scheme of the model

    Project-specific portfolio approachesProject-specific portfolio approaches

    StrategicClassification

    Internal Criticality

    Value importance

    - Time availability- Quality request

    Market

    - Number of suppliers - Reference level

    Kinds of productsFirms Strategy

    TOTAL CRITICALITY

    Guido JL Micheli 16LIUC - Portfolio Approaches

  • A Project-specific portfolio approach A zoom on the evaluation of the total criticality

    Project-specific portfolio approachesProject-specific portfolio approaches

    HIGH VALUEMEDIUM CRITICALITY

    HVMC

    HIGH VALUEHIGH CRITICALITY

    HVHC

    LOW VALUELOW CRITICALITY

    LVLC

    LOW VALUEHIGH CRITICALITY

    LVHC

    Internal Criticality

    Valu

    e im

    port

    anceHIGH VALUE

    LOW CRITICALITYHVLC

    LOW VALUEMEDIUM CRITICALITY

    LVMC

    Guido JL Micheli 17LIUC - Portfolio Approaches

  • A Project-specific portfolio approach The outcome is a set of n extended matrix, where n depends on

    the number of kinds of products. For every kind of products, the matrix can be depicted in the following way:

    Project-specific portfolio approachesProject-specific portfolio approaches

    LVLC HVLC LVMC HVMC LVHC HVHC

    TOTAL CRITICALITY

    MA

    RK

    ETC

    OM

    PET

    ITIV

    E

    M

    ON

    OPO

    LY

    std.

    non

    std

    .

    s

    td.

    n

    on s

    td.

    Guido JL Micheli 18LIUC - Portfolio Approaches

  • Supply Strategies and ToolsSupply Strategies and Tools

    The use of a Project-specific portfolio approach The outcome of the innovative model (a set of n extended matrix,

    where n depends on the number of kinds of products) allows to identify the best strategies and tools for each item to be procured. Particularly:

    Buyer-Supplier Relationships Outsourcing of one or more phases of the procurement process E-Procurement tools

    (Supplier Selection, Expediting, VR policies, )

    Guido JL Micheli 19LIUC - Portfolio Approaches

  • Supply Strategies and ToolsSupply Strategies and Tools

    The use of a Project-specific portfolio approach A scheme

    LVLC HVLC LVMC HVMC LVHC HVHC

    TOTAL CRITICALITY

    MA

    RK

    ETC

    OM

    PET

    ITIV

    E

    M

    ON

    OPO

    LY

    std.

    non

    std

    .

    s

    td.

    n

    on s

    td.

    Buyer-Supplier Relationships

    Outsourcing

    E-Procurement tools

    Guido JL Micheli 20LIUC - Portfolio Approaches

  • Supply Strategies and ToolsSupply Strategies and Tools

    The use of a Project-specific portfolio approach Buyer-Supplier Relationships

    Medium-term Relationships (agreements)

    Partnership

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