International Purchasing Course - 2018 - PART I PDF

INTERNATIONAL PURCHASING
IN THE INDUSTRY
By David PAYEN – Purchasing & Transport Manager at STERIMED
dhpayen@gmail.com
CONFIDENTIAL
Avant-propos
Ce cours dresse une passerelle pragmatique entre le monde universitaire et le monde

industriel en matérialisant les étapes d’une demarche achat.
Son objectif est de donner aux étudiants la méthodologie d’approche de l’expression du

besoin à la construction d’une demarche ordonnée et professionnelle vers la gestion et la
contractualisation des engagements externes,
Tout en passant par la gouvernance fournisseurs et en s’apuyant sur la stratégie de

l’entreprise.
Planning CM / TD
FORMATION INTITULE DU COURS ET PRECISIONS CM/TD/GR SEMAINE DU …/…./…. AU …/…/…. JOUR HORAIRES
M2 CI INTERNATIONAL PURCHASING / CM 15JA au 21JA 2017 18JA 17h à 19h
M2 CI INTERNATIONAL PURCHASING / CM 22JA au 28JA 2017 25JA 17h à 20h
M2 CI INTERNATIONAL PURCHASING / CM 29JA au 04FE 2017 30JA 17h à 19h
M2 CI INTERNATIONAL PURCHASING / CM 29JA au 04FE 2017 01FE 17h à 20h
M2 CI INTERNATIONAL PURCHASING / TD Groupe 2 05FE au 11FE 2017 08FE 17h à 19h
M2 CI INTERNATIONAL PURCHASING / TD Groupe 2 26FE au 04MAR 2017 01-mars 17h à 20h
M2 CI INTERNATIONAL PURCHASING / TD Groupe 1 05MAR au 11MAR 2017 08-mars 17h à 19h
M2 CI INTERNATIONAL PURCHASING / TD Groupe 1 20MAR au 01AVRIL 2017 29-mars 17h à 20h
Class in English
What about your English level?

A brief description of my education and professional career
1988 – 1990: DUT Génie Mécanique et Productique (France)
1990 – 1992: Bachelor of Engineering (Beng) in Mechanical Engineering

Coventry Polytechnic (UK)
1992 – 1993: Master Of Science (Msc) in General Engineering

Coventry Polytechnic (UK)
A brief description of my professional career
1995 – 2000: Project / Product Engineer at Delphi (Automotive Tier 1*)

Various locations: Paris, Sandusky (Ohio, US), Cadiz (Spain)
Experiences in Manufacturing Support, Product Design,
Project management with customers such as Daimler,
FIAT
TIER 1 Supplier
TIER 2 Supplier
Original Equipment
Manufacturer
(OEM) Like Delphi, Valeo…
Like PSA, BMW, FIAT… TIER 3 Supplier
Few Suppliers
Few Manufacturers Plenty of Suppliers
Few Suppliers
2001 – 2004: Supplier Quality Engineer at Delphi Paris

Experiences in supplier quality development for
new project launch
2005 – 2009: Category Buyer at Delphi for Europe

Various locations: Paris, Barcelona
European Management of Suppliers from Sourcing
to regular production in casting category.
A brief description of my professional career as a Buyer
is a global Tier 1 Supplier with billions of USD Turnovers, composed of different business units …
One of the products supplied by DELPHI is for example the Diesel Fuel System, part of the DIESEL
Sytem Business Unit.
Inside of a business unit, a purchasing organization is composed of Category (Portfolio) Buyers
where each buyer is expertise in its own category and able to buy not only for one product but
products from different application.
Common Rail Fuel System Example here after:
Buyers such as:
Forging Category Buyer

Electronic Category Buyer
NEED: Rubber Category Buyer
Tubing Category Buyer
Etc…
Each buyer responsible of few

Dozen millions of Euros
2010 – now: Purchasing/transport Manager at STERIMED (Amélie les Bains)

Experiences in various types of purchasing / Supply Chain /
Team management
In terms of raw material and Packaging, I am currently in charge

of 35 Millions Euros of Purchase.
As a smaller size company and lower resources, we have to
concentrate our expertise on High Value Categories.
Program
PART I: Introduction : General Purchasing Overview in Industry
Why Purchasing has a Key role?
Internal interfaces
Categories of Purchasing
Suppliers relationship
Purchasing Strategy: some fundamentals
Competences needed for a buyer
Purchasing and Procurement Process

Program
PART II: Direct Purchasing : From RFQ* to Supplier Selection and the industrial follow-up
Overview
From RFQ (Request For Quote) to Contract set-up…
Preparation of the RFQ

Analysis of the quotes and Supplier Selection
Industrial Validation of the Supplier
Contract Application
Industrial Follow-up (Key Performance Indicators)
Commercial Indicator
Quality Indicator – Non-Compliance Management
Procurement Indicators
Program
PART III: Indirect Purchasing : The various Types of « sourcing » and its management
Purchasing in Investment
Purchasing in Maintenance
Purchasing in Transport
Purchasing in Energy
Other types of Purchasing
PART IV: Conclusion – Questions / Answers

Why Purchasing has a key role?
1- Purchasing is a “Support” function for companies looking for continuous improvement

in regards to the evolutions and the constraints of the market.
2- Purchasing Function needs to adapt its activities with the market changes:
Suppliers Evaluation
Strategic Suppliers Management
Simplification and
Standardisation of the
Purchasing Process PURCHASING Globalization of Products and Services
Cost optimisation
Complete The Right Sourcing Risk Definition and Management

3- Purchasing is contributing to the financial results of the company with:
- A good understanding of the needs and a proper globalization

- A good harmonization of the internal processes (Manage the duration of the
process)
- Reduction of the global cost
One of the main contributors for the company profit margin !

Example of Company Income Statement Report to show Purchasing share and importance:
Current State With 3% RM Saving
NET COMPANY TURNOVER 76 914 k€
Manufacturing Fixed Cost - 24 090 k€

Energy Purchase - 4 994 k€(6,5%)
Purchasing Raw Material (RM) Purchase - 33 838 k€ (44%) - 32 823 k€
55% Transport Expenses - 3 462 k€(4,5%)
Other Costs (SG&A) - 7 220 k€
EBITDA* 3 310 k€ (4,3%) 4 325 k€ (5,6%)
* Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company's
operating performance. Essentially, it's a way to evaluate a company's performance without having to factor in
financing decisions, accounting decisions or tax environments.
4- Purchasing is securing the relationships “uphill” (Suppliers)of the company by:
- Referencing and continuous evaluation of the suppliers

- Contract Negotiation
- Implementation of the appropriate techniques (Co-design, Innovation,..)
- Follow-up of the financial and manufacturing relationships
Guarantee the stability of the suppliers relationships !

- Example of supplier relationship failure:
Lack of product deliveries or Major Quality defect that would stop the
manufacturing lines of your own company:
With STERIMED:
A day of “shutdown” may cost up to 100 k€ / day
With my previous company DELPHI:
A day of “shutdown” may cost few hundred thousand Euros …

5- Selecting the right suppliers with fundamentals such as:
- The supplier support the Research and Development in order

for your company to ensure the leadership in your products
- The supplier initiate Cost Improvement Projects in order for your company to
remain competitive
- The supplier ensure their own positive operating income stability

Internal Interfaces
Why do we purchase?
- To consume (also called “Indirect purchasing”):
- Through investments
- General expenses
- Consulting, Interims,…
- To integrate (also called “Direct Purchasing”)
- Through the manufacturing process of your company
- To resell
- Trade products
Three different orientations which correspond to three types of purchasing

- Direct Purchasing
Definition: Purchased products which are directly used for the manufacturing of
the finished goods in your industry
Example: DELPHI Company as a manufacturer of steering columns
Direct Purchasing consist of purchased

products such as the wheel, screws,…
Products which are directly linked to the
steering column assembled by DELPHI.
- Indirect Purchasing
Definition: Sourcing of all goods and services for a business that enable its activity,
such as:
Travel Management, IT related services (hardware, software)
HR related services (recruitment agencies, training)
Facilities Management and office services

(Telecoms, furniture, cleaning, catering, printers)
Utilities (gas, electricity, water), Consumable (Grease, Oil etc.)
Maintenance, Capital Goods (Plant & machinery)
Transport
- Trade Products
Definition: a movement whose goal is to help producers in developing countries

to get a fair price for their products
Example: Within STERIMED Sales Portfolio, we promote trade products such as

Medical Plastic Films – This product is not manufactured by STERIMED
but by a manufacturer of film not involved in medical application.
Goal is to use STERIMED Sales Worlwide organization in order to better

support the sales of trade products (which would not be feasible short
term for a company not involved in Medical Sales )
Supplier Relationship
- Frequently, a long term relationship is implemented for Direct Purchasing
Selecting a supplier for a new business opportunity is very crucial

If the sourcing decision was not good, you may spend more time and more money to
Resource a new supplier
In Automotive industry, new product life is 5 years in Series and

at least Five years in Aftermarket.
In Medical industry such as Sterimed, very often at least ten years …
- For Indirect Purchasing, it varies …
A capital investment such a manufacturing equipment will be more crucial than

sourcing office furniture, car rental services, travel agency services …
Supplier Relationship
- A long term relationship is also implemented for Trade Products
Marketing Organization of your company will promote trade products to Customers
And it is then vital to make sure to carry out the best long term relationship possible with the
Company which will manufacture your trade product!

Implement contracts:
To establish a price agreement during the contract

period
To determine the payment terms and the incoterms

(FCA, DAP, DDP,..)
To establish a cost reduction program along the

contract period
To secure a manufacturing capability at Supplier Site

by providing a yearly Volume Forecast (but never an
engagement from the buyer)
Manage a quality performance board and follow-up quality

improvement plan through audits and action plans
Study alternative product/supplier in order to have in place a back-

up solution, anticipate new market demands, …
Get the best understanding of the supplier cost breakdown in order

to ensure a better budget preparation and to support in further
negotiation
Support in minimizing stock value by consignment stock

implementation or Safety stock at supplier site
Right size the number of suppliers in order to have a better follow-

up of the suppliers and to allow leverage negotiation when
sourcing
Avoid One Purchased Product = One supplier

Look for several products at same supplier
Main Competences needed for a buyer
- Good communication skills
The buyer is the interface between the plant needs and the suppliers and vice-versa
- Good work organization
The buyer must be capable of gathering different source of data as he might be

Involved in different types of purchasing
- Be curious
The buyer must investigate the market in order to learn any technology improvement,
Cost improvement, etc…
- Good negotiation skills

A process is a system of activities utilizing resources in order to

transform incoming elements to a result of services.
The process responds to the question: “What to do?” whereas a

procedure responds to the question : “How to do?”
A process will be composed then of procedures

Purchasing Strategy
When defining a purchasing strategy, it involves to know the needs of your company,
to handle the capacity of your suppliers in order to satisfy the customers demands
Company
Needs
Suppliers Customers
SATISFY
Needs
Kinds of Market Sales Impact
Purchasing Strategy
Those elements represent the fundamentals needed for driving an efficient purchasing
organization!
Purchasing Strategy
Elaborating a Purchasing Strategy is composed of FOUR main phases:
The BUYER in charge of the portfolio will be

The
the responsible of those phases implementation
Internal Company Needs
Portfolio Suppliers Market Analysis Purchasing Strategy Definition Implementation

Segmentation (Objectives, Action Plan) &
Follow-up
Risk Evaluation
(Financial, Technical)

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INTERNATIONAL PURCHASING

Ce cours dresse une passerelle pragmatique entre le monde universitaire et le monde

Son objectif est de donner aux étudiants la méthodologie d’approche de l’expression du

Tout en passant par la gouvernance fournisseurs et en s’apuyant sur la stratégie de

What about your English level?

1988 – 1990: DUT Génie Mécanique et Productique (France)

1990 – 1992: Bachelor of Engineering (Beng) in Mechanical Engineering

1992 – 1993: Master Of Science (Msc) in General Engineering

1995 – 2000: Project / Product Engineer at Delphi (Automotive Tier 1*)

2001 – 2004: Supplier Quality Engineer at Delphi Paris

2005 – 2009: Category Buyer at Delphi for Europe

Common Rail Fuel System Example here after:

Buyers such as:

Forging Category Buyer

Each buyer responsible of few

2010 – now: Purchasing/transport Manager at STERIMED (Amélie les Bains)

In terms of raw material and Packaging, I am currently in charge

PART I: Introduction : General Purchasing Overview in Industry

Why Purchasing has a Key role?

Purchasing Strategy: some fundamentals

Competences needed for a buyer

Purchasing and Procurement Process

From RFQ (Request For Quote) to Contract set-up…

Preparation of the RFQ

Industrial Follow-up (Key Performance Indicators)

PART IV: Conclusion – Questions / Answers

1- Purchasing is a “Support” function for companies looking for continuous improvement

Complete The Right Sourcing Risk Definition and Management

3- Purchasing is contributing to the financial results of the company with:

- A good understanding of the needs and a proper globalization

One of the main contributors for the company profit margin !

Current State With 3% RM Saving

NET COMPANY TURNOVER 76 914 k€

Manufacturing Fixed Cost - 24 090 k€

Other Costs (SG&A) - 7 220 k€

EBITDA* 3 310 k€ (4,3%) 4 325 k€ (5,6%)

4- Purchasing is securing the relationships “uphill” (Suppliers)of the company by:

- Referencing and continuous evaluation of the suppliers

Guarantee the stability of the suppliers relationships !

- Example of supplier relationship failure:

A day of “shutdown” may cost up to 100 k€ / day

With my previous company DELPHI:

A day of “shutdown” may cost few hundred thousand Euros …

5- Selecting the right suppliers with fundamentals such as:

- The supplier support the Research and Development in order

- The supplier ensure their own positive operating income stability

- To consume (also called “Indirect purchasing”):

- To integrate (also called “Direct Purchasing”)

- Through the manufacturing process of your company

Three different orientations which correspond to three types of purchasing

Direct Purchasing consist of purchased

Travel Management, IT related services (hardware, software)

HR related services (recruitment agencies, training)

Facilities Management and office services

Utilities (gas, electricity, water), Consumable (Grease, Oil etc.)

Maintenance, Capital Goods (Plant & machinery)

Definition: a movement whose goal is to help producers in developing countries

Example: Within STERIMED Sales Portfolio, we promote trade products such as

Goal is to use STERIMED Sales Worlwide organization in order to better

- Frequently, a long term relationship is implemented for Direct Purchasing

Selecting a supplier for a new business opportunity is very crucial

In Automotive industry, new product life is 5 years in Series and

In Medical industry such as Sterimed, very often at least ten years …