Ch.7 Supply Mngt / Procurement Flashcards
Org activities to
- analyze sourcing opportunities
- develop sourcing strategies
- select suppliers
- procure G/S
Supply Management
Sourcing / Purchasing / Procurement
Why Supply Management Is Critical
- Global Sourcing
- Financial Impact
- Performance Impact
To compete against global competitors & their SC, managers have to realize and
Global Sourcing
Financial Impacts of Supply Mngt
- COGS
- Inventory
-
Profit Margin
Net Income/Sales (%) -
Return on Assets (ROA)
Net Income/Avg Total Assets
use EBIT
Profit Leverage Effect
The effect of
1. COGS -$1 ⇒
EBIT +$1 (fixed sales)
2. Sales +$1 ⇒
EBIT +$1×Profit Margin
EBIT=Pretax Profit
Calculation of
↑ Profit Margin
by ↓ COGS
(EBIT r/t Net Income)
- Amount of COGS↓
=EBIT↑⇒ Profit Margin↑ - % of COGS↓
=% of Inventory↓⇒ROA↑
EBIT↑ / Total Assets↓
Performance Impacts of
Supply Mngt
Cost + Quality & Delivery
performance
Improve long-term business performance by
- understand sourcing needs
- develop long-term sourcing strategies
- selecting suppliers
- managing supply base
Strategic Sourcing
Strategic Sourcing Process
- Assess Opportunities
- Profile Internally & Externally
- Develop Sourcing Strategy
- Screen Suppliers &
Create Selection Criteria - Conduct Supplier Selection
- Negotiate & Implement Agreement
bidding/negotiating/contracting
A high-level strategic decision regarding G/S provided internally or externally from SC partners
Develop Sourcing Strategy
Make-or-Buy Decision
InSourcing vs OutSourcing
Identify & Quantify all major costs of various sourcing options
Total Cost Analysis
Incl. Direct/InDirect Costs of
OSC activities
3 Internal Costs of Operation to decide InSource / OutSource?
- Staff
- Material
- Overhead
MOS
A structured approach to develop sourcing strategy based on value potential & relative complexity or risk of a sourcing opportunity
Portfolio Analysis
Portfolio Analysis quadrants
-
Routine Quadrant
G/S accnt for small portion of purchase expense -
Leverage Quadrant
G/S accnt for large portion of purchase expense -
Bottleneck Quadrant
G/S of unique reqmts met by a few potential suppliers -
Critical Quadrant
G/S of unique reqmts w/ limited supply
2 x 2 Quardrant for Portfolio Analysis
Complex. Bottleneck Critical
or hi
Risk ↑ Routine leverage
Impact ↓
low ← → high
$ Value
A Sourcing Strategy that
the buying firm depends on a single company for all of particular G/S
Single Sourcing
A Sourcing Strategy that
the buying firm shares business with two/multiple suppliers
Dual/Multiple Sourcing
A Sourcing Strategy that
the buying firm uses
1 supplier for 1 particular part/service
&
another supplier for a different part/service
Cross Sourcing
2 Approaches to creating profiles
Profile Internally & Externally
-
Category Profile
understand a sourcing category that impacts sourcing strategy -
Industry Analysis
profiling major force/trend impacting industry, e.g. $/competition/regulation/substitution/tech/supply-demand trend
To assess opportunities, the Quantitative Techniques to understand spending patterns and identify improvement opportunities
Spend Analysis
1. G/S Categories make up the bulk of spending
2. How much spent w/ various suppliers
3. Location-wise spending patterns
Qualitative Criteria to evaluate suppliers
- Process & Design capabilities
- Mngt capabilities
- Financial & Cost structure
- Long-term Relationship
An inquiry to gather data from potential supplier about G/S for potential use in business
RFI
Request for Info
System for Conducting Supplier Selection
Weighted-Point Evaluation System
A formal request for suppliers to prepare bids, based on terms & conditions set by buyer
Request for Quotation
