GLOBAL SOURCING Exam 1 Study Guide with complete
solution
Supply Chains and Networks
-Supply chain extends from the ultimate customer back to mother earth
-The chain is viewed as a whole, a single entity rather than fragmented groups
-Money enters the supply chain only when the ultimate customer buys a product or
service
-Supply systems play a key role in supply chains
-Supply chains are relatively easy to describe and visualize, but the term supply network
is emerging as a more accurate description
Simplified Diagram of a Supply Chain
your suppliers' suppliers -->
your suppliers -->
your organization-->
your customers -->
your customers' customers
A network view of a supply chain
Suppliers: Inputs
Manufacturing/service support operations: transformation
Distribution/local service providers: localization
Customers: outputs
Evolution of supply chains
Pre 1939: Clerical
1940-49: Supply assurance
1950-69: managerial emphasis
1970-89: purchasing strategy
1990-99: integration into corporate strategy
2000-10: integrated supply networks and information technology
2010-now: sustainability, security, globalization, risk management
Why is purchasing important?
companies struggle to increase customer value by improving performance, leading to a
focus on purchasing and supply chain management
What are the results of strong supply chain management?
-Purchased items account for a large percentage of the cost of goods sold
-Potential for profitability
-Improved product and service quality
-Outsourcing allows firms to focus on their core competencies
-A dollar saved in materials cost is usually considered a dollar increase in profit
Supply chain management impact on net income and the bottom line
Increased Sales:
-faster to the market
-improved quality
-pricing flexibility
-innovation
,Lower total cost:
-acquisition cost
-processing cost
-quality cost
-downtime cost
-risk cost
-supply chain cost
The Purchasing Cycle
1. Identify user need
2. Evaluate potential suppliers
3. bid, negotiate, and select supplier
4. purchase approval
5. release and receive purchase requirements
6. measure supplier performance
Three levels of strategic planning
Corporate: Decisions and plans that answer
-what business are we in?
-how will we allocate resources among these businesses
Unit: Decisions mold the plans of a particular business unit to contribute to corporate
strategy
Function: plans concern
-how each functional area contributes to business strategy
-allocation of internal resources
Supply strategy interpreted in organizational strategy
Supply objectives
Supply Strategy
Organizational objectives
Organizational strategy
-Supply strategy links current and future markets to current and future needs
Supply Strategy Simplified
business strategy (past) -> organizational strategy (present) -> supply chain strategy
(future)
Organizational and Supply Objectives
Organizational
1. survival
2. growth
3. financial
4. environmental
Supply
1. quality
2. quantity
, 3. delivery
4. price
5. service
Three challenges in setting supply objectives and strategies
1. effective interpretation of corporate objectives and supply objectives
2. The choice of the appropriate action plan or strategy to achieve the desired
objectives
3. The identification and feedback of supply issues to be integrated into organizational
objectives and strategies
Six Major Supply Strategy Areas
1. assurance of supply
2. cost reduction
3. supply chain support
4. environmental change
5. competitive edge
6. risk management
Three categories of supply risk
1. operational:
-risk of interruption of the flow of goods or services
2. financial:
-risk that the price of the goods or services acquired will change significantly
3. reputational:
-risk that the organization's reputation will be harmed by a supply decision
Managing supply risks
-Identify and classify risks
-Assess impact and probability of risk event
-Develop a risk management strategy
Compare likelihood with consequences
Corporate risk management
-All organizations are exposed to supply risk and other forms of risk
-In large organizations, a corporate risk management group headed by a risk manager
or chief risk officer (CRO) assess total risk exposure and seeks the best ways of
managing all risks
-The chief purchasing officer works with the CRO in the three area of supply risks
Strategic Purchasing Planning Process
?
Examples of Organizational strategies involving supply
1. materials management
2. project management
3. logistics management
4. supply chain management
5. JIT purchasing/production
6. Make or buy.insource or outsource
Supply strategy questions
solution
Supply Chains and Networks
-Supply chain extends from the ultimate customer back to mother earth
-The chain is viewed as a whole, a single entity rather than fragmented groups
-Money enters the supply chain only when the ultimate customer buys a product or
service
-Supply systems play a key role in supply chains
-Supply chains are relatively easy to describe and visualize, but the term supply network
is emerging as a more accurate description
Simplified Diagram of a Supply Chain
your suppliers' suppliers -->
your suppliers -->
your organization-->
your customers -->
your customers' customers
A network view of a supply chain
Suppliers: Inputs
Manufacturing/service support operations: transformation
Distribution/local service providers: localization
Customers: outputs
Evolution of supply chains
Pre 1939: Clerical
1940-49: Supply assurance
1950-69: managerial emphasis
1970-89: purchasing strategy
1990-99: integration into corporate strategy
2000-10: integrated supply networks and information technology
2010-now: sustainability, security, globalization, risk management
Why is purchasing important?
companies struggle to increase customer value by improving performance, leading to a
focus on purchasing and supply chain management
What are the results of strong supply chain management?
-Purchased items account for a large percentage of the cost of goods sold
-Potential for profitability
-Improved product and service quality
-Outsourcing allows firms to focus on their core competencies
-A dollar saved in materials cost is usually considered a dollar increase in profit
Supply chain management impact on net income and the bottom line
Increased Sales:
-faster to the market
-improved quality
-pricing flexibility
-innovation
,Lower total cost:
-acquisition cost
-processing cost
-quality cost
-downtime cost
-risk cost
-supply chain cost
The Purchasing Cycle
1. Identify user need
2. Evaluate potential suppliers
3. bid, negotiate, and select supplier
4. purchase approval
5. release and receive purchase requirements
6. measure supplier performance
Three levels of strategic planning
Corporate: Decisions and plans that answer
-what business are we in?
-how will we allocate resources among these businesses
Unit: Decisions mold the plans of a particular business unit to contribute to corporate
strategy
Function: plans concern
-how each functional area contributes to business strategy
-allocation of internal resources
Supply strategy interpreted in organizational strategy
Supply objectives
Supply Strategy
Organizational objectives
Organizational strategy
-Supply strategy links current and future markets to current and future needs
Supply Strategy Simplified
business strategy (past) -> organizational strategy (present) -> supply chain strategy
(future)
Organizational and Supply Objectives
Organizational
1. survival
2. growth
3. financial
4. environmental
Supply
1. quality
2. quantity
, 3. delivery
4. price
5. service
Three challenges in setting supply objectives and strategies
1. effective interpretation of corporate objectives and supply objectives
2. The choice of the appropriate action plan or strategy to achieve the desired
objectives
3. The identification and feedback of supply issues to be integrated into organizational
objectives and strategies
Six Major Supply Strategy Areas
1. assurance of supply
2. cost reduction
3. supply chain support
4. environmental change
5. competitive edge
6. risk management
Three categories of supply risk
1. operational:
-risk of interruption of the flow of goods or services
2. financial:
-risk that the price of the goods or services acquired will change significantly
3. reputational:
-risk that the organization's reputation will be harmed by a supply decision
Managing supply risks
-Identify and classify risks
-Assess impact and probability of risk event
-Develop a risk management strategy
Compare likelihood with consequences
Corporate risk management
-All organizations are exposed to supply risk and other forms of risk
-In large organizations, a corporate risk management group headed by a risk manager
or chief risk officer (CRO) assess total risk exposure and seeks the best ways of
managing all risks
-The chief purchasing officer works with the CRO in the three area of supply risks
Strategic Purchasing Planning Process
?
Examples of Organizational strategies involving supply
1. materials management
2. project management
3. logistics management
4. supply chain management
5. JIT purchasing/production
6. Make or buy.insource or outsource
Supply strategy questions
