MGMT 510Global Sourcing & Planning

Class Nine

Agenda- Going into the final week

- Final questions will be reviewed- Best practices & Final paper due tomorrow by

12:00- e-Procurement

- Benefits- Risks- Uses

- Sun Microsystems case- Sustainability Overview

e-Procurement Tools

General Benefits of e-Procurement

- Strategic BenefitsAlign Procurement strategy with procurement GoalsStrengthen Alliances for product innovation

combining complementary roadmap capabilities in NPI and development stage.

Exchanging key suppliers with market information

- Reduces Spending and Time90% Conversion of spot purchasing into contract

purchasing

e-ProcurementReducing costsCosts can be reduced by leveraging volume, having structured

supplier relationshipsVisibility of spendCentralized tracking of transactions enables full reporting on

requisitions, items purchased, orders processes and payments made

Productivity Procurement staff can be released from processing orders to

concentrate on strategic sourcing and improving supplier relationships.

e-ProcurementUsing technology • E-procurement advantages can only be fully realized when the

systems and processes to manage it are in place. • Software tools are needed to create the standard procurement

documentation: electronic requests for information (e-RFI), requests for proposal (e-RFP) and requests for quotation (e-RFQ).

Controls• Standardized approval processes and formal workflows ensure

that the correct level of authorization is applied to each transaction and that spend is directed to draw off existing contracts.

• Compliance to policy is improved as users can quickly locate products and services from preferred suppliers and are unable to create maverick purchases.

E-Procurement – Global Phenomena

E-Procurement is not a local phenomena but a global one, Enabled global sourcing of goods and servicesReduction of CostsBreaking Trade BarriersReduction in Agents

Benchmark Report –04 by Aberdeen Group indicates the followingReduced requisition-to-order cycles by 66%Cost Reduction : up to 25% or more

Supports Online Reverse AuctionSupports Online Reverse Auction

Core ObjectivesOf e-procurementCore Objectives

Of e-procurement

Real Time MonitoringReal Time Monitoring

Process Efficiency Process Efficiency

New supplier discovery

New supplier discovery

Cost Reduction

Cost Reduction

Paper less environmentPaper less

environment

TransparencyTransparency

Core Objectives of e-Procurement

StreamliningProcurementprocesses

E-MARKETS: IT DESIGN ISSUES

- TECHNOLOGY limitations•Authentication and security•Electronic payment•Software architecture•Embedded Agents and lack of mobility•Scalability•Interoperability

eSupplier Report Card (eSRC)

- What is it?• Automation of and increased compliance to the Supplier

Ranking and Rating Spec via a web-based tool

- Why is it considered innovative?• Accelerates and automates the overall SRC process• Promotes sharing of metrics (i.e. eSRC templates, questions,

etc.) within and/or across teams & orgs• Extends the SRC process to more suppliers & allows input

from more stakeholders• Drives spec compliance without requiring detailed knowledge

or understanding of the SR&R spec

- Description:

•An online negotiation capability, allowing real-time bidding by multiple suppliers, within a singular negotiation forum, that utilizes strategy and the Internet to achieve cycle time reduction and the lowest total cost. 

- Innovative features:

•Uses Internet technology to create a virtual dynamic marketplace environment, providing real-time bidding info to suppliers on their position relative to the competition. Bids/ RFQ’s were previously a manual process, generally executed through e-mail or snail-mail

Online Negotiations (formerly eAuctions)

Online Negotiations Buyer’s Perspective

Source : Freemarkets

e-Procurement

Negotiations:- Lose body language and voice inflections- Increases risky behavior, such as

aggressiveness or take-it-or-leave-it approaches

- Negotiators feel less accountable and are not sure WHO they are negotiating with.

- Takes relationship out of the process

Sun Microsystems – e-Procurement

What do we know?- Spends $9B in direct mtls- Cost cutting raised GM% by 7 points- What about relationships?- What about single sourced suppliers?- Pros & Cons of e-Procurement

Sun Microsystems - Questions

- What are the Pros and cons of using technology to manage supplier relationships?

- If you moved forward with this bidding process, would you change your offering to suppliers?

- What would your recommendation be to the CEO?

Pros and cons to e-Procurement to manage relationships

- Pros:- Dynamic bidding creates:

- Cost savings- Reduce noise in the process- Reduces embeddedness- Transparency- Equalizes the information shared to

suppliers

Pros and cons to e-Procurement to manage relationships

- Cons:- Lose information available often found in

negotiation process- Emphasizes price- IT complexity and alignment- Lose technology or roadmap discussions

with Sourcing Professionals

What would you offer the suppliers?

- Make the software free to all suppliers?- Provide implementation kits to all- Provide those who cooperate a preferred

bidding status- Include in the scorecard measurement

process

What would be your recommendation?- The pilot was successful- There is risk due to IT complexity- The success may differ pending

commodity typeIn Closing:- SUN moved forward with the

recommendation- Challenge is relationships and face-to-

face benefits

Sustainability in sourcing

Sustainable Sourcing

CSR: Covers several principles- Community – for you and your suppliers- Diversity – MWBE- Environment – Upstream & Downstream- Ethics – code of conduct- Financial responsibility – transparency- Human rights – avoid complicity in abuse- Safety – ISO14000

Sustainable Sourcing

Definition : “selecting goods and services which promote a healthier community and environment. . . . Just as importantly, sustainable purchasing is NOT simply about paying a premium for a product and service attributes. . . . But aims to find a reasonable balance”

**Easton et al.

Challenges & Status to Sustainable Sourcing – Sourcing Strategy - Three barriers identified - buyers

1. Internal Corporate barriers (lack of know-how)• Lowest cost mind-set• Time pressures & fear of change

2. Market barriers (pricing, quality)• Lack of choice• Premium pricing

3. System wide barriers (NAFTA, China vs. local)• Lack of accepted standards• Free trade and globalization emphasis

Challenges & Status to Sustainable Sourcing – Suppliers

- Three barriers identified by suppliers1. Corporate barriers

- Inconsistency in value statements and practice- Weight of sustainable metrics in scorecard

2. Market barriers- TTM versus value goals

3. Framework barriers- Limited access to certifications by S-M size- Lack of industry wide standards

Three themes in research

- How do best practices take a sourcing strategy from “more sustainable” to “truly sustainable?” ie: continuous improvement vs. revolutionary change.

- Ecocentricity - Sourcing should include “greater good” of communities

- Integration of goals into day-to-day practices

Pagell & Wu (2009) propositions

- Innovation capability is required- Management orientation toward sustainability

- Part of the value or mission statement or somewhere visible

- Sourcing should reach out to NGOs and competitors- Sourcing should treat suppliers as strategic partners- Metrics must be a process that includes sustainability- Develop measurement and reward systems- Align financial and environmental goals

Defee et al. (2009). Closed Loop Supply Chains (CLSC)

- CLSC – Strategically focused on excellence of forward and reverse SCM

- CLSC can lead an organization in CSR initiatives- RoHS, WEEE, Energy Star, EPEAT

- Reverse SCM is critical- Views CLSC holistically not just supplier-

customer “forward flows”

CLSC – Reverse Flow is critical

A system: CLSC

Three examples: Walk the talk

On the other side…..Prius

http://www.leftlanenews.com/study-prius-production-harmful-to-environment.html

And lastly: Shipshttp://www.cbsnews.com/stories/2006/11/03/60minutes/main2149023.shtml