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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. - PowerPoint PPT Presentation
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Procurement Service Provider Procurement Service Provider and Supply Chain Management and Supply Chain Management Training: Training: -Lesson 3: Innovation and Opportunity-Lesson 3: Innovation and Opportunity-Lesson 4: The Three-to-Five Year Outlook -Lesson 4: The Three-to-Five Year Outlook
Source One Management Services, LLCSource One Management Services, LLC724 Fitzwatertown Road724 Fitzwatertown RoadWillow Grove, PA 19090Willow Grove, PA 19090
(215)-902-0200(215)-902-0200www.sourceoneinc.comwww.sourceoneinc.com
Lesson 3 IntroductionLesson 3 Introduction
A 1 percent reduction in the cost of purchased A 1 percent reduction in the cost of purchased materials is equivalent to a 12 to 18 percent rise materials 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 source More companies and countries from which to source
(globalization)(globalization) Increasingly sophisticated approaches to managing the Increasingly sophisticated approaches to managing the
supply management function (Procurement Service supply management function (Procurement Service Providers such as Source One Management Services, LLC Providers such as Source One Management Services, LLC for example)for example)
Maturing and Scaling of Maturing and Scaling of Procurement TechnologyProcurement Technology
Procurement Procurement Technologies can:Technologies can: Help curtail rogue spendingHelp curtail rogue spending Work efficiently with wider Work efficiently with wider
range of suppliersrange of suppliers Simplify the sourcing Simplify the sourcing
processprocess Help actively manage total Help actively manage total
costscostsFree E-Commerce tools such as
www.WhyAbe.com provide Reverse Auctions, RFx, and Supplier
Management
E-Sourcing CapabilitiesE-Sourcing Capabilities
Becoming more sophisticated and popularBecoming more sophisticated and popularHave become more integral to e-Have become more integral to e-
procurement initiativesprocurement initiativesSpecialized capabilities are evolving:Specialized capabilities are evolving:
Facilitating easier interaction concerning Facilitating easier interaction concerning contract languagecontract language
Evaluating numerous variables on a large Evaluating numerous variables on a large scalescale
PLM and RFID SystemsPLM and RFID Systems
RFID (Radio Frequency Identification RFID (Radio Frequency Identification Systems)Systems)Provides real-time defective product data, Provides real-time defective product data,
improves item tracking, aids supplier-improves item tracking, aids supplier-managed inventory processesmanaged inventory processes
PLM (Product Life Cycle Management PLM (Product Life Cycle Management Systems)Systems)Manipulates the relationship between the Manipulates the relationship between the
product life cycle and cost reduction product life cycle and cost reduction opportunityopportunity
Global Sourcing and Supply ManagementGlobal Sourcing and Supply Management
Three major recent developments Three major recent developments in the evolution of global in the evolution of global sourcing:sourcing:
More companies pursuing More companies pursuing global supply baseglobal supply base
Increase in number of Increase in number of countries viewed as sourcing countries viewed as sourcing candidatescandidates
Increase in quantity and Increase in quantity and variety of available productsvariety of available products
Why Alternate Supply Sources?Why Alternate Supply Sources?
Worker EducationWorker EducationSize of Domestic and Export MarketSize of Domestic and Export MarketMarket LiberalizationMarket Liberalization
China’s admission into the WTO has assured China’s admission into the WTO has assured commitments to reduce high tariffscommitments to reduce high tariffs
Abundance of low-wage labor availableAbundance of low-wage labor availableChina’s average hourly manufacturing wage is China’s average hourly manufacturing wage is
60 cents an hour with a able workforce of 941 60 cents an hour with a able workforce of 941 millionmillion
Global Sourcing ChallengesGlobal Sourcing Challenges
Identifying and establishing new supplier Identifying and establishing new supplier relationshipsrelationships
Less advanced IT systems and Less advanced IT systems and information sharinginformation sharing
More research and due diligence must be More research and due diligence must be done on overseas suppliersdone on overseas suppliers
Incorporating local business culture into Incorporating local business culture into negotiation strategynegotiation strategy
Approaches to Global SourcingApproaches to Global Sourcing
International Supply International Supply Management OfficeManagement Office
Local Joint VenturesLocal Joint Ventures Work with in-country Work with in-country
enterprise to establish enterprise to establish presencepresence
Trading AgentTrading Agent ““sourcing brokers”sourcing brokers”
Procurement OutsourcingProcurement Outsourcing Cost reductions of 5 to 18 Cost reductions of 5 to 18
percent can result from an percent can result from an organization’s ability to:organization’s ability to:
1.1. Drive contract complianceDrive contract compliance
2.2. Source effectivelySource effectively
3.3. Connect with a larger Connect with a larger supplier basesupplier base
4.4. Operate more efficientlyOperate more efficiently
5.5. Address complex services Address complex services spendspend
6.6. Leverage technology more Leverage technology more effectivelyeffectively
Procurement Service Providers, such as
www.SourceOneInc.com can supplement internal
procurement departments without risk.
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 you’re sourcingBe knowledgeable about what you’re 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 leverage NYCDOE as example of consolidating smaller spends to leverage pricing with supplierspricing with suppliers
Financial Services PracticesFinancial Services Practices Optimize SourcingOptimize Sourcing
Make intelligent and informed sourcing decisionsMake intelligent and informed sourcing decisions Rebuild the Procure-to-Pay ModelRebuild the Procure-to-Pay Model
Streamline processesStreamline processes Increase Use of Electronic ToolsIncrease Use of Electronic 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
Chapter 4 IntroductionChapter 4 Introduction
The Three-to-Five Year OutlookThe Three-to-Five Year OutlookCEO expectations for supply managementCEO expectations for supply managementCPO expectations for supply managementCPO expectations for supply managementHow do we reach these goals?How do we reach these goals?
CEO ExpectationsCEO Expectations Cost and Price FocusCost and Price Focus
Take advantage of opportunities and strive for 100% compliance Take 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 Forward-thinking companies will have an edgeForward-thinking companies will have an edge
Mass Industry ConsolidationMass Industry Consolidation More takeovers and buyoutsMore takeovers and buyouts
Critical Supply Management Critical Supply Management QuestionsQuestions
What business are we in?What business are we in? What are the ways to go What are the ways to go
to market?to market? What are the business What are the business
models we could use?models we could use? What supply chains make What supply chains make
sense in the given sense in the given business modelbusiness model
How can I synthesize How can I synthesize existing supply chains?existing supply chains?
What next best practices What next best practices should we create for should we create for competitive advantage?competitive advantage?
Risk Management in Supply Risk Management in Supply
Risk assessment and Risk assessment and management is management is becoming becoming increasingly importantincreasingly important
Shift in focus from Shift in focus from mitigation to mitigation to optimizationoptimization How can we use risk How can we use risk
analysis to our analysis to our advantage?advantage?
How Do We Prioritize Supply How 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 you’re getting the most out of suppliers while Make sure you’re 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
Types of Supply Chain ExecutivesTypes of Supply Chain Executives
EntrepreneursEntrepreneursStrategic ThinkersStrategic ThinkersResults-DriversResults-DriversRecruitersRecruiters
EntrepreneursEntrepreneurs
Broad thinkersBroad thinkersLong-term focus on profitability and cost Long-term focus on profitability and cost
managementmanagementBusiness acumen and financial knowledgeBusiness acumen and financial knowledge
Strategic ThinkersStrategic Thinkers
Strong communication skillsStrong communication skillsKnows when to develop new relationships Knows when to develop new relationships
and rekindle old onesand rekindle old ones
Results-DriversResults-Drivers
Defines, predicts, Defines, predicts, measures, and tracks measures, and tracks benefits of supply benefits of supply managementmanagement
Markets and sells supply Markets and sells supply managementmanagement
Focuses on continuous Focuses on continuous improvementimprovement
Possesses market Possesses market intelligence skillsintelligence skills
RecruitersRecruiters
Measures performance to recognize key Measures performance to recognize key peoplepeople
Can identify right skills for any given Can identify right skills for any given positionposition
Rotates team members to gather cross-Rotates team members to gather cross-functional experiencefunctional experience
Brings out the best in othersBrings out the best in others
In Closing…In Closing…
Supply Management in the next 3-5 years Supply Management in the next 3-5 years will focus on:will focus on:Creating value for customersCreating value for customersEliminating waste in processesEliminating waste in processesBetter defining connections between Better defining connections between
processes, customers, and suppliersprocesses, customers, and suppliersWorking more collaboratively with suppliersWorking more collaboratively with suppliers
Resources for These Lessons:Resources for These Lessons:Lesson 3: Innovation and OpportunityLesson 4: The Three-to-Five Year Outlook
The Supply Management Handbook:The Supply Management Handbook:Seventh Edition: McGraw-HillSeventh Edition: McGraw-Hill
Source One Management Services, LLCSource One Management Services, LLC
www.sourceoneinc.com