The document discusses sourcing complex categories using market informed sourcing. It provides examples of sourcing flexible films and personal hygiene products for large companies. Traditional category management limits options by defining requirements upfront, whereas market informed sourcing allows suppliers to propose flexible options and alternatives. This unlocks greater value and savings of 15-45% compared to 5% expected from traditional negotiations. The approach collects a large number of proposals from suppliers on inputs, processes, and costs to identify optimal sourcing solutions.
Best Practices in demand driven contract packaging – Peak Vs Weak seasons
The outsourcing of packaging operations is an area which has witnessed significant growth in the recent years. Companies in a range of industries see value in the practice, particularly with regard to increasing flexibility, reducing costs and risks. Meeting peak season (Christmas, major sports events/festivals) demand while maintaining margins has become a huge challenge for Consumer Packaged Goods (CPG) and Food, Beverage and Tobacco (FBT) companies.
Watch Beroe’s packaging experts, Ishpreet Virdi and Abhiraj Munnangi, as they discuss best practices followed across the CPG and FBT industry to meet peak season demand spurts and the evolution of contract packaging services in emerging markets.
About the speaker:
Munnangi Abhiraj - Munnangi Abhiraj is a packaging expert at Beroe Inc. He specializes in providing Rigid and Flexible packaging formats related procurement intelligence to Fortune500 companies. In his 2 years at Beroe, Abhiraj has built extensive knowledge and expertise in categories including Rigid and flexible packaging in the end use markets such as pharmaceuticals and Consumer packaged goods among others. He has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics he has covered in his papers include “Parenteral Packaging: Raw Material Substitution and Procurement Impact” and “Regulatory Panorama and Regional Acceptance of CR Formats of Packaging”.
Ishpreet Virdi - Ishpreet Virdi is a packaging expert at Beroe Inc. She specializes in providing Flexible packaging formats related procurement intelligence to Fortune500 companies. In her 2 years at Beroe, Ishpreet has built extensive knowledge and expertise in categories including pouches, sachets, bags and laminates among others. She has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics she has covered in her papers include “Stripping complexities with Strip, Stick and Blister Packs” and “Flexible Packaging – The Game Changer for CPG Companies”.
Best Practices in demand driven contract packaging – Peak Vs Weak seasons
The outsourcing of packaging operations is an area which has witnessed significant growth in the recent years. Companies in a range of industries see value in the practice, particularly with regard to increasing flexibility, reducing costs and risks. Meeting peak season (Christmas, major sports events/festivals) demand while maintaining margins has become a huge challenge for Consumer Packaged Goods (CPG) and Food, Beverage and Tobacco (FBT) companies.
Watch Beroe’s packaging experts, Ishpreet Virdi and Abhiraj Munnangi, as they discuss best practices followed across the CPG and FBT industry to meet peak season demand spurts and the evolution of contract packaging services in emerging markets.
About the speaker:
Munnangi Abhiraj - Munnangi Abhiraj is a packaging expert at Beroe Inc. He specializes in providing Rigid and Flexible packaging formats related procurement intelligence to Fortune500 companies. In his 2 years at Beroe, Abhiraj has built extensive knowledge and expertise in categories including Rigid and flexible packaging in the end use markets such as pharmaceuticals and Consumer packaged goods among others. He has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics he has covered in his papers include “Parenteral Packaging: Raw Material Substitution and Procurement Impact” and “Regulatory Panorama and Regional Acceptance of CR Formats of Packaging”.
Ishpreet Virdi - Ishpreet Virdi is a packaging expert at Beroe Inc. She specializes in providing Flexible packaging formats related procurement intelligence to Fortune500 companies. In her 2 years at Beroe, Ishpreet has built extensive knowledge and expertise in categories including pouches, sachets, bags and laminates among others. She has written and published several thought leadership papers in leading global Packaging Magazines. Some of the topics she has covered in her papers include “Stripping complexities with Strip, Stick and Blister Packs” and “Flexible Packaging – The Game Changer for CPG Companies”.
Jumpstart Success in Your Supply Chain: What Resilience Means in 2021Aggregage
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Supply Chain Network Design: Key Questions for a Successful Distribution NetworkHannah Flynn
As we plan for the world of eCommerce and the customer expectation of quick, free shipping, our ability to forecast is turned on its head. How many distribution centers do we even need, and is that number feasible? Can we use historical data to plan for demand and design our networks, or is there a better way?
If we're going to offer the speed of shipping and variety of inventory that today's customers have come to expect, there are a lot of different questions that need to be asked. Join Irina Rosca, Director of Supply Chain Operations at Helix and an experienced global supply chain strategist, as she walks through the key questions to a successful and efficient distribution network. You'll leave knowing what data you can start collecting today to answer these questions.
Return to Basics: Supply Chain Re-design ..'Isc' turkey 2015Walaa Maher
What is Supply Chain/Network redesign basics .. ... Not saying it is the best or working 100%.. just it worked for me every time in every company... and themed with Frank Sinatra :)
Jumpstart Success in Your Supply Chain: What Resilience Means in 2021Aggregage
If you thought your supply chain was resilient before 2020, you may have been proven very wrong. If your supply chain is still feeling the effects of the pandemic, you may feel that the insights and lessons are yet to be distinguished among the mess--that's what we're here for. Join Scott Wooley, President of Thermal Solutions at Atlantic Tape and Packaging, and redefine what a resilient supply chain is.
Supply Chain Network Design: Key Questions for a Successful Distribution NetworkHannah Flynn
As we plan for the world of eCommerce and the customer expectation of quick, free shipping, our ability to forecast is turned on its head. How many distribution centers do we even need, and is that number feasible? Can we use historical data to plan for demand and design our networks, or is there a better way?
If we're going to offer the speed of shipping and variety of inventory that today's customers have come to expect, there are a lot of different questions that need to be asked. Join Irina Rosca, Director of Supply Chain Operations at Helix and an experienced global supply chain strategist, as she walks through the key questions to a successful and efficient distribution network. You'll leave knowing what data you can start collecting today to answer these questions.
Return to Basics: Supply Chain Re-design ..'Isc' turkey 2015Walaa Maher
What is Supply Chain/Network redesign basics .. ... Not saying it is the best or working 100%.. just it worked for me every time in every company... and themed with Frank Sinatra :)
e-Sourcing 101: The Procurement Professional's Practical Guide to Strategic S...PROACTIS, Inc.
This SlideShare is a preview to the e-Sourcing Essentials eBooks - a series designed to take readers from the basics to advanced concepts of e-sourcing tools and processes.
Strategic Sourcing and B2B E Commerce Solutions For ASEAN Purchasing Professi...Bill Kohnen
As ASEAN regional demand grows the skill of Purchasing professionals in the region will need to change from the current focus on export industries and tactical BPO industries. Specifically developing core Strategic Sourcing skills and utilizing B2B E Commerce Solutions in ways optimized ASEAN demand will be important. 2015 PASIA Conference discussion presentation.
Best Practices in Vendor Management, Strategic Sourcing, Procure to Pay and D...SAP Ariba
Supplier Relationship Management Initiatives are playing a critical role to drive Sustainable savings, operational efficiency and optimizing cash in many organizations especially in today's highly volatile commodity markets and risk-prone global supply chains. Yet many organizations do not realize the ROI and value that can result out of a best in class Supplier Relationship implementation that addresses all aspects of Spend categories including complex services. This session would focus on best practices that can be employed across the entire Procurement life-cycle including Invoice and Payment processes that help achieve quantifiable ROI and value.
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KEY ELEMENTS OF SUPPLY CHAIN STRATEGY
A supply chain strategy involves many interlocking activities and decisions, large and small. According
to Michael Porter, strategy guru and author of Competitive Advantage, successful business strategy relies
on the concept of “fit”—that is, a group of activities that support a chosen competitive strategy.
Although any single activity can be copied, the activities taken together form a system that is virtually
impossible to duplicate.9
Porter’s concept of fitness holds equally true for supply chain strategy. Five elements of your
business—and the choices you make regarding these elements—are fundamental:
Customer service. What are your objectives in terms of delivery speed, accuracy, and
flexibility?
Sales channels. How will your customers order and receive your goods and services?
Value system. Which supply chain activities will be performed by your organization and which
by your partners?
Operating model. How will you organize the planning, ordering, production, and delivery
processes to provide customer service while still meeting your working capital and cost
objectives?
Asset footprint. Where will you locate your supply chain resources, and what is their scope of
action?
Companies often make decisions about each of these elements in isolation, without considering the
others. It’s possible, for example, to develop a manufacturing footprint that reduces costs, only to fall
short of required customer-service levels. To get the full strategic benefit a supply chain can offer,
however, it’s critical to treat each element as part of an integrated whole (Figure 1.2).
Figure 1.2 Elements of Supply Chain Strategy
https://jigsaw.vitalsource.com/api/v0/books/0071846646/print?from=9&...
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Page 11
CUSTOMER SERVICE
The first step in developing a supply chain strategy is to define customer service objectives. Offering
various levels of delivery speed, accuracy, and flexibility for different types of customers can help
distinguish the overall customer experience. Should, for example, deliveries reach all customers in the
same amount of time, or should customers who are more valuable receive deliveries faster? Should the
ordering process be the same for all customers? Answers to questions like these will be dictated by your
company’s business strategy and target audience—that is, whether you are addressing B2C or B2B
segments.
Business to Consumer
In the B2C world, off-the-shelf product availability is often the key service criterion. Customers are
willing to wait for hot products from a leading brand—but only up to a point. Retailer Nordstrom
introd.
Companies are relocating manufacturing and sourcing to regions with lower labour costs to stay competitive. This affects the efficiency of warehousing and distribution. But which elements, in particular, will be strategically important in the next two years?
Markets are changing – as are customer and service requirements. You may have implemented a new manufacturing and supply chain setup, but customers are asking for more frequent and faster deliveries.
The key to staying competitive is how quickly you can get your products from the warehouse to your customers. This can challenge your operations and calls for a review of your warehouse and distribution setup.
We asked our international clients which themes, within warehousing and distribution, they believe will have the most strategic relevance within the next two years. Here are the top five.
Solutions which focus on easy collaboration, visibility and efficiency, across your entire supply chain.
Maximize your profit, reduce costs and increase competitiveness, definitely, with these solutions.
This booklet explores a few use cases of analytics for the supply chain and how it can be leveraged.
For more info visit: https://www.teamcomputers.com/businessanalytics/Supply%20Chain/Booklet-Supply-chain-Digital.pdf
Presentation of the workshop on Public Procurement, Dynamic Purchasing Systems, held in Ankara on 10 April 2018. Presentation made by Mr. Paul Smith, SIGMA.
Strategic Role of Purchasing
Purchasing Portfolio
Supplier Selection
Customer Centric Supply Chain
Supply Chain Management
Supply Chain Management in the 21st Century
Research Topics in Supply Chain Management
Risk Management can be applied to everything we do, however it is sometimes only considered once the issue is apparent.
How can we as procurement professionals identify, manage and mitigate the risk associated with both our supply chain and our roles? Are we allowing the tools we may already have at hand to support and guide us?
Identification is the most difficult element of Risk Management, and we look at how to capture known Risks and Issues through the use of planning tools, including Programme Management. We will also discover how Evaluation can mitigate risks and minimise potential challenges.
As part of the interactive presentation, we introduced the audience to the concept of Vendor Performance Management and the ability to capture, understand and act upon information before a risk is transformed into a problem. The concepts, techniques and technology were brought together via a real customer case study.
Throughout this session the human element will remained a constant, as the most important factor to consider...
BravoConnect 2014: Post Office on Procurement Savings Identification, Forecas...BravoSolution
Procurement is its own worst enemy. After working hard for many years to increase awareness in the boardroom, the boardroom is now asking for more savings and faster. Gone are the quick wins of old, now savings are hard earned and must be carefully managed to ensure they deliver on promises.
Procurement professionals are therefore faced with the task of identifying ever more complex savings opportunities, assessing their potential value, complexity and risk, implementing the initiative, and then tracking the realisation of the opportunity through compliance and performance metrics. Finance will also quite rightly want to be involved in order to understand the real financial impact on the bottom line… often with a different viewpoint than Procurement.
The presentation covered the types of saving that can be identified, common pitfalls to watch out for when identifying and claiming savings, and the KPIs that can be used ensure visibility of the solution.
BravoSolution offer a flexible set of solutions to assist procurement professionals manage the complexities of delivering a complex savings programme and the session will include a hands on look at these covering spend analysis, savings identification and management, approvals, and forecasting.
The session also saw case studies presented by Amcor, a global packaging leader and the Post Office, a retail, finance and insurance organisation.
In many organisations, Procurement is beginning to see Risk as part of their responsibilities, second only to savings. In this presentation we will look at identifying risk and consider how it might be treated to arrive at the best Risk solution for your organisation.
Real world sourcing - Making Spend Analysis WorkBravoSolution
Too often Procurement functions are hamstrung by their lack of spend data. Even when sophisticated Spend Analytics are available, the power of the available information and analysis is not harnessed. This session aims to talk about making the most of the spend data you have.
Real world sourcing - Taking on a New CategoryBravoSolution
Starting a new category, whether an experienced practitioner or a newcomer to the procurement profession can be a daunting prospect. However the process is remarkably similar regardless of the specific category.
The briefing laid out a plan of approach for taking on a new category, or starting out on Category Management for the first time.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
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Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
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Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
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3. 3
Peter Hodgkinson
• 11 Years Supply Chain and
Procurement experience
• Proven ability to define and deliver
savings and efficiency programmes
for clients
• MCIPS qualified and MBA, Strategy
and Procurement Management, led
by Professor Andrew Cox at
Birmingham University Business
School
• Proven ability to implement solutions
which evolve with clients
requirements
4. 4
Sourcing a Complex Category
What, Why, How, When & Who?
Peter Smith | Spend Matters UK & Europe
5. 5
About Peter Smith
• Managing Editor of Spend Matters
UK/Europe
• Procurement Director for Dun &
Bradstreet Europe, the Department
of Social Security, and the NatWest
Group.
• Fellow and 2003 President of CIPS
• MA in Mathematics from
Cambridge University
• Co-authored book, “Buying
Professional Services”, published
in June 2010.
6. 6
1. Introduction
2. Traditional Procurement and Category Management
3. Sourcing a Complex Category with Market Informed
Sourcing?
4. How does it work – and why is it valuable?
The Sourcing Revolution
7. 7
A requisition comes into the procurement department
OR
The factory requires something, usually specified by the line
manager or engineering, design, R & D...
In both cases, procurement is told – with some precision in
most cases – what it should go out and source / buy from the
market
Traditional Procurement
8. 8
• Procurement (maybe with stakeholders) defines a set of categories,
sub-categories
• Takes a pro-active approach to determining the best way of
purchasing each category
• Procurement analyses the market, relates that to the internal
requirement
• Procurement approaches the market – or a few suppliers – with a
well-defined requirement in terms of quantity, specification, etc.
Category Management
9. 9
Strengths:
• Proactive
• Links business needs to market and suppliers
• Considers aggregation and leverage
• Well-structured and repeatable process
BUT...
• It assumes that the buyer understands how to frame the
requirement better than the market
Category Management
10. • You are buying fresh tomatoes for Milano Foods, who
use them in a number of finished consumer products,
made in a number of European factories
• Production is all year round, but varies month by month
in terms of quantity
• What are the variables you might wish to consider in your
specification and in suppliers’ responses?
Exercise
11. • Volume needed
• Number and location of production sites
• Usage quantities / schedules
• Number of suppliers (is dis-aggregation allowed?)
• Shelf life
• Delivery dates / times – inc. collection options
• Quality – specification and substitution variables
• Price – basic, volume related, delivery size etc.
• Conditional price factors (“if / or”)
Buying tomatoes - What are the variables?
12. • The complexity of the requirement is evident!
• That means we tend to drive towards a standard solution that the
suppliers can make offers against
• That enables us to handle the multiple variables and make
rational assessment of the alternatives
Buying tomatoes - What are the variables?
13. • If we allowed suppliers to suggest alternatives, we simply couldn’t
cope with the complexity in terms of the responses from multiple
suppliers
• We would not be able to analyse the sheer amount of data, and the
options it would contain
• So we apply Category Management – we second guess the market
through research and strategising
• We then decide in advance how many suppliers we want, delivery
quantities, timings, the quality levels, specifications, max / min
volumes and other parameters
Why do we use Category Management?
14. • But this is not the best way of doing things!
• It restricts suppliers’ flexibility to offer alternatives – part-offers,
alternative specifications, time constraints – which might provide
value
• But we limit this because doing so is just the only way we can run
manageable and fair sourcing exercises
• BUT... There is now an alternative, which is generating savings of
20%+ even for firms who have done CatMan well for years!
Why do we use Category Management?
15. • I can supply 100 tonnes of tomatoes each month between March
and October but only to your two factories in Spain and France, at an
“A” quality level.
• I am happy to supply a minimum of three months (consecutively ) but
I will not contract for just one or two months.
• I can deliver and here are my rates depending on delivery size to
each factory – on top of my ex-farm price. OR you can organise
shipment if you prefer.
• If you contract for the whole 1600 tonnes I will offer an additional 2%
discount. If you buy 500 tonnes of peppers as well, there is an
additional 1% on the table.
What is Market Informed Sourcing?
16. • We close options down not because it is the best way of managing
the sourcing problem
• We do it because otherwise we just don’t know how to cope with the
complexity of the alternative
What is Market Informed Sourcing?
19. Defining complexity
• The size and nature of the supply market - a greater number of suppliers, or a
wider geographic spread, will potentially increase the complexity of the process.
• The number of ‘lines’ or items that need to be purchased; so a finished product
with many individual components, or a transport contract with many ‘lanes’, has
intrinsic complexity.
• The scope or spread of the requirement in terms of the purchasing organization; so
if we need the item delivered to 45 different company offices or factories situated in
47 various countries from Australia to Peru, then the activity is intrinsically more
complex than a single delivery point.
• The number of users or stakeholders internally; as their numbers increase, so too
will the likely complexity or breadth of the requirement, and the need to align a wide
group of people with the process and the outcome of the procurement.
20. • The potential for dis-aggregation of the requirement i.e. whether suppliers can offer
some of the entire requirement rather than the totality; if there are multiple items, is
it feasible for suppliers to offer a subset of the total package?
• The timescale over which the purchase is to be made. So a single one-off
purchase is easier to source than an item or service that will be delivered in lots or
continuously over an extended time period.
• The potential for substitution; can suppliers offer alternatives to the goods or
services specified by the buying organisation?
• Supply chain dependencies or critical paths; if items A and B are needed in order to
produce item C, then I may have to consider that critical path . There may also be
the option to consider disaggregating that supply chain rather than going for an
integrated single supplier approach.
• Supplier-created dependencies; situations in which a supplier can make conditional
offers; for instance, ‘I can only offer you this price on item A if you also buy item C
from me’.
Defining complexity (continued)
21. A major food company runs an annual European logistics tender.
The basic parameters are:
• 1,000 Routes
• 90,000 Movements
• 200 Hauliers
• 60 Factories
(Other criteria – quality, green issues, speed of response – also take
into account)
Defining complexity (continued)
22. Another Example
A firm requires a complex printed product; a catalogue, brochure or
similar perhaps. Assume the quantities are such that one or more major
printing suppliers will be required. The product is required in large
quantities across 30 countries; it then needs to be delivered in batches to
over 100 locations in those countries.
So, while the product itself is relatively easy to specify, the supply chain
has a number of different elements, principally:
• The base paper required for the product
• The printing process – ‘ink onto paper’
• Assembly and binding of the product
• Intermediate storage and stock-holding
• Delivery to the final customer locations
How would you approach the market?
23. Another Example
• So what is the best way of structuring the supply chain?
• How aggregated or dis-aggregated should it be?
• What is the right number of suppliers?
• How about location of suppliers?
A perfect problem for an optimisation / market-informed sourcing
approach
Allow the market to suggest the “best” way of doing this
24. How does it work?
A request is presented to the market, with as many options and variables
as required.
That might include supply to different factories by month / quantity /
specification; or quotes for different routes (lanes) and load sizes / types
in a logistics situation.
Suppliers respond (electronically) and the platform then runs the
optimisation calculation using complex mathematical algorithms.
The optimal solution is calculated, which can then be further interrogated.
25. After the initial optimisation analysis, the user can then look at different
scenarios. For instance:
•Reduce the number of suppliers
•Spread the geographic risk e.g. Country of origin
•Spread the supplier risk – maximum share of volume
•Maximum suppliers per country / site
•Preferential treatment for incumbents
•Preference for SMEs, minority owned businesses
In each case, the system can assess the premium that would be paid
against the initial optimal solution
How does it work?
26. • Leading adopters have seen average 15-20% saving even where
category management has previously been well implemented
• Understanding of supply chain and opportunity to widen the supply
base e.g. SME participation
• Supplier perceptions improved – they feel they are being given the
chance to express different options and contribute their ideas
• So although it has some of the ‘toughness’ of auctions (and can
even be combined with elements of auctioning), it supports good
collaborative relationships and supplier innovation
• Transparency is also very strong
The Results
27. • Some users are going beyond “just” sourcing and using the
technology for wider issues
• That can include production planning, manufacturing optimisation,
supply chain and related issues
• For example, internal production capabilities can be built into the
calculations along with external providers so make / buy decisions
can be included in the analysis
The Results
28. • Very simple contract requirements or categories may not justify the time or
effort needed to run a MIS process.
• If the requirement is very clear and there is no possible benefit in opening
options up to the market, then clearly MIS is not justified.
• MIS may not be suitable if there may be reasons above and beyond the
normal commercial objectives that mean, for instance, an organisation
wishes to develop a partnering relationship with a particular supplier.
• Even where MIS is worth using, judgement still needs to be applied in terms
of how many options are considered. So you wouldn’t look to dis-aggregate
your FM requirement to the level where you asked for pricing per floor of
every building for the cleaning element of the contract.
• There will need to be careful thought around how MIS can be used in the
public sector, but we see no intrinsic reasons why that is not possible; for
instance, within a Competitive Dialogue process.
The Results
29. • Skills needed by the procurement executive change
• Less focus on market analysis and structuring a very definite tender
• Identification of the key variables and understanding of the market in
order to know how to frame the enquiry and the alternative criteria
for responses is key
• Understanding of the “what if” questions post event and the ability to
look at options creatively whilst meeting business goals
The Role of Procurement
30. In Summary
• Market Informed Sourcing does not replace Category Management,
but it changes the fundamental nature of the CatMan / strategic
sourcing process and requires a different process to be adopted by
buyers
• MIS allows the procuring organisation to open up options to the
market, instead of narrowing down which is the core of traditional
CatMan. That enables the market to reflect back true economic
factors in a manner that can benefit the buyer.
• Market-Informed Sourcing is the most significant development in
core procurement practice since Category Management
32. • Thought leader for advanced
sourcing techniques for over 15
years
• Broad supply chain expertise across
a range of industries and categories
• Proven ability to apply complex
problem solving skills to specific
customer challenges
• Thought leader and developer of
applied optimization techniques to
strategic sourcing and many other
supply chain solutions
• Proven ability to design and
implement customized category
management programs
Jeff Ryan
33. Client
Project
Company
Background
One of the largest meat processors in the
world with a network of 51 distribution
centers reaching supermarkets, retail and
wholesale markets, food service and other
institutional clients in more than 110
countries
Over 100 year old, American retailer,
representing largest supermarket chain
in the US; employs 343,000 associates
with sales close to $100 billion
Project HQ San Paulo, Brazil Cincinnati, Ohio
Scope
$R 254 million ($150 million)
2,124 items
$93 million annually
158 SKUs
Flexible Films Personal Hygiene
The Role of Procurement
34. Flexible Films Personal Hygiene
Requested pricing on existing
structures
Structures were historically
custom-engineered by supplier to
reduce competition
Avoided being in the market due
to regular resin increases
Expectation: 7% to 8% price
INCREASE
Merchandizing mentality /
Fragmented spend
Many costs buried for
convenience (e.g. artwork, plates,
promotional expectation, transportation)
Onerous terms (e.g. two year fixed price,
finished good inventory demands)
Recent direct negotiations
yielded 0%
Savings Prayer: Flat Savings Hope: 5%
The Role of Procurement
35. Enabler – Sourcing Optimization
Optimization
Engine
Complete proposal complexity
Includes all expressive offers (disparate bundles,
discounts, alternates, etc.)
Multiple levels of conditional pricing
Optimal
Award
Allocation
Real-world business rules
Team models buyer’s constraints
and hypotheses
Scenarios submitted through web
interface
Ensures feasibility of solution
Scenario Analytics
Scenario Comparisons
Solution Summaries
Solution Details
Operational Impacts
Negotiation Preparation
Implementation Support
Optimization technology embedded into a versatile scenario generation tool to
removes historical limitations on analysis
Supplier
Proposals
Buyer’s
Demand
Profiles
36. Don’t tell the supply base the answer; tell them the needs
Develop deeper understanding of supplier economics
Focus on supplier capabilities and interests
Lean on suppliers for creativity and innovation
Let proposal collection be expressive
RFPs are simply a study of the marketplace; decide later which
solutions make the most sense
Collaborative Principles
37. Expressive Features
Suppliers are given the capability to demonstrate more efficient approaches and
put their best foot forward
Flexible Films Personal Hygiene
Design alternate structures
Substitute supplier preferred
components (resins/films)
Propose various process capabilities
(printing, extrusion, lamination)
Generate more efficient run economics
(setup cost in many cases effectively reduced to zero)
Provide additional incentives (Bundle
discounts, volume discounts, payment terms)
Un-bury hidden costs (artwork, plates, displays,
freight)
Focus on commercial approach
- Share risk on volatile cost components
(price Indexing)
- Offer conditional strategic expansion
(proposed facilities, proposed equipment)
- Propose more meaningful contract duration
(3, 4, 5 years)
Consider full lifecycle and TCO
- Order frequency/size
- Distribution route (regional DC, local DC)
- Freight cost alternatives (LTL, TL, IM)
- Inbound terms (Delivered, Collect)
38. More proposals…less supplier effort; e.g.. from Flexible Films
Suppliers enter economic drivers; BCS creates
the proposals
2,124 Items
123 Functional
Spec Items
Supplier input
Collected at most
appropriate level:
• 40 material
components
• 8 conversion facilities
• 20 machine level
pricing
• 32 freight costs
-----------------------
100 inputs
~25
Structures
per supplier
For each structure (eg.)
• 2 material set choices
• 3 conversion facilities /
processes
• Shipping cost to 4 end locations
2 x 3 x 4 = 24 proposals
Each structure could satisfy eight (8)
functional spec items
8 X 24 = 192 proposals
Each function spec item maps to 20
items
20 x 192 = 3,840 proposals
Times 25 proposed structures
25 x 3840 = 96,000 proposals
World of Opportunity: 96,000 proposals x 47 suppliers = 4.5 million proposals
39. Proposal collection is the single biggest differentiator in advance sourcing;
better solutions from better proposals
Materials Process Packaging Final CostTransportation
692 305 573 Result: >2.5M
proposals
92
# of options provided across supply base
The Role of Procurement
40. Results
Project
Flexible Films Personal Hygiene
Expected Savings 0% 5%
Savings
Unconstrained 45% 20%
Short-term
Implementable
25%
$37.5 million
15%
$14 million
Looking Forward
Selected items with greatest
savings and least change for
immediate implementation
Chose to work on harder
implementations after PMI
activities slowed
Stuck with status quo in a few
valuable area to reduce
implementation challenges
Professing to work on artwork and
plate handling, brokerage,
distribution options, and inbound
freight terms conversion