Summary MNP3701_ Strategic Sourcing_ Exam Notes.

MNP3701_ Strategic Sourcing_ Exam Notes. Supply Management and Commodity Strategy Development Chapter Overview  Aligning supply management and enterprise objectives  What is a category strategy?  Category strategy development  Types of supply management strategies  E-reverse auctions  Evolving sourcing strategies Aligning Objectives  What markets will the firm compete in, and on what basis?  What are the long-term and short-term business goals?  What are the budgetary and economic resource constraints, and how will these be allocated to functional groups and business units? How Companies Make Money “Watch, Listen and Learn. You cannot do it all yourself…..anyone who thinks they do it is destined for mediocrity.” Donald Trump Page | 29 Integrative Strategy Development  Corporate strategy  Definition of businesses in which to participate  Acquisition and allocation of resources to those businesses  Business unit strategy  Scope or boundaries of those businesses  Basis of competitive advantage  Supply management strategy  Support the desired competitive business-level strategies  How to complement other functional areas Commodity strategy Supply management strategy Business unit strategy Corporate strategy “Watch, Listen and Learn. You cannot do it all yourself…..anyone who thinks they do it is destined for mediocrity.” Donald Trump Page | 30  Commodity strategy  How to purchase commodities to support higher-level strategies Components of Integrative Strategy Translating Objectives Goals  Cost reduction objectives  goals  Be low-cost producer in industry  Reduce material costs by 15%  Reduce levels of inventory required to supply internal customers  Reduce raw material inventory ≥ 20 days’ supply  Technology/new product development objectives  goals  Outsource non-core competency activities  Qualify 2 new suppliers by end of year  Reduce product development time  Develop a formal supplier integration process manual by 12/31  Supply base reduction objectives  goals  Reduce the number of suppliers used  Reduce the supply base by 30% in next 6 months  Joint problem solving with remaining suppliers  Identify $300,000 in cost savings with 2 suppliers by end of fiscal year  Supply assurance objectives  goals  Assure uninterrupted supply from identified suppliers  Reduce order cycle time on key parts ≥ 1 week  Quality objectives  goals  Increase quality of services and products  Reduce average defects by 200 ppm on all receipts in next fiscal year Enabling Effective Category Strategies Company objectives Cross-functional business objectives Purchasing and supply chain goals Purchasing and supply chain strategies Performance measurement system Performance measurement review Continuous improvement “Watch, Listen and Learn. You cannot do it all yourself…..anyone who thinks they do it is destined for mediocrity.” Donald Trump Page | 31  Spend money on resources initially, including assessment of current spend, data collection, market research, training, and people  Validate savings or contribution to other company objectives achieved by supply management and drive them to bottom line  Sustain the initiative through presentations to senior executives who support the move towards an integrated supply management function with other functional groups in the supply chain Conducting a Spend Analysis  What did the business spend its money on over the past year?  Did the business receive the right amount of products and services given what was paid for them? (S/OX issue)  What suppliers received the majority of the business?  Did the suppliers charge an accurate price across all divisions vs. P.O. requirements, contracts, and SOWs?  Which divisions spent their money on products and services that were correctly budgeted for?  Are there opportunities to combine volumes and standardize purchases? Procurement KPIs Example Spend Analysis Spreadsheet  Sort by commodity  Find total spend by commodity “Watch, Listen and Learn. You cannot do it all yourself…..anyone who thinks they do it is destined for mediocrity.” Donald Trump Page | 32  Chart top 10 in descending $ amount  Sort by number of suppliers/commodity  Chart top 10 by descending # of suppliers  Find average spend/supplier/commodity  Apply Pareto analysis for opportunities Sample Spend Categories Supplier Commodity Annual Spend Rebate Company Rebate fulfillment & call center $329,873,663 Invest Company Investments $130,328,512 Advert Company Advertising $56,134,490 Repair Company Service repairs $49,339,218 Benefits Company Benefits $48,969,149 Hardware Company Hardware $40,572,450 Partco Service parts $39,910,372 Telecom Telecommunications $31,055,599 Display Company Store displays $30,020.969 Penpaper Company Paper $29,175,843 Labor Company Contract labor $27,880,363 Supply Company Paper $23,844,707 Contract Company General contracting $22,579,113 Office Company Paper $22,257,690 Graphics Company Graphic design $21,966,989 “Watch, Listen and Learn. You cannot do it all yourself…..anyone who thinks they do it is destined for mediocrity.” Donald Trump Page | 33 Payment Company Business & management services $20,380,275 Freight Company Surface freight $19,369,010 Paper Company Paper $15,603,682 Service Plan Company Service plan $15,478,827 Service Company Service parts $14,868,023 Consumer Company Consumer financing $14,833,333 Energy Company Energy $14,087,177