Supply Chain for Management Consultants & Business Analysts

1. 1 Supply Chain for Management Consultants Practical guide how to improve the business of your customer

2. 2 Supply chain is extremely complex, especially in the era of multichannel and globalization. Therefore, you have to become very analytical and innovative to find savings and improvements

3. 3 Thanks to this presentation you will learn main aspects of supply chain that you need in consulting projects

4. 4 The presentation is organized into 9 sections General information on Supply Chain Retail - Examples of business analyses of Supply Chain FMCG - Examples of business analyses of Supply Chain SMCG - Examples of business analyses of Supply Chain Purchasing - general information Distribution model - general information Commodity - Examples of business analyses of Supply Chain Sales forecasting and customer service - general information Production Planning - general information

5. 5 General information on Supply Chain

6. 6 Introduction to General Information on Supply Chain

7. 7 In this section we will talk about 6 topics that will serve as an introduction and give you a flavor of what supply chain is What is Supply Chain? Components of Supply Chain Finding the strategic fit Lost sales and stock level How to tackle the uncertainty? How much Supply Chain costs?

8. 8 What you will see in this presentation is a part of my online course. For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15

9. 9 What is Supply Chain

10. 10 We can look at supply chain from 2 different perspectives Global perspective Internal perspective

11. 11 Operational framework for Supply Chain covers the physical flow of goods as well as exchange of information Physical flow of goods Flow of information Supply chain management and control Degree of integration/fragmentation External/internal organization and control Inbound logistics (Procurement) Internal logistics (Production) Outbound logistics (Distribution) Suppliers Producer Central Warehouse Point of Sales Customers Orders and order filling system Information regarding demand forecasting Information regarding efficiency and costs monitoring Other information - Procurement - Planning - WIP Management Stock management and warehouse management Transport Transport Transport

12. 12 We can also view the Supply Chain as internal processes from customer order taking till goods delivery Finished Products depot Shipping (delivery to customers) Raw materials warehouse Production Production planning Purchase planning Raw materials purchase Customer Service Office - Accepting an order Suppliers Customer CustomerRaw materials Products Raw materials Sales planning Physical flow of goods Information flow Supply chain management and control

13. 13 In other words by supply chain we mean all activities you do and resources you need to move goods and services at the right time, quantity and quality

14. 14 Components of Supply Chain

15. 15 We can be talking about 5 components that supply chain consist of Distribution / Logistics Procurement / Purchasing Production Planning Sales Forecasting Customer service

16. 16 Finding the strategic fit for the Supply Chain

17. 17 The successful supply chain strategy cannot be developed apart from overall strategy for the firm Product Developme nt Strategy Supply Chain Strategy ▪ Manufacturing ▪ Inventory ▪ Lead time ▪ Purchasing ▪ Transportation Marketing and Sales Strategy Information Technology Strategy Finance Strategy Human Resources Strategy Competitive Strategy / Landscape Source: Sunil Chopra, Supply Chain Management

18. 18 There are 2 things that you have to decide on to achieve the strategic fit Understand the customer and implied uncertainty of the demand Decide on the responsiveness of the supply chain required to compete on the market

20. 20 When we talk about uncertainty of the demand we have many different options Low implied demand uncertainty ▪ Purely functional products: commodities like petrol Somewhat certain demand ▪ Established goods: toothpaste, yogurt, Mars bars Somewhat uncertain demand ▪ New models of existing goods: Samsung 9, iPhone 9 High implied demand uncertainty ▪ Entirely new products: AI Source: Sunil Chopra, Supply Chain Management

21. 21 Uncertainty level influences many aspect like margin, forecast error, stock out rate and markdowns ▪ Product margin ▪ Average forecast error ▪ Average stock out rate ▪ Average forced season-end markdown ▪ Low ▪ 10% ▪ 1% to 2% ▪ 0% ▪ High ▪ 40% to 100% ▪ 10% to 40% ▪ 10% to 25% Area Low Implied Uncertainty High Implied Uncertainty Source: Sunil Chopra, Supply Chain Management

23. 23 When we talk about responsiveness of the demand we have many different options Highly efficient ▪ Integrated steel mills: Production scheduled weeks or months in advance with little variety or flexibility Somewhat efficient ▪ Slow Fashion using Push model: a traditional make-to- stock manufacturer with production lead time of several weeks Somewhat responsive ▪ Most automotive production: delivering a large variety of product in a couple of weeks Highly responsive ▪ Dell: Custom made PCs and servers in a few days Source: Sunil Chopra, Supply Chain Management

24. 24 As you may have guessed. Responsiveness is expensive. Efficiency is much cheaper High Low Cost Low High Responsiveness

25. 25 Let’s now put responsiveness and demand uncertainty on 1 graph Responsive Supply Chain Responsiveness spectrum Efficient Supply Chain Certain demand Implied Uncertainty Spectrum Uncertain demand Source: Sunil Chopra, Supply Chain Management

26. 26 Comparison of efficient and responsive supply chain

27. 27 Let’s compare Efficient and Responsive Supply Chain Efficient Supply Chain ▪ Supply demand at the lowest cost Responsive Supply Chains ▪ Maximize performance at minimum product cost ▪ Lower margins because price is a prime customer driver ▪ Minimize inventory to lower cost ▪ Lower costs through high utilization Primary goal Product design strategy Pricing strategy Manufacturing strategy Inventory strategy Lead time strategy Supplier strategy Transportation strategy ▪ Greater reliance on low cost models ▪ Select based on cost and quality ▪ Reduce but not at the expense of costs ▪ Respond quickly to demand ▪ Create modularity to allow postponement of product differentiation ▪ Higher margins, as price is not a prime customer driver ▪ Maintain buffer inventory to meet unexpected demand ▪ Maintain capacity flexibility to meet unexpected demand ▪ Greater reliance on responsive models ▪ Select based speed, flexibility, and quality ▪ Aggressively reduce even if the costs are significant

28. 28 Type of products vs type of Supply Chain

29. 29 When we talk about types of supply chain that you should have you can also use the Hau Lee’s Uncertainty Framework High (evolving process) Supply uncertainty Low (stable process) Low (functional products) Demand Uncertainty High (innovative products) Efficient supply chain ▪ Grocery ▪ Basic apparel ▪ Food ▪ Gas and oil Responsive supply chain ▪ Fashion apparel (fast fashion) ▪ Computers, iPhones ▪ Physical books that are new Risk hedging supply chain ▪ Hydroelectric power ▪ Some food produce Agile supply chain ▪ Telecom ▪ High-end computer ▪ Semiconductors Source: Chase, Jacobs, Aquilano, Operations Management for competitive Advantage with global cases

30. 30 Those 4 types of supply chain differ in goals and tactics Goal ▪ Use tactics that provide highest cost efficiency Tactics used Efficient supply chain ▪ Eliminate non-value activities ▪ Pursue scale economies, do things in bulk ▪ Optimize capacity utilization especially of transportation modes and warehouses ▪ More push than pull ▪ Use tactics that enable you being responsive and flexible to the changing and diverse need of the customersResponsive supply chain ▪ Keep close the suppliers ▪ Operate on short lead times ▪ Use build-to-order and mass customization process ▪ More pull than push ▪ Use tactics of pooling and sharing resources in order to minimize the impact of disruptionRisk-hedging supply chain ▪ Keep higher safety stock ▪ Share stocks ▪ Provide info on the stock availability and transfer it or transfer customers to the place where the stock / capacity is available ▪ Use tactics that enable you being responsive and flexible to the changing and diverse need of the customers and at the same time by pooling and sharing resources enable you minimize the impact of disruption Agile supply chain ▪ Use tactics for risk hedging on the supply side ▪ Use tactics for responsive supply chain on the demand side Source: Chase, Jacobs, Aquilano, Operations Management for competitive Advantage with global cases

31. 31 Lost sales and stock level

32. 32 While analyzing stock-outs we should divide them into three groups to be able to estimate in a better way their influence on our profit and planning Initial budget Customer walks away to another store Customer postpones the purchase Customer buys a substitute at a lower price Real purchases performed by customers X% lower sales due to stock-outs 100

33. 33 In Supply Chain a lot of attention goes to stock level. It depends on the cost of lost sales and inventory cost Cost of keeping stocks** % Cost of lost sales* % Computers Newspapers Clothes Tendency to keep insufficient level of stocks Tendency to produce more than the expected demand *Lost margin **Marginal production cost minus residual unit price which could be achieved during sales Lost sales …Inventory cost

34. 34 How to tackle the uncertainty (buffering)

35. 35 Variability of demand means that you have to buffer with one of 3 things Ballpoint Pens ▪ Can’t buffer with time (who will backorder a cheap pen?) ▪ Can’t buffer with capacity (too expensive, and slow) ▪ Must buffer with inventory Ambulance Service ▪ Can’t buffer with inventory (stock of emergency services?) ▪ Can’t buffer with time (violates strategic objectives) ▪ Must buffer with capacity Organ Transplants ▪ Can’t buffer with WIP (perishable) ▪ Can’t buffer with capacity (ethically anyway) ▪ Must buffer with time Source: Wallace J. Hopp, Mark L. Spearman, 1996, 2000

36. 36 KPIs for Supply Chain

37. 37 The primary goals of Supply Chain are: minimization of costs with assumed optimal service level and maximization of elasticity Costs minimization Maximization of elasticity Optimization of customer service level ▪ Delivery time accuracy ▪ Delivery flexibility ▪ Service time ▪ Products quality ▪ Reaction speed ▪ ‘Time to market’ ▪ Operational costs ▪ Fixed assets ▪ Stock level

38. 38 There can be different specific KPIs on every stage Customer service level Supplier Producer Distributor Point of sales Customer Production plan vs. production Finished goods availability Resources and materials stock level Finished goods stock level Material availability Fully / without mistakes In time Availability on shelf Time accuracy of deliveries Length of filling the order process Raw materials price level Raw materials quality OEE x = Sale vs. plan

39. 39 How much Supply Chain costs

40. 40 Supply chain cost may represent significant percentage of total costs in many industries 100 75 50 25 0 Engineering Airline industry Food industry Motor industry Health service Electronics/domestic appliances Chemical industry Banking Media

41. 41 Impact of Supply Chain on ROCE

42. 42 The course is organized into 8 sections and I will be adding new soon ▪ Distribution ▪ Planning ▪ Depot management ROCE Operating profit Capital employed Costs Revenue on sales Fixed assets Current assets ▪ Distribution ▪ Planning ▪ Distribution ▪ Depot management ▪ Planning ▪ Purchasing Medium Low High + – / ▪ Purchasing ▪ Distribution High Area of impactRelative impact A C D B

43. 43 The course is organized into 8 sections and I will be adding new soon Operating costs Production costs S&M costs Distribution costs Administrative costs Materials Energy Remuneration Maintenance Other Transport Packaging Warehouses Other Other + + + ▪ Logistic assets maintenance cost f.e. depots, fork lift trucks, cars, etc. ▪ Cost of material purchase POS ▪ Cost of materials and raw materials purchase ▪ Consumption, level of waste materials (specifications) Hypothetical determinants ▪ Cost of energy purchase ▪ Energy consumption (production planning ) ▪ Employment scale (production planning, distribution, depots) ▪ Cost of spare parts purchase ▪ Cars exploitation ▪ Routes planning ▪ Cost of purchase og logistic services ▪ Cost of packaging purchase ▪ Level of pallets return / recovery ▪ Cost of administrative materials purchase A

44. 44 The course is organized into 8 sections and I will be adding new soon Sales Sales volume Prices x ▪ Level of customer service ▪ Operating costs ▪ Availability of products on different distribution system stages ✓ Producer’s depot ✓ Distributors ✓ Point s of retail sale ▪ (planning, purchasing, distribution) Hypothetical determinants B

45. 45 The course is organized into 8 sections and I will be adding new soon Capital employed Fixed assets Working capital + ▪ Stock level ▪ Purchasing policy / strategy ▪ Payment maturities / purchasing policy ▪ Distribution assets (i.e. warehouses) ▪ Warehouse equipment ▪ Quote-to-cash ▪ Accuracy of invoicing + Other receivables + Raw materials and packaging + Finished goods - Trade liabilities Tangible fixed assets Long-term investments Intangible + - Other liabilities + Trade receivables + ▪ Stock level ▪ Distribution model Hypothetical determinants C D

46. 46 Cycle view of Supply Chain

47. 47 The course is organized into 8 sections and I will be adding new soon Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Retailer Distributor Manufacturer Supplier Cycles Stages Customer Source: Sunil Chopra, Supply Chain Management

48. 48 Push/pull view of supply chain processes (L.L. Bean) Customer Order Cycle Replenishment Cycle Manufacturing Cycle L.L. Bean Manufacturer Pull processes Customer Procurement Cycle Supplier Customer Order Arrives Customer Order Cycle Replenishment Manufacturing Procurement Cycles Push processes Source: Sunil Chopra, Supply Chain Management

49. 49 Push/pull view of supply chain processes (DELL) Customer Order and Manufacturing Cycle Manufacturer (Dell) Pull processes Customer Procurement Cycle Supplier Customer Order Arrives Customer Order and Manufacturing Cycle Procurement Cycle Push processes Source: Sunil Chopra, Supply Chain Management

50. 50 Types of consulting projects done in Supply Chain

51. 51 There are 6 typical supply chain project that you will perform for your customers Operational Audit Performance Improvement Creating the Supply Chain Strategy Division Integration New business development

52. 52 Distribution model - general information

53. 53 Introduction to Distribution Model

54. 54 Distribution is the physical part of the supply chain. Its aim is to get the right products to the factory or customers on time, unharmed, fast while keeping as little inventory as possible

55. 55 In this section you will learn 5 things Goals of Distribution Model Basic laws of distribution Where you can find savings in distribution Typical problems in Distribution Different types of distribution

56. 56 Goals of Distribution Model

57. 57 The primary goals of distribution are cost minimization and proper execution of orders Costs minimization % of order execution Cost related to the inventory ▪ Cost of warehousing ▪ Cost of frozen capital ▪ Cost of lost sales ▪ On Time ▪ In Full ▪ Free of Error ▪ Minimize the cost per unit of transportation

58. 58 For transportation we have simple goals that can be measured using the OT-IF-EF framework IFOT% order execution EF 90%90%72,9% 90% ▪ Delivered on time ▪ In Full – meaning the exact number as it was supposed to be delivered ▪ Error Free – exactly what was asked for with all accompanying documents

59. 59 You would also look at the cost per unit. I recommend decomposing it so you can say more about the drivers of this cost COST TONNE = COST km or miles LOAD x x TONNE km or miles LOAD ▪ Here you want to minimize the cost of 1 km ▪ Here you want to minimize the number of km that a single shipment (load) has to go through ▪ Here you want to increase the usage of the shipment (load) – have more tons there

60. 60 Basic laws of distribution

61. 61 The course is organized into 8 sections and I will be adding new soon Inventory Costs Transpor- tation Cost Facility Costs Response time Total Logistics Cost Number of Facilities Number of Facilities Number of Facilities Number of Facilities Relationship between Number of Facilities and Facility Costs Variation in Logistics Cost and Response Time with Number of Facilities Relationship between Number of Facilities and Inventory Costs Relationship between Number of Facilities and Transportation Costs

62. 62 Different types of distribution

63. 63 There is no idle distribution scheme. Each and every has its pros and cons Suppliers Retail Stores Direct shipping Suppliers Retail Stores Direct shipping with milk run

64. 64 There is no idle distribution scheme. Each and every has its pros and cons DC Suppliers Retail Stores All shipment via DC Suppliers Retail Stores DC Milk runs from DC

65. 65 There is no idle distribution scheme. Each and every has its pros and cons Pros ▪ No intermediate warehouse ▪ Simple to coordinate Cons ▪ Lower transportation costs for small lots ▪ Lower inventories ▪ Lower inbound transportation cost through consolidation ▪ Lower outbound transportation cost for small lots ▪ Very low inventory requirement ▪ Lower transportation cost through consolidation Direct shipping Direct shipping with milk runs All shipments via central DC with inventory storage All shipments via central DC with cross-dock Shipping via DC using milk runs Tailored network ▪ Transportation choice best matches needs of individual product and store ▪ High inventories (due to large lot size) ▪ Significant receiving expense ▪ Increased coordination complexity ▪ Increased inventory cost ▪ Increased handling at DC ▪ Further increase in coordination complexity ▪ Increased coordination complexity ▪ Highest coordination complexity

66. 66 Where you can find savings in distribution

67. 67 In distribution there are number of standard places where you can find savings Warehousing Distribution Logistics Cost per kilometer Truck utilization Frozen capital Warehousing space Number of kilometers Waste in transport Waste in warehousing Allocation of equipment Stock outs ▪ Consolidate transportation contracts and negotiate prices ▪ Change trucks ▪ Reduce fuel consumption ▪ Check of real km with the planned ones ▪ Move orders to another distribution center/plant ▪ Change routing ▪ Sell return trips ▪ Consolidate transports to the same direction / region ▪ Introduce second level in trucks ▪ Improve of pallets controls ▪ Improve the control of expiry date ▪ Introduce FIFO ▪ Improve security checks ▪ Reallocate resources to other locations ▪ Centralize warehouses ▪ Negotiate price ▪ Reorganize warehouses ▪ Find optimal levels of stocks with respect to loss revenue due to stock out and cost of frozen capital

68. 68 Typical problems in Distribution

69. 69 There are a few typical problem usually occur in logistics Potential Problem ▪ Lack of control over the flow of goods in distribution channels Analysis needed ▪ Not optimal distribution model (distribution channel structure, location, distribution centers number. Analysis of distribution stage etc.) Logistics ▪ Employed resources (people, cars, fork lift trucks etc.) are higher than needs ▪ Low usage of cars ▪ Low planning of car routes ▪ Low customer service level (OTIFEF) ▪ Low level of returnable packaging return ▪ Level of control over goods in distribution channels (access to stocks in warehouses in specific channels) ▪ Identification of alternative distribution models (Best practices analysis, Competition analysis) ▪ Analysis of employed resources usage (f.e. Number of shipments per one car, number of loading per one fork lift truck etc.) ▪ Analysis of cars utilization (number of goods transported vs. cars capacity) ▪ Analysis of car loading methods ▪ Analysis of car packing / palletizing methods ▪ Low customer service level (OTIFEF) ▪ Analysis of OTIFEF (execution of dispatch on ticme, fully, without mistakes) ▪ Analysis of routes planning process, random analysis of real routes ▪ Packaging sent vs. returned

70. 70 There are a few typical problem usually occur in stock management Potential Problem ▪ Not optimal stock level (too less – shortages, too much – risk of outdating, frozen capital, wrong exploitation of depot etc.) Analysis needed Stock management ▪ Analysis of the lever of order realization (number of executed vs. number of accepted ) – Analysis of lost sales ▪ Analysis of products availability within last months ▪ Analysis of stock level vs. average monthly sale (sale coverage with stocks, outdating risk) ▪ Analysis of the way in which stock level are evaluated ▪ Low usage of warehouse space ▪ Stocks levels vs. warehouse capacity (number of pallets stored vs. theoretical number of pallet places), Analysis of warehouse organization ▪ Employed resources (people, cars, fork lift trucks etc.) are higher than needs ▪ Analysis of the usage of employed resources (i.e.. number of loadings per one forklift, etc.), benchmarking between warehouses / production plants ▪ High warehouse losses (shortages, damages, utilization etc.) ▪ Analysis of warehouse losses costs and reasons ▪ High value of spoiled goods (f.e. outdated) ▪ Analysis of costs related to spoiled goods

71. 71 For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15

72. 72 Sales forecasting and customer service - general information

73. 73 Introduction to sales forecasting and customer service

74. 74 Sales forecasting is about predicting the future demand. You want to figure out ahead of time how much products, what products and when the customer will need

75. 75 In this section you will learn 3 things Goals of sales forecasting and customer service Sales forecasting and customer service value drivers Typical problems in sales forecasting and customer service

76. 76 Sales forecasting Production planning Procurement plan Resource planning Corporate budget Target setting for sales force Negotiations and contracting Maintenance planning Sales forecasting is important part of the supply chain as it will influence all other elements

77. 77 Goals of Sales forecasting and customer service

78. 78 The primary goals of sales forecasting is to guess what the customer will need but also make sure that you can achieve planned EBITDA Achieve budgeted EBITDA Keep or grow shares in the market Minimize capital employed ▪ Try to keep as little as possible inventory in the system ▪ Try to minimize required assets ▪ Have the stock on-time ▪ Have the stock in the right place and quantity ▪ Balance lost sales with costs ▪ Plan the amount of goods in the system that will allow the firm to achieve the assumed goals

79. 79 Sales forecasting and customer service value drivers

80. 80 We have number of drivers through which sales forecasting can influence the EBITDA of the company Sales forecasting and customer service Accuracy and frequency of sales forecasting Order lead time Number of complaints CRM capabilities Availability of customer service Driver Impact on ▪ Number of stock-outs, back- orders, production costs, shrinkage and waste ▪ Client satisfaction, ▪ Ability to win new contracts ▪ Ability to win early/ late orders (especially in FMCG) ▪ Client retention ratio , ability to win new clients ▪ Client loyalty , ability to win new clients, operating costs

81. 81 Typical problems in Sales forecasting and customer service

82. 82 There are a few typical problem usually occur in Sales Forecasting Potential Problem ▪ Low accuracy of sales forecasts Analysis needed ▪ Low stability of sales plans, frequent changes Creating the sales forecast / plan ▪ Low level of detail planning ▪ Short planning horizon ▪ Not optimal customer service process ▪ Time of accepting orders („panic orders”) ✓ Logistics parameters (orders scale, delivery time) ✓ Time of passing orders to its execution ▪ Unstable inflow of orders during the month ▪ Real sales vs. sales plan (for SKU) ▪ % of coverage by sales plan real sales (i.e. for customers) ▪ Sales planning process analysis (who, when, input data etc.) ▪ Number and scale of plan corrections a month/week ▪ Level of detail planning vs. procurement/production needs ▪ Sales planning horizon vs. production planning horizon vs. „lead time” and stock management model ▪ Analysis of customer service process (process mapping) ✓ Number of orders accepted in particular hours / time of day ✓ Average scale of deliveries (total and for SKU), time of filling the orders ✓ Time of accepting order vs. time of passing the order ✓ Analysis of sales within a month ▪ Analysis of sales by weeks Receiving and managing the orders

83. 83 Production Planning - general information

84. 84 Introduction to Production Planning

85. 85 In production planning you have to decide how to organize production so that it is optimal not only from the point of view of production but the whole supply chain

86. 86 In this section you will learn 3 things Goal of production planning Production Planning value drivers Typical problems in Production Planning

87. 87 Goals of Production Planning

88. 88 The primary goals of Production Planning is to efficiently produce, with low inventory and providing at the same time on time delivery Efficiency of production High Customer Service Low inventory ▪ WIP ▪ Finished Goods ▪ Raw Materials ▪ High utilization of machines ▪ Smooth production ▪ Low costs ▪ On time delivery ▪ Delivery according to the order

89. 89 Production Planning Value Drivers

90. 90 Several drivers related to production planning have impacts on value generation Production planning Allocation of products to machines/ production routes Machine utilization Batch order Batch size Driver Impact on ▪ Machine efficiency, throughput, waste level ▪ Delivery time, throughput, costs ▪ WIP level, lead time, efficiency of machines, waste level ▪ Waste level, efficiency of machines (set up time), lead time Variability ▪ Delivery time, throughput, waste level

91. 91 Typical problems in Production Planning

92. 92 There are a few typical problem usually occur in production planning Potential Problem ▪ Production planning process not linked with sales planning process Analysis needed ▪ Production planning does not take into account machine park abilities, production plan does not optimize OEE, i.e.: ✓ Short production batches ✓ Frequent setups / losses of raw materials ✓ Products not ascribed to machines on which their production is optimal ▪ Low stability of production plans ▪ Real production differs from production plans ▪ Short planning horizon Production planning vs sales planning process ▪ Analysis of production planning process (process mapping) ▪ Number and scale of plan corrections a month / week Production planning vs production ▪ Analysis of the logic behind planning model used (production for warehouses vs. production as a realization of orders) ▪ Analysis of production planning efficiency (impact on OEE): ✓ Analysis of planned downtime (frequency and length of setups) ✓ Analysis of production batches length in comparison with optimal batches length and scale of orders / sale in regarded period ✓ Analysis of the level of shortages on different production lines / for different length of production batches ▪ Production planning horizon vs. „lead time” and stock management model ▪ Real production vs. production plan

93. 93 Purchasing - general information

94. 94 Introduction to Purchasing

95. 95 Purchasing is extremely important part of the supply chain. It is the stage at which you get the right materials or goods for your business, hopefully at the right time and price

96. 96 In this section you will learn 3 things Goal of Purchasing Purchasing value drivers Typical problems in Purchasing

97. 97 Goals of Purchasing

98. 98 The primary goals of Purchasing is to buy what is needed at lowest possible cost and keeping low inventory at the same time On-time and free of error Minimize the total cost of usage / ownership Low Inventory ▪ WIP ▪ Finished Goods ▪ Raw Materials ▪ Take into account not only cost of purchasing but also all related costs (i.e. waste, efficiency changes in production ▪ Take into account cost of warehousing and frozen capital ▪ On time delivery ▪ Delivery according to the order

99. 99 Purchasing value drivers

100. 100 Several drivers related to purchasing have impacts on value generation Purchasing Reviewing specification of purchased materials Purchasing planning Renegotiation of Contracts Consolidation of suppliers Driver Impact on ▪ Cost of goods sold (COGS) ▪ Waste ▪ Inventor ▪ COGS ▪ Waste ▪ Inventory ▪ Better prices ▪ Better prices and terms of payment ▪ Cash Flow ▪ Shorter lead times and Lower inventory Centralization of purchasing ▪ Better prices and terms of payment

101. 101 Typical problems in Purchasing

102. 102 There are a few typical problem usually occur in Purchasing (1/2) Potential Problem ▪ Purchasing planning process not linked to production / sale planning process Analysis needed Purchasing planning process ▪ Analysis of purchasing planning process (process mapping) ▪ Analysis of materials and raw materials stock level vs. average usage ▪ Analysis of stock aging and identification of lingering stocks ▪ Not optimal stock level (too small – setups, too much – risk of outdating, frozen capital, wrong exploitation of depot) ▪ Analysis of materials and raw materials stock level ▪ Analysis of production downtime reasons ▪ Analysis of materials / raw materials availability ▪ Fragmented or too monopolized supplier base ▪ Analysis of suppliers for specific purchase items number ▪ Non-market prices for materials, raw materials and services (purchasing power used to a small extent) ▪ „Value stream” analysis ▪ Benchmarking between production plants / companies / direct and indirect competition / other customers you have worked for ▪ Competitive offers analysis (sending offers to alternative suppliers) ▪ Analysis of optimal orders scale ▪ Analysis of prices in time / Analysis of reason of changes ▪ Specification or / and quality of materials, raw materials and services not matched to needs ▪ Analysis of specifications, present level vs. required level, analysis of competition specifications, analysis of specification change possibility (f.e. by usage of optimizing units) Suppliers Materials

103. 103 There are a few typical problem usually occur in Purchasing (2/2) Potential Problem ▪ Insufficient control system / Inadequate tools: ✓ Insufficient control of deliveries quality ✓ Insufficient control of delivered raw materials’ quantity ✓ Insufficient control of raw materials’ prices on the world’s markets ✓ Inadequate tools for control of purchasing budget and expenses realization ✓ Lack of clear purchasing procedures Analysis needed Competencies and Procedures ▪ Analysis of tools used to control ✓ Quality of deliveries ✓ Quantity of delivered resources ✓ Raw material prices on the world’s market ✓ Purchasing budget and expenses ▪ Analysis of purchasing procedure (process mapping) ▪ Databases of suppliers / purchasing items / specifications etc. ▪ Low competences of procurement department employees ▪ Analysis of employees’ competences: ✓ Experience / knowledge of the suppliers market and industry ✓ Negotiation, analytical and organizational skills ▪ ‘Excess’ of purchasing procedures ▪ Not optimal organization and location of purchasing department ✓ Too centralized / decentralized ✓ Weak purchasing position in comparison with other departments (position in the organizational structure) ✓ Function situated „far from Board of Directors” ✓ Wrong competences division inside department ✓ Lack of motivating system for traders ▪ Analysis of traders work time division ▪ Analysis of purchasing department organization ▪ Products introduction / change of products does not take into raw materials stock level / materials stock ▪ Stock rotation vs. changes in products portfolio

104. 104 For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15

105. 105 Retail - Examples of business analyses of Supply Chain

106. 106 Introduction to Retail section

107. 107 This section will cover 3 things Overview of the Retail Supply Chain Main Challenges in Supply Chain Cases of Business Analyses

108. 108 Overview of Supply Chain in Retail

109. 109 Retail has become extremely competitive. Retail supply chain has become extremely complicated due to having some of the supplier far away, multichannel, increased importance of private labels and bigger changes in external conditions

110. 110 Retail supply chain is not only long and involves many parties but also is fluctuating a lot

111. 111 Main challenges in Supply Chain in Retail

112. 112 There are number of challenges in the Supply Chain in Retail Managing suppliers in Far East Managing your own brand Long Supply Chain and Long Lead Time Local differences on markets where it operates Automation Increasing cost of labor at your country and China Supply chain activities in the stores More extreme weather conditions Multichannel New retail concept including manufacturing Big Data for Planning and Allocation

113. 113 Introduction to cases for Retail

114. 114 In this section I will show you examples of analyses that you will be doing in retail for supply chain Groceries – warehouse optimization Fashion – division of products for 2 business units Kids ware -measuring the costs and the capacity of central warehouse Convenience stores – analysis of tariffs Pharmaceuticals – how to manage long tail DIY – internal logistics optimization

115. 115 To see the cases go to my online course. Below a link with a nice discount. You will find there the cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15

116. 116 FMCG - Examples of business analyses of Supply Chain

117. 117 Introduction to FMCG section

118. 118 In this section consists of 3 parts Overview of the FMCG Supply Chain Main Challenges in Supply Chain Cases of Business Analyses

119. 119 Overview of Supply Chain in FMCG

120. 120 FMCG are all branded goods that you consume frequently during the year. In this category we have food, cosmetics and other similar products

121. 121 FMCG supply chain is pretty complicated on the outbound side – the distribution to end-customers

122. 122 Main challenges in Supply Chain in FMCG

Supply Chain for Management Consultants & Business Analysts

Supply Chain for Management Consultants & Business Analysts

Recommended

More Related Content

What's hot

What's hot(20)

Similar to Supply Chain for Management Consultants & Business Analysts

Similar to Supply Chain for Management Consultants & Business Analysts(20)

More from Asen Gyczew

More from Asen Gyczew(17)

Recently uploaded

Recently uploaded(20)

Supply Chain for Management Consultants & Business Analysts