Chapter 11

Global Supply Chain

Procurement and Distribution

 1
Lecture Outline

• Procurement
• E-Procurement
• Distribution
• Transportation
• The Global Supply Chain
 Procurement & E- Procurement

• Procurement Definition
The process of purchasing goods or services and is usually in reference to
business spending

• Why does it require a procurement process?

Help companies to get goods that meet the criteria for their needs.

• Objectives :
To reduce costs as small as possible and maximize profits as much as
possible.
Procurement Process

1. Identify company needs

2. Purchase authorization by management
3. Approval of purchase by management
4. Opening of tenders to suppliers and vendors
5. Identification and analysis of suppliers and vendors
6. Receipt of Quotation / offer of goods and services
7. Negotiation of terms of payment, price, quality etc.
8. Supplier selection
9. Limitation of Purchase Orders
10. Receiving Delivery Orders / Work Orders
11. Acceptance and quality checking
12. Invoice Documentation
13. Invoice checking
14. Payment to Suppliers

 Copyright 2011 John Wiley & Sons, Inc.  11-4

E- Procurement
• Definition
Electronic procurement of goods or services facilitated by the
internet, software or the web by utilizing information and
communication technology.
Usually starts from public auctions, then pre-qualifications and
finally electronic sourcing

• According to Chaffey (2009):

An electronic integration in managing all procurement activities.

• Objective :
Speed ​up the process of procurement and purchase of goods to vendors
 &

Australia and Scotland are the first two countries

who succeed for developing E-Procurement
System

 Copyright 2011 John Wiley & Sons, Inc.  11-6

E- Procurement Component
1. Hardware
2. Software
3. Human Resource
4. E-Procurement Users
5. Company Infrastructure, policies, business processes and
governance

 Copyright 2011 John Wiley & Sons, Inc.  11-7

E- Procurement Principle

• Delivery of goods or performing services in / to the right place.

• On Time Delivery
• Quality in accordance with orders and company standards
• Exact Quantity
• Goods or Service from appropriate and genuine suppliers

 Copyright 2011 John Wiley & Sons, Inc.  11-8

What can companies buy over the
Internet?

• Manufacturing inputs
 the raw materials and components that go directly into
the production process of the product
• Operating inputs
 maintenance, repair, and operation goods and services

 Copyright 2011 John Wiley & Sons, Inc.  11-9

 Outsourcing
• Outsourcing
• purchase of goods and services from an outside
supplier.

• Decided to do Outsource or Insource ?

Metric Make or Buy
Categories of Goods and Services a
Company Outsource
Why Outsourcing?

1. Cost reduction
2. Focus to the core competencies
3. Flexibility
4. Low risk
5. expense on asset purchases decreased
6. Service Increased

 Copyright 2011 John Wiley & Sons, Inc.  11-12

 Distribution

• Distribution encompasses all channels, processes, and

functions, including warehousing and transportation, that a
product passes on its way to final customer.

• Order fulfillment (The focus of Distribution)

• process of ensuring on-time delivery of an order

• Logistics
• transportation and distribution of goods and services

• Driving force today is speed

 Distribution Centers (DC)
and Warehousing

• Distribution centers adalah bangunan yang digunakan untuk menerima,

menangani, menyimpan, mengemas, dan kemudian mengirim produk.

With this distribution center, shipping costs will be much cheaper than direct
shipping from the original location to the destination location.

Differences:

• The main focus of the Distribution Center is the customer, while the warehouse
is storing products efficiently.

• Distribution Centers have a more complex mechanism compared to

warehouses

• Distribution centers accept external customer orders

 Warehouse Management Systems
• Highly automated system that runs day-to-day operations of a
DC
• Controls item put away, picking, packing, and shipping
• Cara pengaturan barang di WMS :
• FIFO ( First In First Out )
• LIFO (Last In First Out )
• FEFO (First Expired First Out)

Benefit :
• Speed ​up the lead time process
• Know the entire transaction process
• Set the layout of items optionally
• Can track inventory quickly and accurately
Transportation

• The movement of a produst from one location to another as it makes its

way to the end users
• The main mode of transportation at US :
• Rail
• Trucking
• Air
• Package Delivery
• Water
• Intermodal
• Pipeline
 Internet Transportation Exchanges

• Bring together shippers and carriers

• Initial contact, negotiations, auctions
• Examples
• www.nte.com
• www.freightquote.com
 Global Supply Chain

• Benefit :
1. It enables business processes to be organized using internals organization that
be reduced companies can react rapidly to unforcing market condition
2. Transport strategies can be improved
3. Cost can be minimized
4. Waste can be eliminated
5. We can get our produst to market substancially more quickly
Obstacles to Global Chain
Transactions
• Ever-changing regulations that vary from country to country
that govern the import and export of goods
• Limited shipping modes
• Differences in communication technology and availability
• Different business practices as well as language barriers