Procurement Management & Managing Relationships with Suppliers Dira Ernawati, ST. MT Jur. Teknik...
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![Page 1: Procurement Management & Managing Relationships with Suppliers Dira Ernawati, ST. MT Jur. Teknik Industri – UPN “Veteran” Surabaya.](https://reader036.fdocuments.in/reader036/viewer/2022071705/56649f515503460f94c74e2e/html5/thumbnails/1.jpg)
Procurement Management & Managing Relationships with
Suppliers
Dira Ernawati, ST. MT
Jur. Teknik Industri – UPN “Veteran” Surabaya
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Dira Ernawati, ST.MT 2
Background
• About 40 – 70% of cost of goods sold are from material costs
• Non financial contributions of supply management are of high importance:– Quality of supplied materials – Delivery consistency from supplier– Supplier willingness to deliver more
frequently with smaller delivery quantity– Supplier involvement in developing new
products– Supplier production and delivery flexibility
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Dira Ernawati, ST.MT 3
Activities Related Procurement Management
• Design strategic relationships with suppliers
• Selecting appropriate suppliers• Chose and implement appropriate
technology to support procurement activities
• Maintain procurement related data bases• Managing purchasing activities• Evaluating supplier performance
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Dira Ernawati, ST.MT 4
Categories of Goods Purchased
• Direct materials, components, subassemblies
• Property, plant, and equipment (PPE)
• Maintenance, repair, and operating supplies (MRO)
• Services
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Supplier Relationships & Sourcing Strategy
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Dira Ernawati, ST.MT 6
• A close collaboration among two or more trading partners in a supply chain, characterized by friction-free information sharing between them. Trading partners: suppliers, 3PL, dealers/distributors.
• They both agree to share risks and benefits of the relationships for a long term. A study by Helper A study by Helper (1991) revealed that the average length of contract in the (1991) revealed that the average length of contract in the US has increased from 1.2 years in 1983 to 2.3 years in US has increased from 1.2 years in 1983 to 2.3 years in 1989. Some companies (like Chrysler and Mazda 626) 1989. Some companies (like Chrysler and Mazda 626) signed supply contracts for the life cycle of a model signed supply contracts for the life cycle of a model (Typically for 3-5 years).(Typically for 3-5 years).
What is a Partnership
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Dira Ernawati, ST.MT 7
Practices Across Nations
GM Ford Chrysler Toyota Nissan Hyundai Kia Daewoo
Suppliers supply multiple automakers
Suppliers tend to supply only one automaker
Big, but not loyalAble to learn from other customers
Loyal, but smallUnable to learn from other customers
Most effective at strategically
segmenting suppliers
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Dira Ernawati, ST.MT 8
Supplier Segmentation in Automotive Industry
Subsidiaries> 20% ownership30 – 35 suppliers
Supplier Association(90 suppliers)
Supplier Association(190 suppliers)
Engine partsTransmissionAC/HeaterRadiatorsBody PanelsSeats
TiresBatteriesSpark plugsShocksBelts
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Dira Ernawati, ST.MT 9
Supplier Segmentation @ Japanese Automakers
Non Strategic Suppliers
• Standardized / commodity items
• Low value inputs
• Stand alone
• Low asset specificity
• Little help from automakers
• Suppliers supply to multiple automakers
• Single functional interface (marketing to purchasing)
• Price benchmarking
Strategic Suppliers
•Customized items critical for product differentiation
• High value
• Multiple interaction effects with other inputs
• High asset specificity
• Intensive face to face contacts
• Often exclusive relationships
• Multiple functional interfaces (engineering, manufacturing, etc.)
• Self enforcing agreements are necessary (trust, ownership, etc.)
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Dira Ernawati, ST.MT 10
Sourcing Strategy
Leverage More suppliers Large spending value Commoditized items
Strategic Critical, customized Limited suppliers Large spending value
Commodities Low priority items More suppliers Low spending value
Bottleneck Low priority items Limited suppliers
Full Strategic Sourcing
Reverse Auctions
Exchanges Spot buys, integration
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Dira Ernawati, ST.MT 11
E-Auction, Exchange, Integrator, Spot Buys
Jenis Penjelasan
e-Auction Real time negotiation. Supplier bisa merevisi bid, bisa melihat bid orang lain.
Exchange Linking buyers and sellers electronically, can be private or public exchange.
Integrator Third parties, assume responsibility for managing a company’s sourcing activities.
Spot buys Made on open market, based on price. Time consuming, because made on individual basis.
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Dira Ernawati, ST.MT 12
E-Auction Example
AIRLINE EXAMPLE• Number of supplier: 9• Number of bids:46• Materials Sourced: Mixed
consumables• Negotiation format: Reverse
Auction• Duration:30 minutes with two
5-minute extensions
Establish real time competition. Do not address Total Cost of Ownership (TCO). Not suitable if supply < demand.
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Dira Ernawati, ST.MT 13
E-MARKETPLACE APPLICATION FOR STRATEGIC SOURCING
Industry Commodity Historic costs Cost reduction
Airline PC Consumables
$ 2.5 M 37%
Airline Stationary $ 1.3 M 30%
Consumer goods
Direct materials-sub assemblies
$ 9.3 M 30%
Foods Sliced beans $ 230,000 21%
Petrochemical Misc. direct and indirect materials
$ N/A 10-15%
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Dira Ernawati, ST.MT 14
Sourcing Strategy
Leverage Test equipments Batteries Antennae
Strategic Transport equipment High end routers Premium handsets
Commodities Laptops & desktops Cable MRO/Office supplies Fuel
Bottleneck OSP Construction Pedestals Old technology plugs