1 pmap – purchasing management association of philadelphia tuesday december 18, 2007 - tuesday...

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PMAP – Purchasing Management Association of Philadelphia

TuesdayDecember 18, 2007 - TuesdayDinner Presentation

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The Buyer of the Future –What Skills Will You Need?

Who Do You Gotta Be?

What Do You Need To Know?

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Presenter:

Marilyn Gettinger, C.P.M.New Directions Consulting [email protected]

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Topics For Tonight

1. The Business World 2. Before Materials Management 3. Materials Management 4. On Our Way To Today 5. Supply Management 6. Supply Chain Management 7. The Global Supply Chain 8. The Organization of the Future 9. Knowledge and Skills 10. What Do We Need to Know, What Do We Need

To Do, What’s It Going to Take?

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A Little Background Music

The Business World Today?Global Challenges and Impacts?Our Competitive Environment?Drivers of Better, Faster,

Cheaper?

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Our Business World

Global Wide generational

spread Continuous change Greening of the

organization Sustainability

Dow Jones Social Responsibility

ISO 26000 Continual cost

reduction opportunities

Regulatory demands Lack of qualified staff Greater risk

possibilities Customer base Supplier integration Leadership Innovation and

creativity Outsourcing

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Before Materials Management

CEO

Purchasing Inventory Transportation WarehousingProductionPlanning

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Before Materials Management

Lack of communication between materials areas Excess inventory Functional focus Duplication/redundancy Conflicting goals Lack of clear understanding of the impact of one

function on another Competition for approval from CEO Focus on what was best for the

function/department not the organization or the smooth flow of materials or the ultimate customer

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Materials Management

1. An integrated approach to managing materials and the people and resources that support the efficient use of materials

2. Functions involved in the managing of materials are integrated under one manager. Materials Manager VP of Materials

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3. Functions integrated Purchasing Inventory Control and

Management Transportation Customer Service Forecasting Production Planning

and Control Warehousing

including Receiving Shipping

4. All decisions made based on trade-offs Those decisions

that were best for the organization and the lowest ultimate cost of managing materials

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CEO

MATERIALSMANAGEMENT

QUALITYFINANCE MARKETING SALES

Transportation PurchasingProductionPlanning

Scheduling

CustomerService

Inventory Warehousing

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Reduction in inventoryImproved communicationBetter decisionsMore focus on the management of

materialsReduced costs of productionPositive impact on the bottom line

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Focus on managing materials at the lowest ultimate cost

Not yet end-customer focusedNot integrated into other non-material

functions

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Focus on managing materials at the lowest ultimate cost

Not yet end-customer focusedNot integrated into other non-material

functions

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On Our Way To Today Stockless Purchasing P-Cards VMI Consignment Group purchasing arrangements Contractual language E-Commerce Internal relationships Strategic sourcing Optimizing the supply base Tactical to strategic thinking Quality emphasis

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Supply Management

The forecasting, planning, sourcing, acquisition, storing, managing, and disposing of materials used or for potential use to support the organization’s production, distribution, and customer service.

Institute For Supply Management (ISM) Formerly the National Association of Purchasing

Management (NAPM)

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Supply Chain Management

The supply chain is a series of organizations that jointly create value for ultimate customers.

Supply chain management is the proactive management of supply chain links that are critical to an organization’s operations.

A systems approach to managing flows of information, materials, and services from raw materials suppliers through factories and warehouses to the end-customer.

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The Internal Supply Chain

R&D Engineering Purchasing Transportation Finance

A cross-functional team focusing on the design, implementation, and management of a series of activities that provide the ultimate customer with what they want.The design and management of seamless, value-added processes across departmental boundaries to meet the real needs of the end customer.

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Moving Downstream

The Internal

Supply Chain

Customer

Customer

CustomerCustomer

UltimateCustomer

Production Distribution

MarketingFinance

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Moving Upstream

SCMTeam

Tier1

Tier 3

Tier 2

Tier 3

Tier 2

Tier 2Tier 3

Tier 3

Tier 3

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The Total Global Supply Chain

The entire supply chain from cradle to grave including returns management, transportation providers, and other types of providers.

Upstream partners Enterprise Downstream partners

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SCM encompasses all activities associated with the flow and transformation of goods from the raw materials stage through to end users, as well as the associated information flows

The networks, or chains of suppliers, producers, and customers involved in producing and marketing particular products.

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Supply Chain Objectives

Reduce or share risksImprove performanceReduce cycle timeReduce costsImprove customer service/satisfactionGenerate new incomeIncrease profits

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Includes systems management, operations and assembly, purchasing, production scheduling, order processing, inventory management, transportation, warehousing, and customer service.

AT EVERY TIER OF THE SUPPLY CHAIN

Supply Tiers Internally Customer Tiers

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Identify the processes necessary to meet customer expectations

Engineer SCM processes as the core of the business

Move from a silo to a team philosophy Integrate internal processes Define metrics Operate the internal supply chain Measure performance Integrate the internal supply chain with the supply

chains of other organizations

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The Global Supply Chain

Expands to include upstream suppliers anywhere in the world

Expands to include downstream customers anywhere in the world

Expands to an internal supply chain that may produce in global sites owned by the organization

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The Global Supply Chain

China

KoreaRaw Materials

FranceRaw Materials

UnitedStatesTransportation Mexico

Canada

Brazil

Seamless, value-added processes across organizational /country boundaries

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Global Sourcing

The ability of an organization anywhere in the world To purchase materials anywhere in the

worldTo produce anywhere in the worldTo transport materials anywhere in the

worldTo store anywhere in the worldTo sell anywhere in the world

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Portfolio Management

An organization’s analysis and cost structure for buying, producing, transporting, storing, and selling their products at various locations including transportation costs

A cost matrix implemented and maintained so that decisions can easily be made on how best to manage the entire physical chain of products in the face of potential or real risk disruptions

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The Supply Chain Language

Core competencies Stakeholders Enterprise Downstream and upstream channel

members Best tiering Best shoring Tier management Off shoring Low cost country sourcing The bullwhip effect

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The Organization of the Future

20th Century Stability and

predictability Size and scale Command and control Rigidity Rules and hierarchy Guarded information Vertical integration Domestic market

21st Century Continuous

improvement Speed and

responsiveness Leadership for everyone Virtual organizations Information sharing Creativity and intuition Proactive Interdependence Collaborative advantage International focus Business models

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The New Rules

1. Don’t play by the dominant rules of your industry.

2. Get innovative or get dead. 3. Reexamine your organization for hidden

strategic assets, then leverage the heck out of them.

4. Create a bias for speed and action in your company.

5. Be proactive and experimental.

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The New Rules

6. Break barriers. 7. Use all of your people, all of their skills, all of

the time. 8. Globalize your perspective and knowledge base. 9. Admit that the eco-industrial revolution is well

and truly upon us. 10. Turn organizational learning into a corporate

religion. 11. Develop strategic performance measurement

tools. From: The Eleven Commandments of 21st Century

Management Matthew J. Kiernan

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Knowledge and Skills

Materials Management All of the functions in the MM

area Communication and conflict

management Relationship management Project management Tactical manager Strategic thinker Human relations

Supply Chain Professional Collaborative mindset Team orientation Facilitation of teams Manager of diverse

relationships Subject expert Financial understanding Risk manager Trade-off manager Global expert Change management End-to-end thinking Total cost perspective Revenue generator Profit generator Cultural expert Technology understanding

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The Buyer of the Future

CostManagers

TradeoffManagers

Relationship Managers

ProfitManagers/Generators

Asset Managers

Revenue Managers

Generators

RiskManagers

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The Supply Chain ProfessionalThe Buyer of the Future

Walking up and down the organization’s internal and external supply chains

=An understanding of how it all worksValue to all relationships

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Supplier Relationship Management

Moving from arms’ length to partnerships, alliances, and collaborations

This includes divisions

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Customer Relationship Management

Customer segmentationWhat do they need and want?

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Alignment

Successful global supply chains align with business/organizational strategies.

Global supply chains are successful if the cross-functional supply chain team understands the mission, goals, objectives, and challenges of the organization.

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Global Supply Chain Analysis

True internal costs Total Landed Costs

Unit Price +Inland transportation +Port fees +Export licensing +Export documentation +Maritime insurance +ocean/Air freight costs +Container screening +C-TPAT +Inspection

+Customs duties +Customs document

review +Bonded warehousing +Harbor fees +Import documentation +Customs Broker fees +Port fees +Import licensing +Letters of Credit +Special packaging +Inland transportation +Pipeline inventory +Communication +Travel

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Global Supply Chain Analysis

Country Study Template Government Infrastructure Potential employee base Laws and regulations Raw materials Transportation capabilities Business culture Country culture Unions and other employment practices

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Emerging Markets

Countries that are potential sources of materials and outsourcing opportunitiesViet NamLatin AmericaCambodiaEaster block nationsMalaysiaScotland Ireland

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The Successful Global Supply Chain

All stakeholders are focused on the ultimate customer. On-demand, real-time data as to exactly what is happening

anywhere in the supply chain available to all stakeholders Total trust between channel members A supply chain that produces just what and how much is needed,

when it is needed, and where it is needed Metrics that align with business and supply chain priorities Strategies are put before technology. Risk management portfolio for the entire supply chain Collaborative internal, supplier, and customer relationships Flexibility built into the supply chain. Inventory in the right format at the right location in the supply chain An end-to-end focus by all channel members A cross-functional supply chain mindset

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The Successful Global Supply Chain - Adaptive

Pattern Recognition

Demand patternSupply bases

Technology cycleProduct life cycle

Preparedness

Market entrance capabilitySupply network development

Product design flexibilityLook-ahead planning

Supply Chain StructureSupply and manufacturing bases

Outsourcing relationshipsDistribution channels

New markets and customers

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The Successful Global Supply Chain - Agile

Responsiveness to uncertain demands, Robust to unexpected external

disruptions

InformationIntegration

Supplier Integration

Design forPostponement

Inventory/capacitybuffering

Contingencyplanning

EfficientLogistics

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The Successful Global Supply Chain - Aligned

Dimension Exchanges Objectives

Information

alignment

Information

knowledge

Common

shared

Identity

alignment

Role, work, responsibility

Efficiency and flexibility

Incentive alignment

Accountability

risks/

cost/gains

Equitable and

Overall performance

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The Unsuccessful Supply Chain

Lack of understanding at all levels Lack of senior management buy-in Silo mentality Too many measurements and focus on the

wrong measurements Lack of alignment between business,

supply chain, and internal functions Inventory held at every tier Transactional activities Lack of tier management

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Steps in Getting There

1. The existing organizational culture

2. Level of trust at all levels and with suppliers/customers

3. A change management process

Introduction of trust A supply chain

awareness training Steps in undoing

wrongs from the past A champion for

change A strategy for moving

the masses to supply chain thinking

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Getting a Little Help From Other Concepts

Lean Thinking Value Value stream Value stream

mapping Flow the value

stream From push to pull Continuous

Improvement

Six Sigma A particular goal

of reducing defects to near zero

3.4 errors in a million tries

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Six Sigma

Genuine focus on the customerData and fact-driven managementProcess focus, management, and

improvementProactive managementBoundary-less collaborationDrive for perfection, tolerate failure

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The Principles ofGlobal Supply Chain Management

Visibility

Leverage

Technology

Scalability

KnowledgeManagement

SupplyManagement

Synchronization

Risk identification

Collaboration

Event ManagementRisk

Management

Connectivity

Inventory

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The Principles of Global Supply Chain Management

Visibility The ability to see

activities throughout the supply chain virtually or near-virtually

Internet Supply chain

software Full integration of all

legacy and new software programs

Collaboration An integration of

planning and decision making across organizational boundaries

All stakeholders understand their roles in the supply chain, business processes, expectations

Everyone is focused on serving the ultimate customer

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Connectivity Strategic, tactical,

and operational connections between all supply chain organizations through open communication, technology, and architecture of the supply chains

Scalability The ability to

develop a set of supply chain business processes that can be duplicated with additional customers and third-party relationships

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Leverage Core competency

focus Leverage the core

competencies of other organizations

Core customer focus Customer

relationship management

Technology Customer relationship

management Supplier relationship

management ERP Demand/Supply RFID E-procurement Warehouse

management Collaborative software

Sales and Operating Collaborative Planning

Forecasting and Replenishment

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Supply base management A documented total

supplier programSelection criteriaEvaluation ManagementDevelopment

Revisions of criteria Security Long-term growth Electronic expansion

Revisions of evaluation criteria

Performance management

Tier sourcing Tier management

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Synchronization Theory of constraints – the slowest link in

the supply chain will impact all other links All links should produce exactly what is

needed at every level, at the right time, at the right place, at the right volume, etc.

No inventory build-up anywhere in the supply chain

Supply Chain Links

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Information/Knowledge Management What information is needed? How will the organization get that information? How will the organization get that information

virtually? What systems and processes are in place to

move that information within the supply chain quickly?

How quickly can the supply chain act on the information

Product Information Customer information

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Material Expert

Titanium DioxideSoy oilWeatherViral outbreaksCost of goods

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Risk Identification Internal

Disruptions of internal operations Business risks Planning and control risks Mitigation and contingency risks

External Demand Supply Environment Business Physical plant

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1. Profile supply baseIdentify each raw material or componentIdentify strategic materialsUnderstand supplier’s organization

2. Assess vulnerabilitySupply risksDemand risksEnvironmental risksProcess and plant risksBusiness risks

3. Evaluate implications 4. Identify mitigation and contingency actions 5. Complete cost/benefit analysis

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Business Continuity Planning

Awareness Internal External

Prevention

IdentificationAssessmentTreatmentMonitoring

RemediationPlan Measure Impact Duration ResourcesExecution

KnowledgeManagementTrack resultsThings gone wrongThings gone rightFuture Action list

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Portfolio DesignMultiple supply sourcesMultiple manufacturing locationsTransportation modesTransportation channelsSpecial conditionsCosts for each possible source Create various supply chain scenariosSystem will provide total cost per

example

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Inventory ConsiderationsPostponementReduction of inventory at every level of

the supply chainForms of inventoryLocation of inventory within the supply

chain

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Event ManagementA supply chain event

Any individual outcome or non-outcome of a supply chain cycle,

(sub) process, activity, or taskSupply chain event management

The application of statistical process and technology identification and control solutions to standard and non-standard supply chain events

Event categoryA logical grouping of supply chain events

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The Hierarchy of the Global Supply Chain Evolution

FunctionalProcess Unit

Intra-Enterprise

Inter-Enterprise

External

Total Business System

Enterprise Integration

Corporate Excellence

Partner Collaboration

Value Chain Collaboration

Full Network connectivity

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The State of the Union

Impact of supply chain management on cost savings and revenue improvement Up to 20%

Supply chain evolution in various industries

Inter-enterprise collaboration

Alignment of business strategies and supply chain strategy

Challenges Software as the cure-all Customer satisfaction

and supply chain competency

Understanding relationships between business and technology

Importing/exporting Teamwork Vulnerability reviews

Potential disruptions International freight

movement

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Future Expectations

At the third level or higher on the hierarchy model

One to three points of new profit for a typical three-year supply chain effort

– longer initiatives the points increase to five to eight

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The State of the Union

Strategic sourcing of direct materials

Sales and operations planning

Strategic sourcing of indirect materials

Strategic inventory planning

Advanced planning and scheduling

Senior management commitment

Metrics aligned to supply chain outcomes

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“It’s not enough to be busy… the question is:

What are we busy about?”

Henry David Thoreau

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Now It’s Your Turn

What three new ideas did you gain from this presentation that you want to find out more about?

What steps could you take to implement some of these ideas?

What do you want more information on?

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Thank you

[email protected] additional questions and answersNew Directions Consulting Group

1 pmap – purchasing management association of philadelphia tuesday december 18, 2007 - tuesday...

Documents

managing of materials

materials management4

smooth flow of materials

lowest ultimate costnot

supply basetactical

supply management6

integrated approach

global supply chain8