21st Century Purchasing In A Flat WorldPresentation Transcript
21 st Century Purchasing In A Flat World Dan Marino, CPIM Senior Partner Marino Associates, LLC
21 st Century Purchasing In A Flat World
Purchasing organizations must become both Strategic and Tactical
Purchasing organizations must understand the customer’s needs and wants
Purchasing organizations must have drastically improved response times
Purchasing organizations must be staffed with a highly educated and trained workforce
Purchasing organizations must concentrate on continuous supply change improvements
Purchasing organizations must forge the correct supplier alliances that meet the needs of the company
The Mission of 21 st Century Purchasing In A Flat World Develop best in class global suppliers for commodities that assist in managing cost and improving your competitive advantages Develop Six Sigma Quality processes for all key commodities Develop continuous improvement programs with your supply base with a goal of lead time reduction and a 100% on time delivery Develop long term alliances with all key suppliers Develop Processes that support operational goals
PURCHASING COMPLEXITIES Logistics Legal IT Finance Engineering Operations Purchasing
21 st Century Purchasing Changes
Purchasing departments are going through many changes as the world goes flat. This is often reflected in departmental name changes :
Supply Chain Managers
21 st Century Purchasing Change
Along with the name changes has come the growing recognition of the importance of purchasing activities to the success of an organization
21 st Century Purchasing Transformation
Stage 1- Classify all material in terms of profit impact and supply risk
Stage 2- Weigh the bargaining power of the suppliers against that of the purchasing company
Stage 4- Develop action plans that coincide with these strategies
Stage 5- Educate and train key supply chain employees in 21 st century concepts
Stage 6- Insure that internal systems and processes supports all your transformation goals
Purchasing Transition to LSCM
Purchasing Silo’s Cross functional
With suppliers Partnership/Alliances
Arms distance approach Shared goals and
With internal customers rewards
Environment with waste Organization that
Reactionary response Strategic response
Purchasing Transformation Tools
Process Mapping the Material and Information Flow
Kaizen Blitz Events
Optimizing ERP (ABC approach)
Supply Chain Summit/Supply Chain Assessment
Supplier Competency Model
Lean Supply Chain Management
One of the most aggressive approaches in achieving excellence in an organization is to develop and implement a superior Lean Supply Chain Management process.
Best In Class Supply Chain Companies Are Realizing Financial and Operating Advantages over Their Competition
More Responsive to Customer Needs
More Responsive to Market Changes
More Effective in Controlling Cost
WHAT IS LEAN SUPPLY CHAIN MANAGEMENT?
Sourcing and Procurement
The process of managing the flow of material and information beginning at the lowest raw material level of the supply chain to the ultimate consumption of the finished product.
LEAN SUPPLY CHAIN MANAGEMENT BALANCE TO PROFIT
Lack of Clarity
Decisions making ability
Lead time Reduction
On-time and complete
THE RESULTS OF AN UNBALANCED SUPPLY CHAIN
Increased cost to expedite Material
Increased cost of premium freight
Increased cost of excessive inventory
Increased cost of excessive set-up charges
Increased customer dissatisfaction
Increased profitability decline
Supply Chain Balance Questions
Does your company understand the principles of Lean Supply Chain Management?
Do you understand your customers’ needs and requirements?
Do you understand the roll of Logistics?
Do you understand the operational and financial impact of Lean Supply Chain Management?
Does your management team embrace Lean Supply Chain Management as both a strategy and a process?
Do you have the systems, organization and expertise in place to maximize your Lean Supply Chain efforts?
21 st Century Strategy Cost Optimization Supplier and Product Development Consolidate Suppliers Pool volume across units Redistribute volume among suppliers Combine commodity volume Develop Total Cost of Procurement Model Renegotiate prices Unbundled pricing Expand geographic supply base Develop new suppliers Profit from global supply/demand imbalances Product and value engineering Substitute materials Buying alternatives Optimize life cycle cost Value Mapping Share information Integrate logistics Support supplier improvements Establish/develop key suppliers Employ strategic alliances Examine make versus buy Develop integrated supply chain Best Price Evaluation Global Sourcing Relationship Restructuring Joint Process Improvement Product Spec. Improvement Volume Concentration Profit Improvement Strategy
21 st Century Required Business Improvements
Remove the Barriers with Aggressive Lean Supply Chain Management
Inconsistencies in Business Practices Inconsistencies in the Operation Inconsistencies in New Product Introduction Inconsistencies in Systems Applications Inconsistencies in the Organization
21 st Century Tool Kit
Supply Chain analysis (value mapping)
Vendor Managed Inventories
Inplants (JIT II)
“ Bread Man”
Safety stock (or safety lead time)
SUPPLY CHAIN MANAGEMENT BUSINESS FORCES
Cost Management and Reduction
Lead Time Reduction
Market Share and Margin Improvements
21 st Century Flat World Procurement
Review of all raw material suppliers. The focus should be on:
Outsourcing should be reviewed - this is an excellent alternative for products that cannot be produced effectively internally.
Global Procurement – this requires a complete set of specific Supply Chain Processes and Business Rules.
Questions For Manufacturing in a Flat World
What and how many products will be produced?
What will be produced internally and what will be outsourced?
What are the customer satisfaction drivers?
MANUFACTURING – Cont'd .
Selecting product to Global source
Management of your Global partner
21 st Century Logistics
Determine inventory levels by product based on an "A", "B", "C" Analysis of your inventory
Limit the inventory liability in the entire Supply Chain
Develop a process for pulling inventory through the suppliers to point of need
Develop inventory management strategies:
LOGISTICS – Cont'd.
Make-to-Stock Strategy (MTS)
Make-to-Order Strategy (MTO)
Inventory Reduction Goals
Inventory Processes to support Repair and Renovation
Seasonal Demand Patterns
Line Fill Rate Requirements
Erratic Demand Requirements
Many different SKU's
Safety Stock Requirements
21 st Century Technology
Electronic Data Interchange (EDI)
Computer ERP Systems with very sophisticated SCM Systems imbedded in the system
What is the sophistication level of the company and its suppliers?
What am I trying to manage?
Standard parts procurement
Global sourcing and logistics
A combination of standard parts procurement and major value add procurement
Supplier direct ship to your customers
How far back in the supply chain do I want to manage?
What key measurements need improvement?
Knowledge Circle in a Flat World CUSTOMER KNOWLEDGE SCM KNOWLEDGE CIRCLE SUPPLIER KNOWLEDGE INFORMATION KNOWLEDGE PROCESS KNOWLEDGE PRODUCT KNOWLEDGE
Lead Time Requirements
How many products?
What percent of sales does each product represent?
Where is each product in its product life cycle?
What is the typical product mix?
What are your margins per product?
What are the true costs per product?
Understand the Production Process
Just In Time
To Point of Use
To the Customer
What information is required for effective decision-making at each stage in the Supply Chain?
How will data flow between each part of the Supply Chain?
Information on dynamics of the Supply Chain must be shared throughout the chain.
Supplier’s Processes and Constraints
Supplier’s / Supplier Processes and Constraints
Supplier’s Lead Times
Supplier’s Delivery Methods
The Supplier Summit assists in defining mutual trust between the Supplier and Customer.
The Supplier Summit is a detailed study of all supplier systems and processes that deliver a product to a customer.
The Supplier Summit provides positive feedback on processes under control and for processes needing work.
The Supplier Summit establishes the customers’ requirements and assists in eliminating surprises.
SUPPLIER SUMMIT - CONT’D.
Audit forms are given to the Supplier in advance.
An Audit Team sends the Supplier a detailed agenda.
Once the audit is complete, prompt audit feedback to the Supplier is required.
Audit Schedules a Credit Review at the Supplier’s Facility.
Regular Schedule Reviews Planned.
21 st Century Trends
Long-Term Relationships (Supplier Alliance)
Suppliers located close to customers or VMI
Suppliers considered to be essential part of the business
Suppliers involved with New Product Introduction
Managing your company's most expensive asset, material flow, utilizing a supply chain that can rapidly flow information and material can be a significant competitive differentiator.
21 st Century Key Performance Indicators
On-Time and Complete
Percent Time in Stock
Days of Inventory
Cash to Cash
(Inv+A/R-A/P) in days of supply
Days of working capital-DWC (Working Capital/Annual Revenue x 365) Days Sales Outstanding-DSO (Accounts Receivable/Annual Revenue x 365) Days of Inventory- DIO (Inventory Value/COGS x 365) Days Payable Outstanding- DPO (Accounts Payable/Annual Revenue x 365)
Flat World Vision To Reality
'No company is safe… There is no such thing as a “solid,” or even substantial, lead over one’s competitors. Too much is changing for anyone to be complacent. Moreover, the “champ to chump” cycles are growing even shorter.’
Dan Marino, CPIM
21 st Century Purchasing In A Flat World.
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