BA 108: DISTRIBUTION

& LOGISTICS
MANAGEMENT

Tim Humangit
January 16, 2014
Agenda for Today’s Session:

-  Module Quiz 3 & 4 Performance Update

-  Case # 3: Click-a-box factory
-  Purchasing Module
-  Industry Speaker
Trivia Question # 1

You are a buyer from a large company and a
supplier gives you a nice gift like a fancy dinner
for you and your spouse, a personal discount or
an expensive case of wine. What is the actual
intention of the supplier?

A.  Building a friendly relationship
B.  Getting you drunk to get you intoxicated and sign
a contract
C.  Utilizing his marketing budget for tax reasons
D.  Making more profit in the future
Trivia Question # 2

You are a buyer from a large company and a supplier
is in direct contact with somebody within your
company to persuade him to buy their products.
In the purchasing profession, what do we call this
situation?

A.  Backdoor Selling
B.  Misleading Conduct
C.  Bribery
D.  Direct Influence
Trivia Question # 3

What does a buyer describe as "Goldplating"?

A.  Buying a product with a better specification than
you actually need
B.  Buying a top brand product
C.  A supplier selling you rubbish with a convincing
story
D.  Buying a product with a price that changes
everyday
Trivia Question # 4

A set of transportation conditions are agreed upon Globally
so that there is no interpretation mistake about who pays for
transport or who is responsible for insurance. According to
these Incoterms, where is the transition point of risk in the
condition FOB in case you do an international purchase?


A.  At the factory gate of the seller
B.  At the railing of the ship at departure
C.  At the factory gate of the buyer
D.  At the clearance area in the custom office in the
country of the buyer
Trivia Question # 5

A supplier has not raised the price of a product for the
third year in a row. What should your action be?


A.  You should wonder if you are not paying too much, and also
whether you have paid too much in the past few years.

B.  Give the supplier a call and thank him for the fact that the
price is so stable.

C.  Don’t contact the supplier, maybe he has forgotten the

price, enjoy it as long as it lasts.

D.  Give the supplier a call and ask him if he did not make a
mistake. You do not want a surprise during the year on
your purchasing budget.
Purchasing = Procurement

Sourcing and having sufficient supplies at:

-  Required quality
-  Right Time
-  Right Place
-  Right Price
Procurement is not just about Raw Materials.
Going to the Marketplace…

What is your objective?

Going to the Marketplace…

What is your objective?

A.  Ensuring Supply of RMs and WIPs

Basic strategies:
- Vertical Integration (purchase supplying
company)
- Safety stocks
- operating proximity
- procurement hedging
- development of relationships via systemic
partnerships and/or VMI
Going to the Marketplace…

What is your objective?

B. Quality of Supplies

Basic Strategy:

- Set-up a Quality Management
System (QMS)
Going to the Marketplace…

What is your objective?

C. Product Specification

Basic Strategy: Development of Product
Specifications



Going to the Marketplace…

What is your objective?

D. Price

-  Negotiating Skills of the purchasing/
selling team
-  Quality of Goods
-  Detailed knowledge of the product to be
purchased (capacity, delivery, etc.)

Going to the Marketplace…

What is your objective?

D. Other Logistical requirements to
purchase

-  Origin
-  Supply Methodology
-  Mode of Transport

Going to the Marketplace…

What is your objective?

E. Hierarchy of Importance




The Kraljic Portfolio Purchasing Model



The Kraljic Strategic Positioning Matrix



The Kraljic Purchasing Strategic Matrix

Purchaser Ave-High Equilibrium Low-Ave

Supplier Low-Ave Equilibrium Ave-High



Managing Your Suppliers:

-  Who are your
suppliers?
-  How Many Suppliers
do you need?
-  Do you approach them
adversely or
collaboratively?

Let’s Play Chess…
(Purchasing Model)
4 Basic Strategies:

1.  HS-LD: Change
Nature of Demand
2.  LS-LD: Manage
Spend
3. LS-HD: Leverage
Competition
among Suppliers
4.  HS-HD: Seek Joint
Advantage with
Supplier

Let’s Play Chess…