Procure-to-pay: Strategic sourcing

Question 1

Goals

Answer 1

1. efficiently plan long-term purchasing
2. achieve cost savings and improved service levels among their suppliers
3. determine the best sourcing strategy

Question 2

Inputs

Answer 2

1. customer demand

2. new product comes to market

Question 3

Outputs

Answer 3

1. contract with a supplier

2. supplier relationship

Question 4

Main phases

Answer 4

1. Assessment of requirements and spend
2. Identification of suitable sources of supply
3. Negotiation
4. Contracting

Question 5

Main activities

Answer 5

1. Analyse spending
2. Identify material
3. Determine source of supply
4. Publish request for quotation
5. Evaluate and select suppliers
6. Conclude purchasing contract

Question 6

Resources used

Answer 6

1. Marketplace (alibaba)
2. Human
3. Products
4. ERP system

Question 7

Org. unit affected and roles involved

Answer 7

1. Purchasing dpmt
2. Suppliers
3. Manager (approve contract)

Question 8

KPIs

Answer 8

• contract spend ratio
• number of suppliers
• goods returned
• on-time-delivery
• quality of goods received
• costs by suppliers
• flexibility in deliveries and payments (discount period)
• contract duration by suppliers
  …

Question 9

Data created and used

Answer 9

=> Master data:

• product and price list
• supplier

=> Transaction data:

• request for quotation
• quote
• contract

=> Analytical data:

• spend analysis report
• KPIs and reports

Question 10

Value created

Answer 10

• goods received
• supplier relationship
• improving sourcing strategy

Question 11

Direct procurement

Answer 11

raw material / components (used in production) or trading goods (sold to cust.)

Question 12

Indirect procurement

Answer 12

• maintenance, repair and operations materials

- capital goods and services

Question 13

Tasks

Answer 13

• analyse your company’s spend
• search and identify new sources of supply
• negotiate and monitor purchasing contracts

Question 14

Sourcing strategy

Answer 14

=> divides total spend into categories

=> defines per spend category

Question 15

Categories

Answer 15

=> number of suppliers (single, dual, multiple)

=> geo location of suppliers (local, global)

Question 16

Main functions

Answer 16

=> quote comparison (based on different criteria: lead times, payment terms, price)

=> duplicate check (in order to avoid duplicate)