Week #.3 Without Illustrations

8/4/2019 Week #.3 Without Illustrations

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Course: Strategic Procurement in SCM

Lecture / Week #. 3 (19th August, 2011)

Lecture Contents about: Supply Organizations

Book Chapters #. 2

SZABIST. MBA Fall-2011. Instructor: Faisal Abubakar, Strategic Procurement in SCM


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Today, we will cover:

1. Objectives of Strategic Supply Management;

2. Organizational Structures for Supply Management;

3. Potential Pros and Cons of Centralized / De-

Centralized Supply Management Structures;4. Supply Activities;

5. Supply Teams;

6. Supply Processes and with Strategies and GoalAlignment;



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Supply Organizations(Chapter #. 2)



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For procurement people, within the supply managementhas a strategic challenge to ensure the effective use of the

resources and capabilities to maximize supplyscontribution to organizational objectives.

Supply Management is an on going challenge for seniormanagement to select strategies designed to address

competitive challenges and adopts an appropriatecorporate organizational structure to complement thecompanys strategies.

Strategic supply is concerned with the long-term survival

and prosperity of the organization.



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The standard statement of supply management objectives

is to obtain the:1. Right Materials;

2. Right Quantity;

3. Right Time;

4. Right Place;5. Right Price;

6. Right Source;

7. Right Service.

Its like attempting to manage several balls in the air at thesame time.



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Supply Management - Strategies Development Areas:

1. Improve the Organizations competitive position;1. Identify and exploit opportunities of revenue enhancement;2. Asset Management;3. Cost Reduction;

a) Access to new technologies;b) Flexible delivery arrangements;

c) Fast response time;d) Product design and engineering assistance.

2. Provide an uninterrupted flow of materials, supplies and services;1. Stockouts;2. Late Deliveries;

a) Production losses;b) Lower revenues and profits;c) Diminishing goodwill / image.

3. Keep inventory investments and losses at a minimum;1. Inventory Levels i.e. Large or minimum?2. Large inventories require use of capital and expose many associated Risks.



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Supply Management Strategies Development Areas (Contd.):

4. Maintain and Improve Quality:1. Failure would result in end-product would not meet the expectations or will result in

higher than acceptable costs.

5. Find and develop best-in-class suppliers:1. Developing the dependable supplier base through:

a) Analyzing their capabilities and strengths ;b) Should be both responsive and responsible.

6. Standardize, where possible:1. Standardize the items being bought and processes undertaken to procure them;

a) Common specifications or process across an organization, industry or region;i. This leads to:

i. Lower risks in market place;ii. Lower price s;iii. Lower inventory levels;

iv. Supply base reduction;v. Lower Operating costs;vi. More consistent Service Levels;vii. Shortened Cycle Time;viii. Lower Transactional Costs.



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Supply Management Strategies Development Areas (Contd.):

7. Purchase required items and services at lowest total cost:1. Price is the most convenient method to compare competing suppliers proposals.

a) However, other factors also worth considering i.e.a. Quality levels;b. After sales service;c. Warranty costs;d. Inventory and spare parts requirements;e. Lead time;f. Responsiveness.

8. Achieve harmonious, productive internal relationships:1. Supply and Design Engineering - the process of Requirement Specifications Development.This need close cooperation between cross functional teams. These specifications are driven by finalCustomers requirements for value and satisfaction;

2. The failure to do so during design stages results in inadequate product or service performance, costlydelays, rework, and end user dissatisfaction;

3. Supply and Operations - Effectively and efficiently managing equipments, people, and space;

4. Supply and Sales/Marketing - Synchronized with Marketing Campaigns, Special Promotions,Sales Forecasts, Changes in Packaging and Design;

5. Supply and Accounting/Finance - Synchronized interacting areas are accounts payable,planning and budgeting.



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Potential Pros and Cons of CENTRALIZATION


Advantages Dis-advantages

Strategic focus.

Greater buying specialization.

Ability to pay for talent.

Consolidation of requirements-clout.

Coordination and control of policies and

procedures.

Effective planning and research.

Common suppliers.

Proximity to major organizational decisionmakers.

Critical mass.

Firm brand recognition and stature.

Reporting line-power.

Cost of purchasing low.

Lack of business unit focus.

Narrow specialization and job boredom.

Cost of central unit highly visible.

Corporate staff appears excessive.

Tendency to minimize legitimate differences

in requirements.

Lack of recognition of unique business unit

needs.

Focus on corporate requirements, not onbusiness unit strategic requirements.

Most knowledge sharing one-way.

Even common suppliers have difficulty in

geographic and market segments.

Distance from users.

Tendency to create organizational silos.

Customer segments require adaptability to

unique situations.

Top management not able to spend time on

suppliers.

High visibility of purchasing operating costs.


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Potential Pros and Cons of DE-CENTRALIZATION


Advantages Dis-advantages

Easier coordination/ communication with

operating department.

Speed of response.

Effective use of local sources.

Business unit autonomy.

Reporting line simplicity.

Undivided authority and responsibility.

Suits purchasing personnel preference.Broad job definition.

Geographical, cultural, political, environmental,

social, language, currency appropriateness.

Hide the cost of supply.

More difficult to communicate among business

units.

Encourages users not to plan ahead.

Operational versus strategic focus.

Too much focus on local sources-ignores better

supply opportunities.

No critical mass in organization for visibility/

effectiveness- whole person syndrome.Lacks clout.

Sub optimization.

Business unit preferences not congruent with

corporate preferences.

Small differences get magnified.

Reporting at low level in organization,

Limits functional advancement opportunities.

Ignores larger organization considerations.Limited expertise for requirements.

Lack of standardization.

Cost of supply relatively high.

Documents

Week #.3 Without Illustrations