Procurement Service Provider and Supply Chain Management Training

Procurement Service Provider and Supply Chain Management Training: -Lesson 3: Innovation and Opportunity -Lesson 4: The Three-to-Five Year Outlook Source One Management Services, LLC 724 Fitzwatertown Road Willow Grove, PA 19090 (215)-902 -0200 www. sourceoneinc. com

Lesson 3 Introduction l l A 1 percent reduction in the cost of purchased materials is equivalent to a 12 to 18 percent rise in sales growth Several reasons why that reduction is possible l l l New and better technology More companies and countries from which to source (globalization) Increasingly sophisticated approaches to managing the supply management function (Procurement Service Providers such as Source One Management Services, LLC for example)

Maturing and Scaling of Procurement Technology l Procurement Technologies can: l l Help curtail rogue spending Work efficiently with wider range of suppliers Simplify the sourcing process Help actively manage total costs Free E-Commerce tools such as www. Why. Abe. com provide Reverse Auctions, RFx, and Supplier Management

E-Sourcing Capabilities Becoming more sophisticated and popular l Have become more integral to eprocurement initiatives l Specialized capabilities are evolving: l l Facilitating easier interaction concerning contract language l Evaluating numerous variables on a large scale

PLM and RFID Systems l RFID (Radio Frequency Identification Systems) l Provides real-time defective product data, improves item tracking, aids suppliermanaged inventory processes l PLM (Product Life Cycle Management Systems) l Manipulates the relationship between the product life cycle and cost reduction opportunity

Global Sourcing and Supply Management Three major recent developments in the evolution of global sourcing: l l l More companies pursuing global supply base Increase in number of countries viewed as sourcing candidates Increase in quantity and variety of available products

Why Alternate Supply Sources? Worker Education l Size of Domestic and Export Market l Market Liberalization l l China’s admission into the WTO has assured commitments to reduce high tariffs l Abundance of low-wage labor available l China’s average hourly manufacturing wage is 60 cents an hour with a able workforce of 941 million

Global Sourcing Challenges Identifying and establishing new supplier relationships l Less advanced IT systems and information sharing l More research and due diligence must be done on overseas suppliers l Incorporating local business culture into negotiation strategy l

Approaches to Global Sourcing l l International Supply Management Office Local Joint Ventures l l Work with in-country enterprise to establish presence Trading Agent l “sourcing brokers”

Procurement Outsourcing l Cost reductions of 5 to 18 percent can result from an organization’s ability to: 1. 2. 3. 4. 5. 6. Drive contract compliance Source effectively Connect with a larger supplier base Operate more efficiently Address complex services spend Leverage technology more effectively Procurement Service Providers, such as www. Source. One. Inc. com can supplement internal procurement departments without risk.

Government Sourcing Practices l Practice Cost Avoidance l l Know the Market l l Manifest trust of the end users in the system Improve Supplier Management l l Cut through the Red Tape Build Confidence in Strategic Supply Management l l Be knowledgeable about what you’re sourcing Overcome Legislative Burdens l l Identify rogue spending and eliminate unnecessary cost adders Monitor supplier performance and adherence to contract terms Leverage Purchasing Power l NYCDOE as example of consolidating smaller spends to leverage pricing with suppliers

Financial Services Practices l Optimize Sourcing l l Rebuild the Procure-to-Pay Model l l i. e. Legal fees, advertising, market research Maximize Compliance l l Streamline processes Increase Use of Electronic Tools Apply Best Practices to Overlooked Spend Categories l l Make intelligent and informed sourcing decisions To realize optimum cost reduction and efficiency Develop Shared Services Programs Outsource Supply Management Functions l Complex strategies make outsourcing an attractive option

Chapter 4 Introduction l The Three-to-Five Year Outlook l CEO expectations for supply management l CPO expectations for supply management l How do we reach these goals?

CEO Expectations l Cost and Price Focus l l Brand Focus l l l Systems and software can only go so far Global Commerce Dominates Competition l l More than just the bottom line How do we get our name out? Technology Stagnation l l Take advantage of opportunities and strive for 100% compliance with initiatives Forward-thinking companies will have an edge Mass Industry Consolidation l More takeovers and buyouts

Critical Supply Management Questions l l l What business are we in? What are the ways to go to market? What are the business models we could use? What supply chains make sense in the given business model How can I synthesize existing supply chains? What next best practices should we create for competitive advantage?

Risk Management in Supply l l Risk assessment and management is becoming increasingly important Shift in focus from mitigation to optimization l How can we use risk analysis to our advantage?

How Do We Prioritize Supply Management? l Reach l l Measurement l l Make sure you’re getting the most out of suppliers while remaining attuned to the market Global Business l l Think outside the box Extracting Value l l How well do you perform against your competitors? Innovation l l Build a better business case for supply management Think worldwide to optimize sourcing practices Diversity l Expand the horizons of your supply base

Types of Supply Chain Executives Entrepreneurs l Strategic Thinkers l Results-Drivers l Recruiters l

Entrepreneurs Broad thinkers l Long-term focus on profitability and cost management l Business acumen and financial knowledge l

Strategic Thinkers Strong communication skills l Knows when to develop new relationships and rekindle old ones l

Results-Drivers l l Defines, predicts, measures, and tracks benefits of supply management Markets and sells supply management Focuses on continuous improvement Possesses market intelligence skills

Recruiters Measures performance to recognize key people l Can identify right skills for any given position l Rotates team members to gather crossfunctional experience l Brings out the best in others l

In Closing… Supply Management in the next 3 -5 years will focus on: l Creating value for customers l Eliminating waste in processes l Better defining connections between processes, customers, and suppliers l Working more collaboratively with suppliers

Resources for These Lessons: Lesson 3: Innovation and Opportunity Lesson 4: The Three-to-Five Year Outlook l. The Supply Management Handbook: Seventh Edition: Mc. Graw-Hill l. Source One Management Services, LLC www. sourceoneinc. com