OMSAN LOJSTK

Supply in the Logistics StrategyProcurement and Supplier Relationship ManagementLatin America Logistics CenterLogistics Management Series

Statistics Purchased products and services account for more that 60% of the average companys total costs. For steel companies that number goes up to 75%; it is 90% in the petrochemical industry. Even at service companies the figure is typically a hefty 35%. Bringing down procurement costs can have a dramatic effect on the bottom line a 5% cut can translate into 30% jump in profits A Smarter Way to BuyHarvard Budines Review, June 2001

Logistics Master Plan The Logistics Master Plan Synchronises Operations Management with the Strategic Objectives of the Company thorugh permanently assessing performance, improving processes and internal practices, defining infrastrucutre requirements and designing the organisation to support the processes

Supply in the Logistics StrategySupply

Supply Master Plan

Supply Management Dilemmas

Supply Management DilemmasWhich are the Supply Sources that Satisfy our Financial Objectives?

Which Sources Satisfy the Service Level that OUR Customers Demand?

What is the Supply Sources Mix that Minimises Supply and Inventory Management Costs?

What is the Strategic Supply Sources Mix?

How can I Evaluate my Supply Sources?

Procurement offers the largest opportunities of savingsSources: CRPS, AT Kearney

Chart1

0.17

0.73

0.01

0.01

0.08

Key Opportunites to Save

Sheet1

Inventory17%

Potential Procurement Expenses73%

Supply Operative Costs1%Key savings areas

Inventory Carrying Management1%Sources: CRPS, The Wacht Group, AT Kearney

Aggressive Procurement8%

Sheet1

Key savings opportunities

Sheet2

Sheet3

1. Key Performance Indicators in SupplyCostsProcurement Costs, Procurement Costs by Order

ProductivityOrders per man-hour, SKUs by Purchase officer

QualitySupplier Fill RateSupplier Satisfaction Index% Perfect OrdersSupplier Lead Time Variance

Response TimeOrder Cycle% of Undelivered Orders

Gap Analysis in SupplySupply Processes Include Manufacturing and Procurement

For each Product the Company must choose between Make of Buy

For the Manufactured Products the Supply Objective is to Efficiently Produce to fulfil Inventory Targets

For Purchased Products the Objective is to Efficiently Purchase to fulfil Inventory Targets

Supply ManagementGAP Analysis

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Indicadores

Politica de Servicio de Proveedores

Integracin de Proveedores

Entrada Orden de Compra (O/C)

Procesamiento O/C

Compra &

Pagos

Sistemas de Gerencia de Suministros

Organizacin

0

1

2

3

4

5

Empresa X

Excelencia

_1167135726.doc

KPI

Suppliers Service

Policy

Suppliers Integration

Order Entry

Order Processing

Orders &

Payments

Supply Management Information Systems

Organisation

0

1

2

3

4

5

Company X

World Class

_971776243.doc

Indicadores

Politica de Servicio de Proveedores

Integracion de Proveedores

Entrada O/C

Procesamiento O/C

Compra &

Pagos

SMS

Organizacion

0

1

2

3

4

5

Empresa X

World-Class

Supply Chain Evaluation

2. Supplier Certification Programs Purchase Order Fill Rate

Comprehensive and Trustable Information# PO, ID Lines, Boxes, Batch, Exp. Date

Automatic InformationASNs, VMI, Status Reports

Standard Packaging

Coming Orders Identification

Programming & Performance of On-time Deliveries

3. Suppliers Segmented PoliciesGroups of SuppliersGroups of CustomersSupplierIntegrationPolicyCustomerServicePolicy

A

B

C

Item

Class

(

A

B

C

A

B

C

Y-AxisOrder/run QuantityTotal Cost = OrderingCost + Inventory Carrying CostsInventory Carrying Costs increase with the size of the orderOrdering CostDecrease with theSize of the orderEconomic OrderQuantities4. How Much to Buy? EOQ

Consolidate Orders: Levering Purchasing PowerCentralised NegotiationSuppliersPrices and Payment ConditionsDelivery Terms

Decentralised Operation

Centralised Supplier Certification

Logistics Conditions to the Order Suppliers Fill RateLead Times

5. Strategic Decision of Make or BuyMake?Manufacturing Competitive AdvantageIntellectual PropertyLack of Finished Goods SuppliersAvailable InfrastructureBuy?Strategic Alliances with SuppliersMarketing & Sales Competitive AdvantageFree Technology ProductsPoor Infrastructure Available

Source: Cambridge Technology Partners6. e-Procurement Opportunities

7. Internal Supply Chain Evaluation

7. External Supply Chain Evaluation

SupplierTranslatorInventoryTranslatorPlanningSystemCustomerSupplyTranslatorTranslatorOrder Processing855 Order Recognition852 Inventory Activity8. Integration Initiatives such as VMI Vendor Managed Inventory

9. Value Chain Organization Strategies forCustomer ServicePlanning ManagerSupply Chain Strategic Planning DirectorEstratgiaStrategyCustomer ServiceMangerTraffic SupervisorValue Chain Operations DirectorDistribution ManagerPlanning ManagerMaterialsManagerPlantManagerOperacionesOperationsEndConsumersCustomersDistributionManufacturingSuppliers

10. Supply Chain Information SystemsFuente: Logility, Atlanta

Supply Chain Integration Initiatives16111197765433333211105101520Suppliers CertificationProcurement Process ReengineeringContinuous Replenishment ProgramsPurchasing Process AutomationSupplier Fill Rate AssessmentCritical Information Exchange Vendor Manager Inventory (VMI)Purchase Order StatusOrder Reception Policies Customer Service AlternativesIn-Consignment InventoryStrategic Alliances with Suppliers Coordinated DeliveriesCentralized Negotiation and Consolidate PurchasingProduct Requirement OptimizationUnconventional Suppliers Payment MethodsValue Added Analysis Make or Order EvaluationAnswers from 47 Companies in Central America

* Latin America Logistics Center, 2005* Latin America Logistics Center, 2005* Latin America Logistics Center, 2005* Latin America Logistics Center, 2005*