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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 Lesson 3 Introduction.

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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


lesson 3 introduction
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)
maturing and scaling of procurement technology
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 provide Reverse Auctions, RFx, and Supplier Management

e sourcing capabilities
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
plm and rfid systems
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
global sourcing and supply management
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
why alternate supply sources
Why Alternate Supply Sources?
  • Worker Education
  • Size of Domestic and Export Market
  • Market Liberalization
    • China’s admission into the WTO has assured commitments to reduce high tariffs
  • Abundance of low-wage labor available
    • China’s average hourly manufacturing wage is 60 cents an hour with a able workforce of 941 million
global sourcing challenges
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
approaches to global sourcing
Approaches to Global Sourcing
  • International Supply Management Office
  • Local Joint Ventures
    • Work with in-country enterprise to establish presence
  • Trading Agent
    • “sourcing brokers”
procurement outsourcing
Procurement Outsourcing
  • Cost reductions of 5 to 18 percent can result from an organization’s 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 can supplement internal procurement departments without risk.

government sourcing practices
Government Sourcing Practices
  • Practice Cost Avoidance
    • Identify rogue spending and eliminate unnecessary cost adders
  • Know the Market
    • Be knowledgeable about what you’re 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
financial services practices
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
chapter 4 introduction
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?
ceo expectations
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
critical supply management questions
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?
risk management in supply
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?
how do we prioritize supply management
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 you’re 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
types of supply chain executives
Types of Supply Chain Executives
  • Entrepreneurs
  • Strategic Thinkers
  • Results-Drivers
  • Recruiters
  • Broad thinkers
  • Long-term focus on profitability and cost management
  • Business acumen and financial knowledge
strategic thinkers
Strategic Thinkers
  • Strong communication skills
  • Knows when to develop new relationships and rekindle old ones
results drivers
  • Defines, predicts, measures, and tracks benefits of supply management
  • Markets and sells supply management
  • Focuses on continuous improvement
  • Possesses market intelligence skills
  • 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
in closing
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

Resources for These Lessons:Lesson 3: Innovation and OpportunityLesson 4: The Three-to-Five Year Outlook

The Supply Management Handbook:Seventh Edition: McGraw-Hill

Source One Management Services, LLC