Summary MNP3701 – Strategic Sourcing

MNP3701 – Strategic Sourcing SU 1 CH 1: Intro to Purchasing & Supply Chain M (P& SCM) 1.1 New Competitive Env  Incr numbers of world-class competitors (domestically & internationally)  Forced orgs to improve internal process  Sophisticated cust (industrial & cons) demand price reductions  Info available over internet alters balance btwn buyers & sellers  Abundance of comp & choice have cond cust to want higher quality, faster delivery & tailored prods  Social media spreads prod info at accelerated rate, incl word of mouth  Changes made companies realise how NB it is to M their supply base  Must be involved in M on/ serious interest in suppliers that provide materials/ services  Concerned with network of downstream firms resp for delivery & aftermarket service of prod to end cust  Led to emergence of supply chain M Factors Driving SCM 1 Cost & availability of info res among firms in supply chain allow easy linkages that eliminate time delays 2 Competition in domestic & international markets req quickness, agility & flexibility 3 Cust expectations & req are more demanding 4 Ability of supply chain to react rapidly by M risk minimises disruptions & mitigate impact on lost sales 5 Competition btwn supply chains, not just companies; 1s with best supply chains will be market winners & gain comp adv 1.2 Why Purchasing is NB 1. Increased value & savings  Focus on P&S M to incr cust value by improving perf  Supplier capabilities can differentiate final goods & incr their value to cust 2. Building relats & driving innovation  Relat with suppl to jointly reduce costs & contr innovative ideas to add value  Buyer & suppl must agree to acceptable paybacks so that each realizes a positive gain, with this cooperation, a level of trust is est which sets stage for innovations 3. Improving quality & reputation  P&S impacts quality coz firms are seeking to incr proportion of parts & services outsourced to concentrate on specialities  This incr importance of relat btwn purch, suppl & quality 4. Reducing time to market  Purch acts as liaison btwn suppl & engineers & can help improve prod & process designs  Purch can begin to add value & contr to incr competitiveness by involving suppl early in design process 5. Generating economic impact  Power of org purchasers as a group is significant  ISM report on busn is indicator of economic activity – monthly survey of purchasing M & is monitored by financial market 6. Contributing to competitive adv 2  Effective purch is NB to gaining com adv  Indication of enhanced status, reputation & recognition is higher salaries to purch professionals 1.3 Language of P & SCM Purchasing/ procurement  Functional group (formal entity on org chart) & functional activity (buying goods & services)  Activities incl suppl IDing & selection, buying, negotiating, contracting, supply market research & eval  Referred to as “the 5 rights” – right quality, in right quantity, at right time, for right price, from right source Supply M/ strategic sourcing  Strategic approach to planning for & acquiring orgs current & future needs through effectively managing supply base, using process orientation in conjunction with cross-functional teams to achieve org mission  Identification, acquisition, access, positioning & M of res & related capabilities org needs/ potentially needs in attainment of its strategic obj  Key elements of def: supply M is planning & acquiring current & future needs of org via 1. Strat orientation - req pursuing strat resp (activities with major impact on LT perf of org) & must be aligned with overall mission & strats (excl routine decisions) 2. Supply base M - progressive approach to M supply base that differs from arms-length approach with sellers, req purch professionals to work directly with suppl 3. Process driven approach – process approach to obtaining goods, process of IDing, evaluating, selecting, M & developing suppl for ultimate suppl chain perf 4. Cross-functional groups – suppl M is cross-functional – it involves purch, engineering, suppl quality assurance, suppl & other functions to work together on mutual goal