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Purchasing and Sourcing management. Use industry related acronyms, vernacular, terms, processes, organization structures, job descriptions and customer-supplier relationships in context and complete understanding . Realize the importance of Purchasing and Sourcing management in modern day business.
OPRE 6371 Purchasing & Sourcing Management
typically involved in Purchasing and Sourcing management. Use basic Purchasing and Sourcing management decision-making for problem solving. Demonstrate knowledge of insourcing, outsourcing, make versus buy, cost management and negotiation. Apply Supply Chain principles, techniques and knowledge to solve operational problems and develop
OPRE 6371 Purchasing & Sourcing Management
Chapter sequence changed Case Studies added, half of total are new Focus on decision making in the Supply Chain strengthened Scope of work much more expanded role
& Sourcing Management Introduce terminology, supply & logistics Size of organization Spend & financial significance The nature of the organization Examine Supply qualifications & associations Look at challenges ahead for Supply Managers
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on suppliers to respond to end-customer needs Greater dependence on suppliers for design and build responsibilities for complete subassemblies and subsystems Increased global competition Development of new product technologies Evolving information systems Trend to single sourcing with fewer key suppliers and strategic supplier relationships
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Y2K, 9/11 AOL / Time Warner Wikopedia Facebook, Twitter http://www.youtube.com/results?search_q Ipod, Iphone Enron, Worldcom 2008 Financial meltdown Bernie Madoff Nothing is Youtube
Certain any
for products and services Identify opportunities to increase revenue Implement supply initiatives to improve customer satisfaction Reduce total costs of ownership (TCO) Improve efficiency/effectiveness of the supply process Maximize value from suppliers Work with key suppliers to provide product and service innovations
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Supply Chain Management The design and management of seamless and value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration. *ISM definition
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Supply Terminology
Often used interchangeably;
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Purchasing, procurement, materiel, materials management, logistics, sourcing, supply management, contracting, supply chain management Subtle differences ISM, APICS, CSCMP, JIT, DFT, P2P, VSM, CPSM, C.P.M., CPIM, CSCP, TQM, VA, VE, ROB, Ts & Cs, PP, MM, IM, WM, SAP, BATNA, RFI, RFP, RFQ, ECN, PO, BPO, MSA, MPA, EDI, ASN, VMI/SMI, ERP, MRP, CRP, S&OP, RFID, SOX, DFX, MRO, B2B, CPO, SBU, ESI, DMAIC, EOQ, PDCA, QFD, SPC, ISO, E2E Lean, Just in Time, Six Sigma, Demand Flow, Value Stream, Value Chain, 2% 15 net 45, 3Rs of sustainability, 7 Rs of supply objectives,
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commercially equivalent description Search for potential suppliers Selection of a suitable source Agreement on order or contract details Delivery of the products or services Payment of suppliers
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inventory control, materials handling, packaging, scheduling, inbound and outbound transportation, traffic, and disposal Customer order fulfillment, customer satisfaction These extensions led to the term Supply Chain Management
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Simple product
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National Association of Purchasing Management, NAPM Council of Supply Chain Management Professionals, CSCMP = old Council of Logistics Management, CLM
that plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers requirements.
OPRE 6371 Purchasing & Sourcing Management
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forecasting/plannin g Inventory management Logistics communications Material handling Order processing Packaging
OPRE 6371 Purchasing & Sourcing Management
support Plant and warehouse site selection Purchasing Return goods handling Reverse logistics Traffic and transportation Warehouse storage
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Published in 1887
reliable access to supply of raw materials, supplies and services Two vexing problems in the decade of the 1970s put senior management attention on the supply function:
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Outsourcing has led to increased reliance on suppliers for key components and services
early 21st century provides expectations for supply chain integration, lower transaction costs and faster response times.
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New challenges in the areas sustainability, globalization, supply chain security and risk management
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The Evolution of the Supply Function earl y 190 0s Clerical and tactical
Focus on policies and
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Clerical
World War II
Managerial emphasis
Purchasing strategy
Integration into corporate strategy Integrated supply Networks and Information technology Sustainability, security, globalization, risk management
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1950s office
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2010 Office
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Executive Leadership Executive committee support for integration across company and strategic business unit corporate plans Functional Leadership Company-wide customerfocused leadership Establish integrated visions workers at results and processes Drives supply base/supplier management strategies company-wide
OPRE 6371 Purchasing & Sourcing Management
Strategic Positioning External/internal customer focus Matrix management High-level positioning second, third or fourth levels Integration Cross-functional, crosslocation teaming Part of the technology, manufacturing and SBU planning process
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Supply Base Strategy Quality driven Design standardization Concurrent engineering Supply base optimization Commercial strategy emerging
Supplier Management Focused on supplier development Joint performance improvement efforts Value focused Total cost improvement Supplier benchmarking Systems Global databases Historical performance data Strategic EDI, Internet, EFT, CAD, CAM
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Measurement Customer orientation Total value/cost focused Benchmarking with best in class
uses to buy goods and services needed to run the business Spend management is the way in which companies control and optimize the money they spend. It involves cutting operating and other costs associated with doing business. These costs typically show up as "operating costs" or SG&A (Selling, General and Administrative) costs, but can also be found in other areas and in other
OPRE 6371 Purchasing & Sourcing Management
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Spend Management
Spend Management is meant to
represent a holistic view of the activities involved in the "source-tosettle" or procure-to-pay process. This process includes spend analysis, sourcing, procurement, receiving, payment settlement and management of accounts payable and general ledger accounts. Spend Analytics is a hot button in software.
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Spend Management
Whether it is the money spent on
goods or services for direct inputs (raw goods and materials used in the manufacture of products), indirect material (office supplies and other expenses that do not go into a finished product), or services (temporary and contract labor, print services, etc.), a company needs a mechanism by which they are not only able to save money, but control costs.
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Spend Management
In an enterprise, spend management
is managing how to spend money to best effect in order to build products and services. The term is intended to encompass such processes as outsourcing, procurement, e-procurement, and supply chain management. Spend Analytics offers valuable insights into spending patterns, visibility into contract compliance, purchasing policy compliance, and can
OPRE 6371 Purchasing & Sourcing Management
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Profit-Leverage Effect
Financial impact of the corporate
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Profit-Leverage Effect
Example:
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$100M sales revenue $60M purchase (representative 60% of Sales) $8M profit before taxes (representative 8% net) If $10% reduction in purchase spend thru cost savings
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To achieve $6M increase in Profit by increasing Sales, at 8% profit margin, would require $75M increase in Sales, $75M x .08 = $6M So, a 75% increase in sales would be needed to achieve same level of profit improvement Which would be more likely to be achieved?
Save $6M Profit increases 75% from $8M to $14M So, leverage factor is 75% ($8M x 1.75 = $14M or, $6M/$8M = .75)
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Return-on-Assets Factors
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Strateg ic Opportunity
Maximization
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Performance of others
Indire ct Enhancing
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Negativ e Operationally
deficient Strategically deficient Directly deficient Indirectly deficient
Neutr al Operationally
acceptable Strategically deficient Directly acceptable Indirectly deficient
Positiv e Operationally
acceptable Strategically acceptable Directly acceptable Indirectly acceptable
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Services
of needs is generated by capital, services and other requirements enabling employees to provide the service. In retailing the
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Profit-leverage effect Return-on-assets effect Information source Effect on efficiency Effect on competitive position and customer satisfaction Effect on organizational risk Effect on image Training ground Management strategy and social policy
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value Measurement assess the benefits Purchase of non-traditional goods and services
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