supply chain lesson 3 4
TRANSCRIPT
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Procurement Service ProviderProcurement Service Providerand Supply Chain Managementand Supply Chain Management
Training:Training:--Lesson 3: Innovation and OpportunityLesson 3: Innovation and Opportunity--Lesson 4: The ThreeLesson 4: The Three--toto--Five Year OutlookFive Year Outlook
Source One Management Services, LLCSource One Management Services, LLC
724 Fitzwatertown Road724 Fitzwatertown Road
Willow Grove, PA 19090Willow Grove, PA 19090
(215)(215)--902902--02000200
www.sourceoneinc.comwww.sourceoneinc.com
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Lesson 3 IntroductionLesson 3 Introduction
A 1 percent reduction in the cost of purchasedA 1 percent reduction in the cost of purchased
materials is equivalent to a 12 to 18 percent risematerials is equivalent to a 12 to 18 percent rise
in sales growthin sales growth
Several reasons why that reduction is possibleSeveral reasons why that reduction is possible New and better technologyNew and better technology
More companies and countries from which to sourceMore companies and countries from which to source
(globalization)(globalization)
Increasingly sophisticated approaches to managing theIncreasingly sophisticated approaches to managing thesupply management function (Procurement Servicesupply management function (Procurement Service
Providers such as Source One Management Services, LLCProviders such as Source One Management Services, LLC
for example)for example)
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Maturing and Scaling ofMaturing and Scaling of
Procurement TechnologyProcurement Technology ProcurementProcurement
Technologies can:Technologies can:
Help curtail rogue spendingHelp curtail rogue spending
Work efficiently with widerWork efficiently with widerrange of suppliersrange of suppliers
Simplify the sourcingSimplify the sourcing
processprocess
Help actively manage totalHelp actively manage total
costscosts
Free E-Commerce tools such as
www.WhyAbe.comprovide Reverse
Auctions, RFx, and SupplierManagement
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EE--Sourcing CapabilitiesSourcing Capabilities
Becoming more sophisticated and popularBecoming more sophisticated and popular
Have become more integral to eHave become more integral to e--
procurement initiativesprocurement initiatives Specialized capabilities are evolving:Specialized capabilities are evolving:
Facilitating easier interaction concerningFacilitating easier interaction concerning
contract languagecontract language
Evaluating numerous variables on a largeEvaluating numerous variables on a large
scalescale
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PLM and RFID SystemsPLM and RFID Systems
RFID (Radio Frequency IdentificationRFID (Radio Frequency IdentificationSystems)Systems)
Provides realProvides real--time defective product data,time defective product data,
improves item tracking, aids supplierimproves item tracking, aids supplier--managed inventory processesmanaged inventory processes
PLM (Product Life Cycle ManagementPLM (Product Life Cycle ManagementSystems)Systems)
Manipulates the relationship between theManipulates the relationship between theproduct life cycle and cost reductionproduct life cycle and cost reductionopportunityopportunity
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Global Sourcing and Supply ManagementGlobal Sourcing and Supply Management
Three major recent developmentsThree major recent developments
in the evolution of globalin the evolution of global
sourcing:sourcing:
More companies pursuingMore companies pursuingglobal supply baseglobal supply base
Increase in number ofIncrease in number of
countries viewed as sourcingcountries viewed as sourcing
candidatescandidates
Increase in quantity andIncrease in quantity andvariety of available productsvariety of available products
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Why Alternate Supply Sources?Why Alternate Supply Sources?
WorkerEducationWorkerEducation
Size of Domestic and Export MarketSize of Domestic and Export Market
Market LiberalizationMarket Liberalization Chinas admission into the WTO has assuredChinas admission into the WTO has assured
commitments to reduce high tariffscommitments to reduce high tariffs
Abundance of lowAbundance of low--wage labor availablewage labor available
Chinas average hourly manufacturing wageChinas average hourly manufacturing wageis 60 cents an hour with a able workforce ofis 60 cents an hour with a able workforce of941 million941 million
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Global Sourcing ChallengesGlobal Sourcing Challenges
Identifying and establishing new supplierIdentifying and establishing new supplier
relationshipsrelationships
Less advanced IT systems andLess advanced IT systems andinformation sharinginformation sharing
More research and due diligence must beMore research and due diligence must be
done on overseas suppliersdone on overseas suppliers
Incorporating local business culture intoIncorporating local business culture into
negotiation strategynegotiation strategy
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Approaches to Global SourcingApproaches to Global Sourcing
International SupplyInternational Supply
Management OfficeManagement Office
Local Joint VenturesLocal Joint Ventures
Work with inWork with in--countrycountry
enterprise to establishenterprise to establish
presencepresence
Trading AgentTrading Agent
sourcing brokerssourcing brokers
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Procurement OutsourcingProcurement Outsourcing
Cost reductions of 5 to 18Cost reductions of 5 to 18
percent can result from anpercent can result from an
organizations ability to:organizations ability to:
1.1. Drive contract complianceDrive contract compliance
2.2. Source effectivelySource effectively3.3. Connect with a largerConnect with a larger
supplier basesupplier base
4.4. Operate more efficientlyOperate more efficiently
5.5. Address complex servicesAddress complex services
spendspend
6.6. Leverage technology moreLeverage technology more
effectivelyeffectively
Procurement ServiceProviders, such as
www.SourceOneInc.com
can supplement internal
procurement departments
without risk.
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Government Sourcing PracticesGovernment Sourcing Practices
Practice Cost AvoidancePractice Cost Avoidance
Identify rogue spending and eliminate unnecessary cost addersIdentify rogue spending and eliminate unnecessary cost adders
Know the MarketKnow the Market
Be knowledgeable about what youre sourcingBe knowledgeable about what youre sourcing
Overcome Legislative BurdensOvercome Legislative Burdens
Cut through the Red TapeCut through the Red Tape
Build Confidence in Strategic Supply ManagementBuild Confidence in Strategic Supply Management
Manifest trust of the end users in the systemManifest trust of the end users in the system
Improve Supplier ManagementImprove Supplier Management
Monitor supplier performance and adherence to contract termsMonitor supplier performance and adherence to contract terms
Leverage Purchasing PowerLeverage Purchasing Power
NYCDOE as example of consolidating smaller spends to leverageNYCDOE as example of consolidating smaller spends to leverage
pricing with supplierspricing with suppliers
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Financial Services PracticesFinancial Services Practices
Optimize SourcingOptimize Sourcing Make intelligent and informed sourcing decisionsMake intelligent and informed sourcing decisions
Rebuild the ProcureRebuild the Procure--toto--Pay ModelPay Model Streamline processesStreamline processes
Increase Use ofElectronic ToolsIncrease Use ofElectronic Tools
Apply Best Practices to Overlooked Spend CategoriesApply Best Practices to Overlooked Spend Categories i.e. Legal fees, advertising, market researchi.e. Legal fees, advertising, market research
Maximize ComplianceMaximize Compliance
To realize optimum cost reduction and efficiencyTo realize optimum cost reduction and efficiency Develop Shared Services ProgramsDevelop Shared Services Programs
Outsource Supply Management FunctionsOutsource Supply Management Functions Complex strategies make outsourcing an attractive optionComplex strategies make outsourcing an attractive option
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Chapter 4 IntroductionChapter 4 Introduction
The ThreeThe Three--toto--Five Year OutlookFive Year Outlook
CEO expectations for supply managementCEO expectations for supply management
CPO expectations for supply managementCPO expectations for supply management
How do we reach these goals?How do we reach these goals?
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CEO ExpectationsCEO Expectations
Cost and Price FocusCost and Price Focus Take advantage of opportunities and strive for 100% complianceTake advantage of opportunities and strive for 100% compliance
with initiativeswith initiatives
Brand FocusBrand Focus More than just the bottom lineMore than just the bottom line How do we get our name out?How do we get our name out?
Technology StagnationTechnology Stagnation Systems and software can only go so farSystems and software can only go so far
Global Commerce Dominates CompetitionGlobal Commerce Dominates Competition ForwardForward--thinking companies will have an edgethinking companies will have an edge
Mass Industry ConsolidationMass Industry Consolidation More takeovers and buyoutsMore takeovers and buyouts
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Critical Supply ManagementCritical Supply Management
QuestionsQuestions What business are we in?What business are we in? What are the ways to goWhat are the ways to go
to market?to market?
What are the businessWhat are the business
models we could use?models we could use? What supply chains makeWhat supply chains make
sense in the givensense in the givenbusiness modelbusiness model
How can I synthesizeHow can I synthesize
existing supply chains?existing supply chains?
What next best practicesWhat next best practicesshould we create forshould we create forcompetitive advantage?competitive advantage?
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Risk Management in SupplyRisk Management in Supply
Risk assessment andRisk assessment and
management ismanagement is
becomingbecoming
increasingly importantincreasingly important Shift in focus fromShift in focus from
mitigation tomitigation to
optimizationoptimization
How can we use riskHow can we use risk
analysis to ouranalysis to our
advantage?advantage?
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How Do We Prioritize SupplyHow Do We Prioritize Supply
Management?Management? ReachReach Build a better business case for supply managementBuild a better business case for supply management
MeasurementMeasurement How well do you perform against your competitors?How well do you perform against your competitors?
InnovationInnovation Think outside the boxThink outside the box
Extracting ValueExtracting Value Make sure youre getting the most out of suppliers whileMake sure youre getting the most out of suppliers while
remaining attuned to the marketremaining attuned to the market
Global BusinessGlobal Business Think worldwide to optimize sourcing practicesThink worldwide to optimize sourcing practices
DiversityDiversity Expand the horizons of your supply baseExpand the horizons of your supply base
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Types of Supply Chain ExecutivesTypes of Supply Chain Executives
EntrepreneursEntrepreneurs
Strategic ThinkersStrategic Thinkers
ResultsResults--DriversDrivers RecruitersRecruiters
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EntrepreneursEntrepreneurs
Broad thinkersBroad thinkers
LongLong--term focus on profitability and costterm focus on profitability and cost
managementmanagement Business acumen and financial knowledgeBusiness acumen and financial knowledge
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Strategic ThinkersStrategic Thinkers
Strong communication skillsStrong communication skills
Knows when to develop new relationshipsKnows when to develop new relationships
and rekindle old onesand rekindle old ones
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ResultsResults--DriversDrivers
Defines, predicts,Defines, predicts,
measures, and tracksmeasures, and tracks
benefits of supplybenefits of supply
managementmanagement
Markets and sells supplyMarkets and sells supply
managementmanagement
Focuses on continuousFocuses on continuous
improvementimprovement
Possesses marketPossesses market
intelligence skillsintelligence skills
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RecruitersRecruiters
Measures performance to recognize keyMeasures performance to recognize key
peoplepeople
Can identify right skills for any givenCan identify right skills for any givenpositionposition
Rotates team members to gather crossRotates team members to gather cross--
functional experiencefunctional experience
Brings out the best in othersBrings out the best in others
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In ClosingIn Closing
Supply Management in the next 3Supply Management in the next 3--5 years5 years
will focus on:will focus on:
Creating value for customersCreating value for customers
Eliminating waste in processesEliminating waste in processes
Better defining connections betweenBetter defining connections between
processes, customers, and suppliersprocesses, customers, and suppliers
Working more collaboratively with suppliersWorking more collaboratively with suppliers
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Resources for These Lessons:Resources for These Lessons:Lesson 3: Innovation and Opportunity
Lesson 4: The Three-to-Five Year Outlook
The Supply Management Handbook:The Supply Management Handbook:Seventh Edition: McGrawSeventh Edition: McGraw--HillHill
Source One Management Services, LLCSource One Management Services, LLC
www.sourceoneinc.com