DEVELOPING PURCHASING AND SUPPLY STRATEGIES AT FEDERAL DELIVERY Ellen jones sat in her office thinking, looking out the window. As director of corporate procurement for Federal Delivery, a company specializing in overnight package delivery, she was responsible for all supply management strategies and issues that affected the company. Ellen had just left a staff meeting with Larry Thomson, the vice president of supply management. Larry opened the meeting by comparing the supply management group to the mar keting group, a comparison that did not evoke a pleasant response among the supply managers present. He said that he had just spent an entire day with the vice president of marketing in a strategy alignment meeting. During this meeting, it became evident how seriously and creatively marketing took its responsibility for developing customer—focused marketing strategies. Larry said it was embarrassing when it was his turn to outline current and future sourcing strategies, which he said paied in comparison to the market ing departments strategies. The staff assembled at this meeting soon realized that Larry was not about to suffer this embarrassment alone. In the words of one staff member, Larry really read us the riot act. Larry argued that the sourcing strategies developed at Federal Delivery were incon sistent and sometimes conflicting. For example, he said that while one group wants a partnership with a supplier, another group is out beating suppliers over the head for a lower price. Meanwhile another group wants a single—source contract at the same time a second group insists on maintaining more than one supplier for every purchased item. An animated discussion of long versus shortterm contract agreements finally sent Larry looking for aspirin. Larry concluded the meeting by saying: The bottom line is that we need to get our act together. Each supply group is off doing its own thing while reinventing the wheel every time we have a purchase requirement. We are not consistent. We are not developing strategies that align with what this company must do to be successful. We operate in our own little world, and from where I sit, that world doesnt command much respect around this company. Ellen, I want your group to address these issues right away. Larrys comments troubled Ellen, particularly his concern that Federal Delivery pursued widely divergent buying strategies. While admittedly the sourcing groups sometimes devel— oped strategies that appeared inconsistent, it was possible that some of these groups were responding rationally to the demands placed on them by each sourcing decision. As she thought about this question, however, it became evident that Federal Delivery could bene~ fit from a strategy development process or framework that would guide the various pur chasing groups and buyers. This process must be robust enough so that all sourcing groups could use it. It was also evident to Ellen that Federal Delivery required a tool or approach for segmentng purchase requirements. She felt that segmenting purchase requirements
DEVELOPING PURCHASING AND SUPPLY STRATEGIES AT FEDERAL DELIVERY Ellen jones sat in her office thinking, looking out the window As director of corporate procurement for Federal Delivery, a company specializing in overnight package delivery, she was responsible for all supply management strategies and issues that affected the company Ellen had just left a staff meeting with Larry Thomson, the vice president of supply management Larry opened the meeting by comparing the supply management group to the mar- keting group, a comparison that did not evoke a pleasant response among the supply managers present He said that he had just spent an entire day with the vice president of marketing in a strategy alignment meeting During this meeting, it became evident how seriously and creatively marketing took its responsibility for developing customer—focused marketing strategies Larry said it was "embarrassing" when it was his turn to outline current and future sourcing strategies, which he said paied in comparison to the market- ing department's strategies The staff assembled at this meeting soon realized that Larry was not about to suffer this embarrassment alone In the words of one staff member, "Larry really read us the riot act." Larry argued that the sourcing strategies developed at Federal Delivery were incon- sistent and sometimes conflicting For example, he said that while one group wants a partnership with a supplier, another group is out "beating suppliers over the head for a lower price." Meanwhile another group wants a single—source contract at the same time a second group insists on maintaining more than one supplier for every purchased item An animated discussion of long- versus short-term contract agreements finally sent Larry looking for aspirin Larry concluded the meeting by saying: The bottom line is that we need to get our act together Each supply group is off doing its own thing while reinventing the wheel every time we have a purchase requirement We are not consistent We are not developing strategies that align with what this company must to be successful We operate in our own little world, and from where I sit, that world doesn't command much respect around this company Ellen, I want your group to address these issues right away Larry's comments troubled Ellen, particularly his concern that Federal Delivery pursued widely divergent buying strategies While admittedly the sourcing groups sometimes devel— oped strategies that appeared inconsistent, it was possible that some of these groups were responding rationally to the demands placed on them by each sourcing decision As she thought about this question, however, it became evident that Federal Delivery could bene~ fit from a strategy development process or framework that would guide the various pur- chasing groups and buyers This process must be robust enough so that all sourcing groups could use it It was also evident to Ellen that Federal Delivery required a tool or approach for segmentng purchase requirements She felt that segmenting purchase requirements would require each group to develop a strategy that was a reasonable response to that pur— chase requirement Shoulcl Federal Delivery really be buying low-dollar office supplies the same way it buys high-dollar aircraft parts? Assignment Develop a multistep process or framework that provides consistency and structure to the development of Federal Delivery's purchasingfsourcing strategies Provide a level of detail that would enable users to understand each step that makes up the strategy development process Be sure to identify any resource requirements the process may require Develop and discuss a X approach that requires users to segment purchase requirements according to variables that you determine are important Be sure to iden- tify where this segmentation tool fits within the strategy development framework Using the approach developed in Question 2, identify ten categories of commodities or goods or services that a company like Federal Delivery might require Next, posi- tion those categories or commodities within your matrix and identify (1] the type of reiationship you recommend for each item or service and (2} a strategy to obtain the item or service Develop a plan for Ellen to introduce the new strategy development process to man- agement at Federal Delivery Question 1: Develop a multistep process framework that provides consistency and structure to the development Federal Delivery 's purchasing/sourcing strategy Provide level of detail that would enable users to understand each step that makes up the strategy development process Be sure to identify any resources requirements the process may need to require OK to use drawing and/or Powerpoint Slides to explain Question 2: Develop and discuss a X approach that requires users to segment purchase requirements according to variables that you determine are important Be sure to identify where the segmentation tool fits within the strategy development framework OK to use drawings or Powerpoint to explain Answer & Explanation Solved by verified expert Answered by BarristerDanger7951 QUESTION The development of a purchasing and sourcing strategy at Federal Delivery should ideally be a multistep process that provides consistency and structure to the various groups involved in the process This process should be designed to ensure that all stakeholders have a clear understanding of the company's overall objectives and how the purchasing and sourcing strategy fits into these objectives Furthermore, the process should be able to segment purchase requirements in order to develop strategies that are appropriate to the type of purchase being made The first step in this process should be to develop a clear understanding of the company's overall objectives What are the company's long-term goals? What are the goals for the next quarter or year? What are the specific objectives of the purchasing and sourcing strategy? Once these objectives have been identified, the various stakeholders involved in the process should be brought together to discuss how the purchasing and sourcing strategy can best support these objectives The second step in the process is to segment purchase requirements This segmentation should be based on a number of factors, including the value of the purchase, the complexity of the purchase, the strategic importance of the purchase, and the lead time required for the purchase Segmenting purchase requirements in this way will allow the different groups involved in the process to develop strategies that are appropriate to the type of purchase being made The third step in the process is to develop specific sourcing strategies for each segment of purchase requirements These strategies should be based on a number of factors, including the company's overall objectives, the lead time required for the purchase, the expected volume of the purchase, and the level of risk associated with the purchase Once these sourcing strategies have been developed, they should be communicated to all of the stakeholders involved in the process The fourth step in the process is to implement the sourcing strategies This implementation should be done in a way that is consistent with the company's overall objectives and the specific sourcing strategies that have been developed Furthermore, the implementation should be monitored on a regular basis to ensure that it is achieving the desired results The fifth and final step in the process is to review and adjust the sourcing strategies on a regular basis This review should be done in light of the company's changing objectives and the evolving needs of the business Adjustments to the sourcing strategies should be made as necessary to ensure that the purchasing and sourcing strategy is always aligned with the company's overall objectives By following this multistep process, Federal Delivery will be able to develop a purchasing and sourcing strategy that is consistent, structured, and aligned with the company's overall objectives This process will also allow the different groups involved in the strategy development process to contribute their own ideas and expertise, ensuring that the final strategy is the best possible fit for the company The strategy development process should be able to take into account the various types of purchase requirements and develop strategies that are responsive to those requirements In order to this, the process should be able to segment purchase requirements into different categories For example, some requirements may be for low-dollar items while others may be for high-dollar items The process should also be able to take into account the different timeframes that may be associated with each purchase requirement For example, some requirements may be for items that need to be delivered immediately while others may be for items that can be delivered over a longer period of time The process should also be able to take into account the different objectives that each purchasing group may have For example, some groups may be more concerned with getting the best price for an item while others may be more concerned with getting the best quality for an item The process should also be able to take into account the different risks that each purchasing group may be willing to take For example, some groups may be more willing to take risks in order to get the best price for an item while others may be more risk-averse and may be willing to pay a higher price in order to get a guarantee of quality Once the purchase requirements have been segmented, the next step in the process is to develop strategies that are responsive to those requirements In order to this, the process should be able to take into account the different objectives, risks, and timeframes that are associated with each segment For example, if a purchasing group is looking for a low-price item, the process should be able to develop a strategy that involves negotiating with suppliers or looking for alternative sources of supply If a purchasing group is looking for a high-quality item, the process should be able to develop a strategy that involves working with a limited number of suppliers or conducting extensive quality testing After the strategies have been developed, the next step in the process is to implement those strategies In order to this, the process should be able to take into account the different resources that are required for each strategy For example, if a strategy involves negotiating with suppliers, the process should be able to identify the resources that are required in order to that If a strategy involves looking for alternative sources of supply, the process should be able to identify the resources that are required in order to that The final step in the process is to evaluate the results of the implementation In order to this, the process should be able to take into account the different objectives that were associated with each strategy For example, if a strategy was developed in order to get the best price for an item, the process should be able to evaluate the results in terms of price If a strategy was developed in order to get the best quality for an item, the process should be able to evaluate the results in terms of quality Step-by-step explanation QUESTION There are many ways to segment purchase requirements, but a simple and effective approach is to use a 2x2 matrix This matrix has two dimensions: (1) the strategic importance of the purchase, and (2) the degree of complexity involved in the purchase Strategic Importance: This dimension captures how important the purchase is to the company's overall strategy For example, a purchase of office supplies would have a low strategic importance, while a purchase of aircraft parts would have a high strategic importance Complexity: This dimension captures how complex the purchase is, in terms of both the product itself and the purchasing process A purchase of office supplies is typically less complex than a purchase of aircraft parts Using this 2x2 matrix, we can segment purchase requirements into four quadrants: Quadrant 1: Low Strategic Importance, Low Complexity This quadrant includes purchases that are not important to the company's overall strategy and are relatively simple to make An example would be the purchase of office supplies In this quadrant, the company would likely use a simple, straightforward purchasing strategy, such as buying from the lowestcost supplier Quadrant 2: Low Strategic Importance, High Complexity This quadrant includes purchases that are not important to the company's overall strategy but are complex to make An example would be the purchase of custom-made parts for a new product In this quadrant, the company would likely use a purchasing strategy that emphasizes quality and reliability over cost Quadrant 3: High Strategic Importance, Low Complexity This quadrant includes purchases that are important to the company's overall strategy but are relatively simple to make An example would be the purchase of raw materials for a manufacturing process In this quadrant, the company would likely use a purchasing strategy that emphasizes cost and efficiency Quadrant 4: High Strategic Importance, High Complexity This quadrant includes purchases that are important to the company's overall strategy and are complex to make An example would be the purchase of aircraft parts In this quadrant, the company would likely use a purchasing strategy that emphasizes quality and reliability This 2x2 matrix can be a useful tool for segmenting purchase requirements and developing appropriate purchasing strategies It can help companies to focus their resources on the most important and complex purchases, and to develop strategies that are well-suited to the specific requirements of each purchase A x framework can be used to segment purchase requirements according to two important variables: (1) the strategic importance of the purchase, and (2) the degree of complexity involved in the purchase Strategic importance can be determined by considering the impact of the purchase on the company's overall competitive strategy For example, a purchase of office supplies would be considered less strategically important than a purchase of aircraft parts, because the office supplies are not likely to give the company a competitive advantage The degree of complexity can be determined by considering the number of suppliers involved, the number of stakeholders, and the potential for supplier power For example, a purchase of office supplies from a single supplier would be less complex than a purchase of aircraft parts from multiple suppliers Once purchase requirements have been segmented according to these two variables, each segment can be assigned a specific sourcing strategy For example, purchases that are both strategically important and complex might be assigned a strategic sourcing strategy, while purchases that are not strategically important and not complex might be assigned a transactional sourcing strategy The x framework can be used to segment purchase requirements according to two important variables: (1) the strategic importance of the purchase, and (2) the degree of complexity involved in the purchase