SOURICING STRATERGIES CAN BE
STRATEGIC *High Level Decisions *Long Term *High Supply Risk TACTICAL *Low Level Decisions *Shorter Term *Clear Requirements
DEFINITIONS
PROCUREMENT
*Pre-Contract & Post Contact Activities
PURCHASING
*Post-Contact Such As Ordering or Invoice Clearing
SUPPLIER/CONTACT MANAGEMENT
*Post Contact Management Of Suppliers And Their Performance
DIFFERENCE BETWEEN PROCUREMENT & PURCHASING
PROCUREMENT - INVOLVED IN MUCH WIDER RANGE OF P/CYCLE
- Strategic
- Pro-Active
- Adds Value
- Considers TCO And Value
- Aims To Avoid Defects
PURCHASING - JUST ABOUT BUYING / SELLING
- Tactical
- Reactive
- Accepts / Rejects Defects
- Price Is Key
- Seen As A Cost Centre
PROCUREMENT CYCLE
1) Understand The Need
2) Market / Commodity - Make vs Buy
3) Develop Strategy
4) Pre-Procurement Activity
5) Develop Documents
6) Supplier Selection
7) Issue ITT / RFQ
8) Bid / Tender
9) Contract Award
10) Warehouse / Logistics
11) Contract Performance
12) SCM / SRM Management
13) Asset Management
STEPS 1-4
1) Understand The Need
2) Market / Commodity - Make vs Buy
3) Develop Strategy
4) Pre-Procurement Activity
STEPS 5-9
5) Develop Documents
6) Supplier Selection
7) Issue ITT / RFQ
8) Bid / Tender
9) Contract Award
STEPS 10-13
10) Warehouse / Logistics
11) Contract Performance
12) SCM / SRM Management
13) Asset Management
DIRECT COST VS INDIRECT COST
DIRECT - VARIABLE COSTS
- Raw Materials
- Labour
- Energy
INDIRECT - FIXED COST
- Admin
- Sales & Marketing
- Rent
- Insurance
Type Of Organisation Costs
- Capital Purchases
- Insurance
- Marketing
- Raw Materials
- R&D
- Salaries
- Services
- Sundry Items For Office
- Training
- Utilities
- Vehicles & Transport
STOCK VS NON STOCK
STOCK
- Raw Materials - Coal, Oil, Gas, Fish, Wheat.
- Components - Light Bulbs, Nuts & Bolts, Plastic Fittings
- Finished Goods - Cloths, Food, Beds, Jewellery
NON STOCK
- Advertising
- Telephone System
- Internet Contract
- Insurance
CAPEX VS OPEX
CAPEX - (ASSET PURCHASE) - MACHINERY, LAND, BUILDINGS
- High Value
- Depreciates Over Time Needs TCO Consideration
- Long Term
- Borrow Money From Loan Or Lump Sum
- Takes Longer To Arrange
OPEX - (Ongoing Expenses) - RAW MATERIALS, SALERIES,RENT, ENERGY
- Lower Value
- Short Term Usually Same Financial Year
- Paid Monthly Or Annually
DIRECT VS INDIRECT PROCUREMENT
DIRECT
- Directly Related To Produce The Product
- Raw Materials
INDIRECTS
- Don’t Contribute To Profit
- Salaries
- Stationery
- Consultancy
KRALJIC MATRIX
USED TO CALCULATE IMPORTANCE OF SUPPLIERS
- Leverage Suppliers - Top Left
- Lots Of Competition
- Easier To Switch
- Examples - Utilities
- Routine Suppliers - Bottom Left
- Low Value Items
- Lots Of Work Assoicated
- Lots Of Variety Like Stationery
- Strategic Suppliers - Top Right
- Critical To Company
- Responsible For Core Products
- Bottle Neck Suppliers
- Usually Hold Monopoly
- Very Few Options
- Usually Low Value
5 Rights Of Procurement
- Right Quality
- Fit for Purpose, Not Over Or Under Spec
- Right Quantity
- Sufficient To Meet Demand, Not Too Much To Cost In Storage
- Right Place
- Suitable Packaging & Delivered To Right Place To Not Hold Up Production
- Right Price
- Secured Goods At Fair Price That Is Reasonable For Quality And Quantity
- Right Time
- Delivered At The Right Time To Meet Demand * Maintain Service Levels
Without Over Stocking
SPEC ENSURES
- Conformance - Must Conform To Suppliers Description
- Performance - Buyer Dictates How Product Should Perform
TOTAL COST OF OWNERSHIP
- BUY
- Price
- Delivery
- Spec
- Supplier Performance
- Own
- Depreciation
- Insurance
- Footprint
- Use
- Install
- Spares
- Maintenance
- Operating Cost
- Training
- Upgrades
- Disposal
- Un-Install
- Transport
- Waste Disposal
KPI’S
Specific - Clear And Well Defined Measurable Attainable Relevant Timebound
KPI - Types
Qualitive - Reject Numbers, Achieve ISO, Reduce Waste
Quantitative - Reduces Late Deliveries, Orders Despatched With Right Quantities
WAYS TO ACHIEVE VALUE FOR MONEY
- Monitor Currency And Exchange Rates
- Environmental Factors
- Freight Costs
- Maintenance Costs
- Packaging Costs
- Payment Terms
- Place
- Product / Service Price
THE SUPPLY CHAIN
- All Organisations & Activities Associated With The Flow And Transformation Of Good From Raw Materials Through To The End User As Well As The Information Associated With It”
SUPPLY CHAIN MANAGEMENT
(INFRASTRUCTURE NEEDED TO GET DOOS TO CUSTOMER)
UPSTREAM
*Producers Extract Raw Materials
*Suppliers Obtain Raw Materials From Producers
——————–
- Materials Sent To Manufactures - Manufacturers Process Materials
——————–
DOWNSTREAM
* Distributor Collects Materials From Manufacturer Delivers Them To Customer
* Customer
*REMEMBER
MANY PRODUCERS SELL TO MANY RETAILERS
- SHOE MANUFACTURER MAY SELL TO NIKE, ADDIDA, PUMA
IF ONE COMPANY RUNS OUT OF A PRODUCT THE CUSTOMER WILL GO TO A COMEPTITOR THIS IS WHY ITS IMPORTANT TO ENSURE GOOD NEGOTATION AND ENSURE YOUR PRODUCTS ARE AHEAD OR IN LINE WITH THE COMPETITORS SOURCING AND DELIVERIES
LOGISTICS
“THE STORAGE, HANDLING AND MOVEMENT OF GOODS”
Planning, Implementing And Controlling Procedures For Efficient Transportation And Storage Of Goods Including Services And Related Information
From Point Of Origin To Point Of Consumption
INTERNAL VS EXTERNAL LOGISTICS
- INTERNAL
- Extraction / Production
- Manufacturing
- Warehousing / Storage
- EXTERNAL
- Distribution
- Transport
- Retail
ALL RELY ON
- Demand Planning
- Fleet Management
- Inventory Management
- Warehousing & Storage
- Order Fulfilment
