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The ways of SCM transformation in the main competitive advantage of the company


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The ways of SCM transformation in the main competitive advantage of the company

  1. 1. The ways of SCM transformation in the main competitive advantage of the company <ul><li>Method 1 : Strategic sourcing </li></ul><ul><li>Vladislav Mandryka, Purchasing Specialist (indirect spending), </li></ul><ul><li>JSC Sarmat / SABMiller p. l. c. </li></ul><ul><li>E-mail : [email_address] </li></ul>
  2. 2. What does strategic sourcing mean ? <ul><li>Strategic sourcing is a process of systematic collection, subsequent analysis and evaluation of the internal and external data in order to develop the most appropriate strategy for selection of the suppliers. </li></ul>
  3. 3. Main aim of the strategic sourcing is : <ul><li>Optimization the spend analysis and achievement a partnership with a limited base of suppliers in order to decrease annual costs, improve quality, increase ROI, increase the quantity of JIT supplies etc. </li></ul>
  4. 4. Classic strategic sourcing 1 2 3 4 5 6 7 Continuous benchmarking and monitoring of Supply market Operational integration Negotiations management Sourcing strategy implementation Generation of the supplier portfolio Sourcing strategy development Identification of the commodity sourcing group
  5. 5. External profiling Internal profiling Step 1. Identification of the commodity sourcing group
  6. 6. Internal profiling <ul><li>Spend analysis ; </li></ul><ul><li>Analysis of specifications ; </li></ul><ul><li>TCO ; </li></ul><ul><li>Historical data analysis using ERP IS (Oracle Business Suite or SAP BI) </li></ul>
  7. 7. External profiling <ul><li>External profiling of the sourcing group involves understanding the supply market, both currently and prospectively. </li></ul>
  8. 8. Sources of information about the market are : <ul><li>online sources ; </li></ul><ul><li>catalogues ; </li></ul><ul><li>trade journals ; </li></ul><ul><li>trade directories ; </li></ul><ul><li>data bases of suppliers </li></ul>
  9. 9. Step 2. Sourcing strategy development Matrix of the supply market complexity High complexity – A few options Low complexity – A lot of the options Low Bottlenecks Non-critical opportunities Impact on the business   Strategic opportunities Consolidated opportunities High
  10. 10. Example of the matrix usage for the &quot;indirect costs“ product category <ul><li>The most effective solution for the product category such as &quot;indirect costs&quot; is to use a strategy of competitive selection of suppliers. It is important to establish long term partnership between the supplier and the consumer for follow-up of additional opportunities to reduce costs in such areas as replacement of goods, standardization and development of new products. </li></ul>
  11. 11. Step 3. Generation of the supplier portfolio <ul><li>a carefully thought-out inventory of evaluation criteria ; </li></ul><ul><li>a good fact base regarding each potential supplier ; </li></ul><ul><li>request for information (RFI). </li></ul>
  12. 12. Step 4. Sourcing strategy implementation <ul><li>economy of scale usage (consolidation of suppliers); </li></ul><ul><li>expansion of the supply scope (the development of the alternative sources); </li></ul><ul><li>an aggressive negotiation. </li></ul>
  13. 13. Step 5. Negotiations management <ul><li>preparation of RFP or RFQ and sending it to suppliers; </li></ul><ul><li>assessment of the benefits for each of the suppliers after receiving of our Purchase Order ; </li></ul><ul><li>each supplier's likely receptivity to our MDO (the most desirable opportunity); </li></ul><ul><li>identification of the supplier's various objectives ; </li></ul><ul><li>identification and assessment of the company’s leverage points ; </li></ul><ul><li>- relative position of one supplier vis-à-vis competitors; </li></ul><ul><li>plan for the negotiating session ; </li></ul><ul><li>overall communications plan </li></ul>
  14. 14. Step 6. Operational integration <ul><li>With a centralized strategic sourcing within the transnational company the main question is a further implementation of its results at the level of subsidiaries, i.e. at the operational level. If the company is not a transnational, the focus should be on the building of the online relationships with a new supplier or the creation of the new business relationships with existing ones. </li></ul>
  15. 15. Step 7. Continuous benchmarking and monitoring of the supply market <ul><li>Strategic sourcing is a permanent process. Therefore the comparative analysis of the supply markets should be conducted on continuing basis. With regard to the selected supplier this can mean such things as the establishment and monitoring of agreed KPI, updates regarding new products, and general market information that can be useful for demand planning. </li></ul>
  16. 16. <ul><li>Thank you! </li></ul>
  17. 17. Sources : <ul><li>Robert A. Rudzki, Douglas A. Smock, Michael Katzorke, Shelley Stewart, JR. Straight to the bottom line : an executive's roadmap to world class Supply Management. - J. Ross Publishing – 2005. – 288 p. </li></ul><ul><li>M.R. Leenders, P.F. Johnson, A.E. Flynn, H.E. Fearon. Purchasing and Supply Management - 13 edition - McGraw-Hill / Irwin – 2006 – 588 p. </li></ul>