Summary
Summary part 2 procurement: strategic procurement
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Strategic procurement (part 2)
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kiarademoor
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International sales &procurement
Strategic procurement
Strategic sourcing: definition
Focus on total cost of ownership
Optimizing the sourcing process through ongoing market analysis
Building relationships with suppliers
Analyzing business needs (and product portfolio) and the marketplace at large
Network (Re)design
- Make or buy
- Off / on / nearshoring
Employ large sets of data to evaluate the value of
- Optimal vendor relationships
- Reduced risk to the business
Make or buy?
Outsource (via suppliers)
Inhouse (do it yourself)
Outsourcing
“handing over functions such as catering and security to third-party specialists, allowing
business to concentrate better on their core competences”.
Today: the transfer of to a third party of the management and delivery of a process
previously performed by the company itself
Examples?
- IT
- Accountancy
- Warehousing and distribution
- Customer service
Dutch translation: “uitbesteding”
Opposite to ‘insourcing”
Drivers for outsourcing
The need for focused competitiveness => focus on the CORE business activity
Outsource where others can do better
Outsource to focus on core business
Outsource to reduce cost base
Other 2nd drivers are:
- Reduce direct and indirect costs
, - Reduce taxes
- Reduce logistics costs
- Spread foreign exchange risks
- Build alternative supply sources
- Learn from local suppliers, foreign customers or competitors
- Gain access to world class capabilities or attract talent globally
Outsourcing: not always succesfull
Many companies report that instead of process improvement => loss of process control
Outsourcing a function saves on average 15%
Only 21% of suppliers in a survey felt that clients communicated their objectives well.
Potential solution => introduce key performance indicators (kpi’S)
- Metrics used to monitor performance on an ongoing basis
- Goals and objectives
- A workable strategic plan
See exercise slides
Offshoring
The transfer of specific proceses to lower cost locations in other countries (Asia, ..)
Advantages:
- Lower staff-related costs
- Lower communication and it-costs
- Less stringent regulatory controls
- Increase productivity / time to market
Pitfalls:
- Training cultural differences & languages
- Quality
- Lay-offs
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