Supply Chain Lesson 3 4

8/3/2019 Supply Chain Lesson 3 4

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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

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Supply Chain Lesson 3 4