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
A 1 percent reduction in the cost of purchased materials is equivalent to a 12 to 18 percent rise in sales growth
Several reasons why that reduction is possible
New and better technology
More companies and countries from which to source (globalization)
Increasingly sophisticated approaches to managing the supply management function (Procurement Service Providers such as Source One Management Services, LLC for example)
Maturing and Scaling of Procurement Technology
Procurement Technologies can:
Help curtail rogue spending
Work efficiently with wider range of suppliers
Simplify the sourcing process
Help actively manage total costs
E-Sourcing Capabilities
Becoming more sophisticated and popular
Have become more integral to e-procurement initiatives
Specialized capabilities are evolving:
Facilitating easier interaction concerning contract language
Evaluating numerous variables on a large scale
PLM and RFID Systems
RFID (Radio Frequency Identification Systems)
Provides real-time defective product data, improves item tracking, aids supplier-managed inventory processes
PLM (Product Life Cycle Management Systems)
Manipulates the relationship between the product life cycle and cost reduction opportunity
Global Sourcing and Supply Management
Three major recent developments in the evolution of global sourcing:
More companies pursuing global supply base
Increase in number of countries viewed as sourcing candidates
Increase in quantity and variety of available products
Why Alternate Supply Sources?
Worker Education
Size of Domestic and Export Market
Market Liberalization
China’ s admission into the WTO has assured commitments to reduce high tariffs
Abundance of low-wage labor available
China’ s average hourly manufacturing wage is 60 cents an hour with a able workforce of 941 million
Global Sourcing Challenges
Identifying and establishing new supplier relationships
Less advanced IT systems and information sharing
More research and due diligence must be done on overseas suppliers
Incorporating local business culture into negotiation strategy
Approaches to Global Sourcing
International Supply Management Office
Local Joint Ventures
Work with in-country enterprise to establish presence
Trading Agent
sourcing brokers
Procurement Outsourcing
Cost reductions of 5 to 18 percent can result from an organization’ s ability to:
Drive contract compliance
Source effectively
Connect with a larger supplier base
Operate more efficiently
Address complex services spend
Leverage technology more effectively
Government Sourcing Practices
Practice Cost Avoidance
Identify rogue spending and eliminate unnecessary cost adders
Know the Market
Be knowledgeable about what you’ re sourcing
Overcome Legislative Burdens
Cut through the Red Tape
Build Confidence in Strategic Supply Management
Manifest trust of the end users in the system
Improve Supplier Management
Monitor supplier performance and adherence to contract terms
Leverage Purchasing Power
NYCDOE as example of consolidating smaller spends to leverage pricing with suppliers
Financial Services Practices
Optimize Sourcing
Make intelligent and informed sourcing decisions
Rebuild the Procure-to-Pay Model
Streamline processes
Increase Use of Electronic Tools
Apply Best Practices to Overlooked Spend Categories
i.e. Legal fees, advertising, market research
Maximize Compliance
To realize optimum cost reduction and efficiency
Develop Shared Services Programs
Outsource Supply Management Functions
Complex strategies make outsourcing an attractive option
Chapter 4 Introduction
The Three-to-Five Year Outlook
CEO expectations for supply management
CPO expectations for supply management
How do we reach these goals?
CEO Expectations
Cost and Price Focus
Take advantage of opportunities and strive for 100% compliance with initiatives
Brand Focus
More than just the bottom line
How do we get our name out?
Technology Stagnation
Systems and software can only go so far
Global Commerce Dominates Competition
Forward-thinking companies will have an edge
Mass Industry Consolidation
More takeovers and buyouts
Critical Supply Management Questions
What business are we in?
What are the ways to go to market?
What are the business models we could use?
What supply chains make sense in the given business model
How can I synthesize existing supply chains?
What next best practices should we create for competitive advantage?
Risk Management in Supply
Risk assessment and management is becoming increasingly important
Shift in focus from mitigation to optimization
How can we use risk analysis to our advantage?
How Do We Prioritize Supply Management?
Reach
Build a better business case for supply management
Measurement
How well do you perform against your competitors?
Innovation
Think outside the box
Extracting Value
Make sure you’ re getting the most out of suppliers while remaining attuned to the market
Global Business
Think worldwide to optimize sourcing practices
Diversity
Expand the horizons of your supply base
Types of Supply Chain Executives
Entrepreneurs
Strategic Thinkers
Results-Drivers
Recruiters
Entrepreneurs
Broad thinkers
Long-term focus on profitability and cost management
Business acumen and financial knowledge
Strategic Thinkers
Strong communication skills
Knows when to develop new relationships and rekindle old ones
Results-Drivers
Defines, predicts, measures, and tracks benefits of supply management
Markets and sells supply management
Focuses on continuous improvement
Possesses market intelligence skills
Recruiters
Measures performance to recognize key people
Can identify right skills for any given position
Rotates team members to gather cross-functional experience
Brings out the best in others
In Closing
Supply Management in the next 3-5 years will focus on:
Creating value for customers
Eliminating waste in processes
Better defining connections between processes, customers, and suppliers
Working more collaboratively with suppliers
Resources for These Lessons: Lesson 3: Innovation and Opportunity Lesson 4: The Three-to-Five Year Outlook
The Supply Management Handbook: Seventh Edition: McGraw-Hill
Source One Management Services, LLC
www.sourceoneinc.com