Managing Procurement Managing Procurement and Sourcingand Sourcing

Getting What You NeedGetting What You Need

GSCM Ch 3 - 2

Global sourcing Global sourcing

Global Sourcing

BenefitsRisk

Factors

Factor-input

Market access

QualityEthical

concernsPatent

protection

Supply management

Aims/objectives Process of sourcing & procurement

Supplier selection

Suppliermanagement

Aims/ObjectivesAims/Objectives

The primary goals/objectives of purchasing are:– Ensure uninterrupted flows of raw materials at the lowest

total cost, – Improve quality of the finished goods produced, and – Optimize customer satisfaction.

Purchasing contributes to these objectives by: – Actively seeking better materials and reliable suppliers, – Work closely with and exploiting the expertise of strategic

suppliers to improve quality and materials– Involving suppliers and purchasing personnel in new

product design and development efforts.

GSCM Ch 3 - 5

The sourcing processThe sourcing process

• Conduct internal needs analysis Item to be sourced; characteristics; import

restrictions; volume

• Conduct market assessment of suppliers PEST analysis of country; risks (threats) and

opportunities

• Collect supplier information Reputation; financials; references

• Develop sourcing strategy Strategic alliance?; level of collaborating

• Negotiate with suppliers Price; quality; delivery times

• Implement supply chain improvements Develop key performance indicators (Kpi)

The sourcing processThe sourcing process

GSCM Ch 3 - 7

Adapting the processAdapting the process

• Spend-driven approach Analysis of every sourced good or service

Suppliers selected to meet company’s spend profile

• Risk-driven approach Placing a trial order

Avoiding high-risk countries

Having more than one supplier

Negotiate conditional payment terms

GSCM Ch 3 - 8

Efficient sourcingEfficient sourcing

GSCM Ch 3 - 9

Efficient sourcing Efficient sourcing

• Total acquisition cost analysis (TAC)

• Supply base rationalization and consolidation

• Primary and secondary sourcing

• E-procurement

GSCM Ch 3 - 10

Partnerships and alliancesPartnerships and alliances

• Benefits of supply chain partnerships

• Foundations for good partnerships

• Common types of supply chain partners Vendor Managed Inventory (VMI)

Collaborative planning, forecasting and replenishment (CPFR)

GSCM Ch 3 - 11

OutsourcingOutsourcing

• Benefits

• Importance of knowing an organization’s core competencies

• Types of agreements: Equity joint venture

Equity strategic alliance

Non-equity alliance

Franchising

Production and assembly

Legal services

Technical training

GSCM Ch 3 - 12

OutsourcingOutsourcing

Benefits

Cost savings

Gaining outside expertise

Improving customer service

Ability to focus on core competencies

Obtaining outside technology

Disadvantages

• Possibility of increased costs

• Loss of company control

• Negative impact on employees

• Negative impact on customers

• Relationship problems

GSCM Ch 3 - 13

Negotiating with suppliers Negotiating with suppliers or outsourcersor outsourcers

• Priority negotiating elements What volume is being purchased?

Discounts available?

Are logistical and importing costs covered in the price?

What does the price include?

What are the responsibilities of each party involved?

• Method of payment and documentation

• Payment terms

• Ensuring receipt

GSCM Ch 3 - 14

Compliance with Compliance with international law: Export international law: Export regulationsregulations

• Export control

• Exchange control licenses

• Export quotas

• Export documentation Commercial invoice

Bill of lading

Export declaration

Packing list

Insurance document

Certificate of origin

GSCM Ch 3 - 15

Compliance with Compliance with international law: Import international law: Import regulationsregulations• Importers liability

• Import quotas

• Antidumping legislation

• Tariff classification

• Import documentation Commercial invoice Bill of lading Import declaration Packing list Insurance document Certificate of origin

GSCM Ch 3 - 16

Customs brokersCustoms brokers

What is a customs broker?

What services do

customs brokers offer?

How should my organization

choose a customers

broker?

GSCM Ch 3 - 17

Becoming a supplierBecoming a supplier

• Benefits

• Locating opportunities

• Tips for responding to an RFP/RFQ

• Bidding realistically

• Export contracts

• Binding agreements and contracts