Procurement%20Service%20Provider%20and%20Supply%20Chain%20Management%20Training:%20-Lesson%203:%20Innovation%20and%20Opportunity%20-Lesson%204:%20The%20Three-to-Five%20Year%20Outlook

1
Procurement Service Provider and Supply Chain
Management Training -Lesson 3 Innovation and
Opportunity-Lesson 4 The Three-to-Five Year
Outlook

• Source One Management Services, LLC
• 724 Fitzwatertown Road
• Willow Grove, PA 19090
• (215)-902-0200
• www.sourceoneinc.com

2
Lesson 3 Introduction

• A 1 percent reduction in the cost of purchased
  materials is equivalent to a 12 to 18 percent
  rise in sales growth
• Several reasons why that reduction is possible
• New and better technology
• More companies and countries from which to source
  (globalization)
• Increasingly sophisticated approaches to managing
  the supply management function (Procurement
  Service Providers such as Source One Management
  Services, LLC for example)

3
Maturing and Scaling of Procurement Technology

• Procurement Technologies can
• Help curtail rogue spending
• Work efficiently with wider range of suppliers
• Simplify the sourcing process
• Help actively manage total costs

Free E-Commerce tools such as www.WhyAbe.com
provide Reverse Auctions, RFx, and Supplier
Management
4
E-Sourcing Capabilities

• Becoming more sophisticated and popular
• Have become more integral to e-procurement
  initiatives
• Specialized capabilities are evolving
• Facilitating easier interaction concerning
  contract language
• Evaluating numerous variables on a large scale

5
PLM and RFID Systems

• RFID (Radio Frequency Identification Systems)
• Provides real-time defective product data,
  improves item tracking, aids supplier-managed
  inventory processes
• PLM (Product Life Cycle Management Systems)
• Manipulates the relationship between the product
  life cycle and cost reduction opportunity

6
Global Sourcing and Supply Management

• Three major recent developments in the evolution
  of global sourcing
• More companies pursuing global supply base
• Increase in number of countries viewed as
  sourcing candidates
• Increase in quantity and variety of available
  products

7
Why Alternate Supply Sources?

• Worker Education
• Size of Domestic and Export Market
• Market Liberalization
• Chinas admission into the WTO has assured
  commitments to reduce high tariffs
• Abundance of low-wage labor available
• Chinas average hourly manufacturing wage is 60
  cents an hour with a able workforce of 941
  million

8
Global Sourcing Challenges

• Identifying and establishing new supplier
  relationships
• Less advanced IT systems and information sharing
• More research and due diligence must be done on
  overseas suppliers
• Incorporating local business culture into
  negotiation strategy

9
Approaches to Global Sourcing

• International Supply Management Office
• Local Joint Ventures
• Work with in-country enterprise to establish
  presence
• Trading Agent
• sourcing brokers

10
Procurement Outsourcing

• Cost reductions of 5 to 18 percent can result
  from an organizations ability to
• Drive contract compliance
• Source effectively
• Connect with a larger supplier base
• Operate more efficiently
• Address complex services spend
• Leverage technology more effectively

Procurement Service Providers, such as
www.SourceOneInc.com can supplement internal
procurement departments without risk.
11
Government Sourcing Practices

• Practice Cost Avoidance
• Identify rogue spending and eliminate unnecessary
  cost adders
• Know the Market
• Be knowledgeable about what youre sourcing
• Overcome Legislative Burdens
• Cut through the Red Tape
• Build Confidence in Strategic Supply Management
• Manifest trust of the end users in the system
• Improve Supplier Management
• Monitor supplier performance and adherence to
  contract terms
• Leverage Purchasing Power
• NYCDOE as example of consolidating smaller spends
  to leverage pricing with suppliers

12
Financial Services Practices

• Optimize Sourcing
• Make intelligent and informed sourcing decisions
• Rebuild the Procure-to-Pay Model
• Streamline processes
• Increase Use of Electronic Tools
• Apply Best Practices to Overlooked Spend
  Categories
• i.e. Legal fees, advertising, market research
• Maximize Compliance
• To realize optimum cost reduction and efficiency
• Develop Shared Services Programs
• Outsource Supply Management Functions
• Complex strategies make outsourcing an attractive
  option

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Chapter 4 Introduction

• The Three-to-Five Year Outlook
• CEO expectations for supply management
• CPO expectations for supply management
• How do we reach these goals?

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CEO Expectations

• Cost and Price Focus
• Take advantage of opportunities and strive for
  100 compliance with initiatives
• Brand Focus
• More than just the bottom line
• How do we get our name out?
• Technology Stagnation
• Systems and software can only go so far
• Global Commerce Dominates Competition
• Forward-thinking companies will have an edge
• Mass Industry Consolidation
• More takeovers and buyouts

15
Critical Supply Management Questions

• What business are we in?
• What are the ways to go to market?
• What are the business models we could use?
• What supply chains make sense in the given
  business model
• How can I synthesize existing supply chains?
• What next best practices should we create for
  competitive advantage?

16
Risk Management in Supply

• Risk assessment and management is becoming
  increasingly important
• Shift in focus from mitigation to optimization
• How can we use risk analysis to our advantage?

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How Do We Prioritize Supply Management?

• Reach
• Build a better business case for supply
  management
• Measurement
• How well do you perform against your competitors?
• Innovation
• Think outside the box
• Extracting Value
• Make sure youre getting the most out of
  suppliers while remaining attuned to the market
• Global Business
• Think worldwide to optimize sourcing practices
• Diversity
• Expand the horizons of your supply base

18
Types of Supply Chain Executives

• Entrepreneurs
• Strategic Thinkers
• Results-Drivers
• Recruiters

19
Entrepreneurs

• Broad thinkers
• Long-term focus on profitability and cost
  management
• Business acumen and financial knowledge

20
Strategic Thinkers

• Strong communication skills
• Knows when to develop new relationships and
  rekindle old ones

21
Results-Drivers

• Defines, predicts, measures, and tracks benefits
  of supply management
• Markets and sells supply management
• Focuses on continuous improvement
• Possesses market intelligence skills

22
Recruiters

• Measures performance to recognize key people
• Can identify right skills for any given position
• Rotates team members to gather cross-functional
  experience
• Brings out the best in others

23
In Closing

• Supply Management in the next 3-5 years will
  focus on
• Creating value for customers
• Eliminating waste in processes
• Better defining connections between processes,
  customers, and suppliers
• Working more collaboratively with suppliers

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Resources for These LessonsLesson 3 Innovation
and OpportunityLesson 4 The Three-to-Five Year
Outlook

• The Supply Management HandbookSeventh Edition
  McGraw-Hill
• Source One Management Services, LLC
• www.sourceoneinc.com