Trang 1 LOGOCHAPTER 3: SOURCING AND PROCUREMENT Trang 2 LOGOCourse book and support materialsvAlanHarrisonandet.2014,Logisticsmanagement and strategy competing through thesupply chain f
1/14/20 CHAPTER 3: SOURCING AND PROCUREMENT MsC Bui Thi Bich Lien LOGO Contents vIntroduction (Definitions, function) vSourcing vSourcing process Steps vOutsourcing vCase Studies LOGO 1/14/20 Course book and support materials LOGO vAlan Harrison and et (2014), Logistics management and strategy competing through the supply chain (fifth edition), Pearson, (course book) chapter 9-pp.353-387 vArnold J.R Tony et al (2008), Introduction to materials management (sixth edition), Pearson, chapter 7, pp.191-215 vMichael Hugos (2003), Essentials of Supply Chain Management, John Wiley and Sons Inc chapter 2: pp.43-76 Learning Objectives LOGO vGain the concept of sourcing, purchasing and procurement vApply the principles of the drivers of procurement value vUse the procurement core-processes vApproach the management of the supply base 1/14/20 Terminologies LOGO Purchasing Procurement Sourcing Vendor Supplier relationship management (SRM) Procurement vs purchasing LOGO vProcurement: vSourcing: vPurchasing: vSource: Douglas M Lambert et al (2001): Strategic logistics management McGraw-Hill 1/14/20 LOGO Definition vPurchasing: is the function of procuring materials, supplies, and services, maintaining purchase order priorities, managing supplier relationships, and ensuring high levels of performance to achieve quality, delivery and cost objectives Categories of purchasing No Categories Resale Conversion MRO support LOGO Industries Distributors Retailers Wholesalers Manufacturers Channel Postponement All Organization 1/14/20 Detailed Purchasing Responsibilities LOGO vProvide an uninterrupted flow of materials and services vPurchasing products competitively vKeeping inventory investment to a minimum vProviding consistent, quality purchased materials and services vDeveloping the supplier base vDeveloping people resources and information tools for productivity optimization Purchasing objectives LOGO Some basic functions: Determining purchasing specifications: right quality, right quantity, and right delivery (time and place) - Selecting supplier (right source) - Negotiating terms and conditions of purchase (right price) - Issuing and administration of purchase orders 1/14/20 Definition of sourcing LOGO vThe body of integrated activities that focuses on the purchase of materials, supplies, and services needed to reach the firm’s strategic goals In a narrow sense, sourcing describes the process of buying, in a broader context, sourcing involves determining the need, selecting the supplier, arriving at the appropriate price, terms, and conditions, drafting the contract, and growing mutually beneficial supplier relationships Definition of procurement LOGO vProcurement is the process of getting the goods and/or services your company needs to fulfill its business model Some of the tasks involved in procurement include developing standards of quality, financing purchases, negotiating price, buying goods, inventory control and disposal of waste products like packaging 1/14/20 Function of Procurement LOGO vFive main activity categories: § Purchasing § Consumption management § Vendor Selection § Contract Negotiation § Contract Management LOGO 1/14/20 LOGO Sourcing LOGO Sourcing strategy in Supply chain The role and the importance of sourcing Viewpoints and development process of SM Sourcing Strategy Basic factors to determine sourcing strategy Outsourcing in Supply chain Definition, advantages and risks Basic factors to make outsource decision Partner choice process Logistics service outsource 1/14/20 Strategic Sourcing LOGO vA comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total spend for material spend categories There is a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals Strategic sourcing Objectives LOGO vEstablish close, collaborative relationships with key suppliers vEnsure reliable quality and delivery of materials vReduce supply risks vEstablish a smaller, more flexible, more responsive supplier base vClosely integrate supplier input to product development and innovation vReduce external spending vReduce transaction costs 1/14/20 Why sourcing is very important? LOGO Suitable cost cutting centre Ensuring smooth and continuous production line and business Intra-corporate interaction center “Door” role Supp - liers Sourcing R&D, Design Manufacture Finance Quality management Custo -mers Why sourcing is very important? LOGO Industries Percent of material cost in cost of good sold Average Petrochemical industry Transport Car manufacture Wood industry Food processing Paper industry Electronic equipment PC, Electronic device 10