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ISQA 439 2 for 1
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Strategic Planning
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Mission Statement Vision Statement Strategies Long-Term Action Plan Commits Organizational Resources Creates Competitive Advantage Performance Measures
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Strategic Planning Steps Developing the Vision Translating the Vision into Goals Developing the Strategies to Achieve the Goals Selling the Strategies Executing the Strategies Tracking Progress
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Development of Commodity and Supplier Strategies Identify Critical Elements Cost Drivers Critical Materials Key Technologies Determine How to Manage The Commodity Each Supplier Within the Commodity
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Commodity Strategy Industry Standard or Custom Criticality Market Study / Commodity Study Global Domestic
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Commodity Strategy Sourcing Strategy Single or Multiple Sources Price/Cost Analysis Contract Type Automation Logistics Inventory Transportation Supplier Evaluations
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Supplier Strategy Formal Analysis Capability, Capacity, etc. Present Status, Desired Status, Methodology Performance Improvements Additional Services Administrative Improvements Consignments, etc. What Must WE Do?
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Strategy Development Example: Nuts and Bolts Critical Elements Quality (Counterfeit) Availability Minimize Administrative Cost Strategy Single Source Local Supplier Or Consigned Inventory Known Manufacturer VMI
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Strategy Development Example Decide How to Manage Specific Supplier Goals / Objectives for That Supplier Develop Specific Performance Measures to Track Supplier Improvement Invoice Accuracy Prompt Backorder Clearance On Time Delivery Supplier Forecasting
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Forecasting as a Strategy Foundation Volume Requirements Timing Locations Future Requirements Technology Impacts
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Technology
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Alphabet Soup ERP MRP MIS CRM SRM WMS TMS RFID GPS EDI CAD CPFR ASRS
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RFID http://www.youtube.com/watch?v=4Zj7txoDxbE http://www.youtube.com/watch?v=4Zj7txoDxbE
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Ladar Forklift http://www.jervisbwebb.com/Products/automatic_tr ailer_loading.aspx?pid=190&qs=1_6_
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ISQA 4/539 Specifications Sourcing Strategy Supplier Selection
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Specifications Responsibility Purchasing’s Role How Described Descriptive Design Performance Statements of Work
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Specification Provides Performance Requirements Parameters Which Describe Including Units of Measure Materials to be Used Production Processes Inspection, Test Requirements Reference to Other Documents or Specifications Mil Specs, Drawings, SAE Specs, etc.
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Elements of Specifications Intended Use, Quality Requirements Standardization Value Analysis Internal Negotiation Opportunities
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Quality How would you define ‘Quality’?
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Quality Definitions Quality - Quality Control PROCESS Controls Rule of 10 Quality and Multiple Sourcing Supplier Certification
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Quality Is Quality Free? Can We Achieve 100% Quality?
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Total Quality Management TQM Principles Know/Understand Customers and Requirements Satisfy/Delight Customers Continuous Improvement Elements of TQM Process Identification Process Mapping Process Simplification Process Controls Track - Monitor Continuous Improvement TQM and Six Sigma
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Value Analysis Begun by Larry Miles at GE Basic Objectives Reduce Cost While Maintaining Function or Increase Function While Maintaining Cost NEVER Cheapen Product While Reducing Cost Focus is Always on Function and Value
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Value Analysis, cont. Exploded View Parts Diagram Question Each Part Really Necessary? An Industry Standard? If Custom, of Most Suitable Material? Do Specs Reflect Need Manufactured in Most Efficient Way? Assembled in Most Efficient Way? Does Each Component “Match” Overall Design? An Example
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Standardization Internal Processes Materials Equipment External Industry Standards (Materials) Industrial Standardization (SAE) Multi-Industry (ANSI, ASTM) International (ISO, Metrics)
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Standardization Industry Standards Company Standardization Impacts on Inventory Impacts on Purchasing Impacts on Maintenance and Repair Impacts on Quality Implementation
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Why Involve Purchasing in the Design Process? Define Requirements Generic or Proprietary Determine Availability and Lead Times Examine Alternative Goods Make/Buy Analysis Minimize Total Cost Early Supplier Involvement
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Suppliers and New Product Development Create Competitive Advantage Early Supplier Involvement Supplier Expertise and Cost Latest Technology Faster to Market Improved Quality Fewer Changes, Change Orders
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Sourcing Strategies
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General Supply Chain Strategies Supply Base Reduction Supply Base Addition Supplier Development Inventory Strategies VMI Consignments Lean Operations Simplification Standardization Automation Risk Management Identification Mitigation Cost Reduction Administrative Commodities Services Leveraging Technology Lead Time Management Sustainability
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Sourcing Strategies Industry Standard or Custom? Criticality Term of Agreement Automation Risk Mitigation Sustainability
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Supplier Selection
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Dave Hoover’s Purchasing Axioms A Firm Has The Suppliers It Deserves A Supplier Will Only Be As Good As It Has To Be The Best Way To Get More From Suppliers Is To Ask For It
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Supplier Selection Goal: Long Term, Close Relationship with World Class Suppliers Create Competitive Advantage from Supply Base Capabilities Performance Future Considerations
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Capabilities Financial Capabilities Today To Grow With Us Technical Capabilities Engineering Buyer Support Quality Process Controls Manufacturing Capabilities Production Capabilities Capacity
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Supplier Characteristics Proximity Access to Infrastructure Union Shop Forecasting Others Terms (2/10, Net 30) Risk Profile Sustainability
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Risk and Sustainability Supply Chain Risk External Governmental Infrastructure Supplier Logistical Terrorism Natural Disasters Accidents Internal Policies Administrative Operational Organizational Ethics Sustainability Environmental Non-Renewable Resource Energy Consumption Emissions Hazardous Materials Social Responsibility Ethics Gender Equity Living Wage Labor and Relationships Organizational Profitability, LT Viability Customer Perceptions Customer Relationships
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Risk Prevention/Remediation Ts and Cs Safety Stock Safety Lead Time Additional Suppliers Geographic Dispersion Business Continuity Ours Suppliers Training ISO 31000 2009 Supply Chain Mapping Forecasting Project Management Review Supplier Selection Process Supplier Visits Daily Diligence
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Supplier Selection Process Clear Specification Marketplace Surveys Identification of Available Suppliers Determining Supplier Qualifications Make/Buy Analysis Selecting from Qualified Suppliers Reverse Auctions
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Supply Base Analysis Industry Average Numbers of Suppliers How Many Suppliers Do You Have? How Many Suppliers Do You NEED? Risk View Suppliers as Investments Is the Supplier Making Money For You? Is the Supplier a Good Return on Your Investment Sustainability
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Supply Base Reduction Maximize Leverage Increase Quality and Reduce Variability Utilization of Resources Minimization of Administrative Cost Create Stable Supply Base Develop Synergy Create Competitive Advantage Through Supply Base Manage Risk
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Supplier Performance Quality On Time Delivery Flexibility Problem Resolution Productivity Improvement Their Supplier Management Program Progress Toward Certification Other Important Criteria
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Buyer Performance Forecast Accurately Share Information Minimize Rush Orders and Schedule Changes Focus on Total Cost - Not Price Pay Bills On Time Manage Supplier Relationships
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Supplier Visits Housekeeping Inventories Order Processing Procedure Quality Processes Their Purchasing Process Financial Statements Other Capabilities Engineering, Logistics, Technology Logistics, Process Improvement Credit Policies and Terms
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Other Supplier Selection Criteria Social Goals Minority/Women Owned Small Business Buying Local (Governmental Set-Asides) Manufacturer vs Distributor Environmental Considerations Supply Chain Risk
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Intangibles Intuition Personality Types Corporate Philosophy Reputation References
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Global Sourcing
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Domestic Sourcing Same Language Same Cultural/Ethical Expectations Same Legal System Same Banking System Same Transportation No Customs, Tariffs
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Global Sourcing Why Look for Global Sources? Lower Total Cost (Landed) Access to Markets (Countertrade) Access to Raw Materials Access to Technologies Other Reasons Quality Competition
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Global Sourcing Finding Global Suppliers Directories Trading Companies Embassies/Consulates Trade Shows Countertrade Logistics Issues INCOTERMS Other Logistics Costs
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Global Sourcing Problems With Global Sourcing Good Specifications Cultural Issues Language Difficulties Long Lead Times Paperwork Payment Issues Political Risk Currency Risk Security Issues Sustainability
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Global Sourcing Methods Intermediaries Foreign Subsidiaries International Purchasing Offices Direct Purchases Inspection Services Customs Brokers and Freight Forwarders
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Global Sourcing: Communication Understanding the True Barriers Speaking Reading and Writing Slang and Colloquialisms Two Word Verbs Vocabulary Conversational Business Technical
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Global Sourcing: Communication Translators Local, At Destination Types Translating Written Materials Business Cards and Titles
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Global Sourcing: Payment Domestic Payment Payment Up Front (Avoid) COD On Account International Payment Payment Up Front (Avoid) Against Documents Letters of Credit On Account
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International Negotiation Age, Gender Status, Authority Formality Numbers and Team Composition Professionalism “Yes” and “No”
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International Negotiation Silence Subtleties Deadlines Cultural Respect On Being Alone
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Make/Buy and Outsourcing
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Make/Buy Products We Never Make Products We Always Make In Between Products: Make/Buy
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Make/Buy Industry Standards, Proprietary Products and Make/Buy Procurement from Suppliers Procurement by Manufacture Fluid Decision Revisit at Regular Intervals As Economic Conditions Change As Internal Conditions Change Always Maintain Internal Capability
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Reasons to Make Quantities Too Small Quality Too Critical Timing Too Critical Trade Secrets (for a time) Cheaper Keep Crew Busy Avoid Sole Source (perhaps) Union Shop Unreliable Supplier
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Reasons to Buy Quantities Too Large Supplier Quality Acceptable Have Sufficient Lead Time Lack of Necessary Competencies Lack of Capacity Cheaper Reciprocity
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Vertical Integration Cost and Responsiveness Insure Performance Scheduling Control Boeing
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Outsourcing Strategic Decision Activity is Not Core Competency Will, In Future Completely Depend on Suppliers Will No Longer Maintain Internal Capability Management of Outsourced Activities
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Outsourcing Our Core Competencies Suppliers’ Core Competencies Dependence on Suppliers Strategic Vulnerability Technology Transfer Source from Competitors’ Suppliers Supplier Exploitation Price Creep Service
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Outsourcing Firms Rethinking Outsourcing Rising Wage Rates Rising Transportation Costs Currency Exchange Rates Long Lead Times Recent Survey (Global Retail Goods Firms): 50% of firms in survey are considering moving out of China 26% actually doing it
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