Course: Strategic Procurement in SCM Lecture / Week #.

3 (19th August, 2011) Lecture Contents about: Supply Processes Book Chapters #. 2

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Today, we will cover:

1. Objectives of Strategic Supply Management; 2. Organizational Structures for Supply

Management;

3. Potential Pros and Cons of Centralized / De4. Supply Activities; 5. Supply Teams; 6. Supply Processes and with Strategies and

Centralized Supply Management Structures;

Goal Alignment;

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Scope of Procurement Strategies:

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Factors influence Strategies

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Supply Organizations
(Chapter #. 2)

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Organization s with large product lengths and widths

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 For procurement people, within the supply

management has a strategic challenge to ensure the effective use of the resources and capabilities to maximize supplys contribution to organizational objectives.

Supply Management is an on going challenge

for senior management to select strategies designed to address competitive challenges and adopts an appropriate corporate organizational structure to complement the companys strategies.

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The

standard statement of supply management objectives is to obtain the:

1. Right Materials; 2. Right Quantity; 3. Right Time; 4. Right Place; 5. Right Price; 6. Right Source; 7. Right Service.

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SZABIST. 1010 attemptingMBA manage several balls in to Fall-2011.

 Supply

Management Development Areas:

1.

Strategies

Improve the Organizations competitive position;

Identify and exploit opportunities of revenue enhancement; Asset Management; Cost Reduction;
a)

1.

2. 3.

Access to new technologies; Flexible delivery arrangements; SZABIST. MBA Fall-2011.

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b)

Supply Management Strategies Development Areas (Contd.):

4.
1.

Maintain and Improve Quality:

Failure would result in end-product would not meet the expectations or will result in higher than acceptable costs.

5.
1.

Find and develop best-in-class suppliers:

Developing through:
a)

the

dependable

supplier

base

Analyzing their capabilities and strengths ; Should be both responsive and responsible. SZABIST. MBA Fall-2011.
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b)

Supply Management Strategies Development Areas (Contd.):

7. Purchase required items and services at lowest total cost:
Price is the most convenient method to compare competing suppliers proposals.
a) a. b. c. d.

1.

However, other factors also worth considering i.e. Quality levels; After sales service; Warranty costs; Inventory and spare parts requirements; Lead time; SZABIST. MBA Fall-2011.
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e.

Sample Organization al Strategies Across all Levels

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Potential Pros and Cons of CENTRALIZATION

Advantages

Dis-advantages

Strategic focus. Greater buying specialization. Ability to pay for talent. Consolidation of requirements-clout. Coordination and control of policies and procedures. Effective planning and research. Common suppliers. Proximity to major organizational decision makers. Critical mass. Firm brand recognition and stature. Reporting line-power. Cost of purchasing low.

Lack of business unit focus. Narrow specialization and job boredom. Cost of central unit highly visible. Corporate staff appears excessive. Tendency to minimize legitimate differences in requirements. Lack of recognition of unique business unit needs. Focus on corporate requirements, not on business unit strategic requirements. Most knowledge sharing one-way. Even common suppliers have difficulty in geographic and market segments. Distance from users. Tendency to create organizational silos. Customer segments require adaptability to unique situations. Top management not able to spend time on suppliers. High visibility of purchasing operating costs.

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Potential Pros and Cons of DE-CENTRALIZATION

Advantages
Easier coordination/ communication with operating department. Speed of response. Effective use of local sources. Business unit autonomy. Reporting line simplicity. Undivided authority and responsibility. Suits purchasing personnel preference. Broad job definition. Geographical, cultural, political, environmental, social, language, currency appropriateness. Hide the cost of supply.

Dis-advantages
More difficult to communicate among business units. Encourages users not to plan ahead. Operational versus strategic focus. Too much focus on local sources-ignores better supply opportunities. No critical mass in organization for visibility/ effectiveness- whole person syndrome. Lacks clout. Sub optimization. Business unit preferences not congruent with corporate preferences. Small differences get magnified. Reporting at low level in organization, Limits functional advancement opportunities. Ignores larger organization considerations. Limited expertise for requirements. Lack of standardization. Cost of supply relatively high.

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