product sourcing
TRANSCRIPT
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Sourcing Group Assignment
Group C
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Introduction
• Product
– Surf CA-20 (Ceteth-20)
• a chemical, which is used for hair care products
• Fatty alcohol polyoxyethylene ether
• Uses – Emulsifying Agent
– Solubilizing Agent
– Surfactant
– Surfactant - Cleansing Agent
– Surfactant - Solubilizing Agent
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The process of sourcing
• It commonly involves
(1) purchase planning
(2) standards determination
(3) specifications development
(4) supplier research and selection(5) value analysis,
(6) financing
(7) price negotiation
(8) making the purchase
(9) supply contract administration(10) inventory control and stores
(11) disposals and other related functions.
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Objective of Sourcing
• Develop and implement purchasing plans forproducts and services that support operationsstrategies
• Continuity of the company’s core activities • Control and Reduction of all sourcing costs
• Reduction of Risk exposure in relation to
Supply markets.• Contribution to product and process
innovation
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Sourcing Cycle
• Receiving a requisition
• Selection of Supplier
•
Placing the Order• Monitor orders
• Receive orders
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Selection
Profile the CategoryThis is the initial most time taking step of the cycle.
We have to analyze : – Currently what is the price we spend for this item: For our selected
Item Average USD 4.00/ Kg.
– What type of results we expect from this ingredient in our finalingredient? ( Thickening & ability of the Hair Conditioner Product.)
– What type of characteristic it should have (technical and physical) ?
– Standard data of this particular item as per the R&D and laboratoryrequirements.
– Study the current competitive situation of this product.
– (Comparatively there are few suppliers in the world market for thisitem.)
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Selection
Search and identify the potential suppliers.
For this productCroda Co.-UK
Jeen International Co.-USA
Luen Chiang Co.- China
Generate the supplier portfolio.
None of potential supplier will discard at this stage.Infomation such as Price, MOQ, Country, Mode of Transport,Lead-Time, technical data are used and analysised to createthe portofolio
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Selection
• Select the implementation path
Obtain the product specification details such asTechinical Data Sheets, quality standards
Obtained from these suppliers.• Negotiate and select suppliers
• Integrate suppliers
When we change the old supplier to new one weshould plan in time according to the changedfeatures of the new supplier considering
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New Vender Development and
Enlistment
• Supplier Capability , Trustworthiness
• Capacity
• Minimums
• Lead-Time/ Geographical location
• Payment terms
• Reliability
• Price competiveness
• Flexibility
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New Vender Development and
Enlistment
• Establishing the supplier screening process – Understanding the supplier capabilities
–
Commitments – On time / correct assortment delivery fulfillment
– Flexibility to adjust the supply, based on the customerdemand
– Maintaining Price competiveness
– Service Prompt
• Continue supplier research
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New Vender Development and
EnlistmentItem Supplier Country Price /Kg Payment MOQ (Kg) Mode of
Transport
Lead time
Ceteth 20 Croda Co. UK EURO 5.75 TT-CIF Col. 600 Sea 4 Weeks
Jeen
International
USA USD7.00 L/C-CIF Col. 1000 Sea 5 Weeks
Luen Chiang
Co.
China USD 3.75 CAD-CIF
Col.
400 Sea 3 Weeks
The selected supplier Luen Chiang co for the Surfer CA-20 is offering the best Price
, Lead time, Minimum in comparison to the rest of the global suppliers
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Supplier Selection and Negotiation
• Supplier selection
Though the single supply Luen Chiang
could provide the best price it can
create a supplier monopolistic situation,
also it increase the risk
• Negotiation
Obtaining the best bargaining surplus
also to consider a win win situation
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• Risk mitigation
Different manufacturing locations has help to overcome the chemical shortage in the market.
Country of manufacturing was not changed the final product cost
• Long-term cost savings
Long term planning & demand forecasting help to reduce the cost of operations
• Contract/consistency in compliance
Consistency in chemical concentration / following the correct packing methodologies has avoid
compliances issues
• Competitive advantage through innovations
Working together to introduced high performing hair care chemical solutions gives the marcket
edge
• Supplier Performance and speed initiativesSupply to the demand with high consistency have reduced the inventory & write offs
• Increases understanding the business requirements
Created a relationship to synchronize the company needs to get the maximum benefits
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• Why Important ?
– Hair care chemical products is one of the nichesegments of the chemical industry
–critical to make sure the product range should bewith top highest standards
– directly in touch with the most critical part of thehuman body
– highly competitive and fragmented, with largenumbers of small/big and specialized suppliersscatted around the world
Contract Management
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• How to overcome such issues?
Key areas of contract
• Environment Regulations
• Government Policies and Governing laws – In-Country Policies
– Export Policies
• The price, Payment terms & Foreign Currency hedging
•Clear description of the goods – Chemical concentration
– Chemical composition & component dynamics
– molecular Biology & molecular dynamics
– Chemical liquidity ratio
– Qty per bottle
– Colour of the bottle
– Number of bottles in a pack
– Number of packs in Shipping Box
• The duration of the contract and specific delivery dates
• Testing parameters & performance frequency
• Quality Standards and acceptance criteria
• Compliance
• Rights of termination
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Strategic Sourcing & Risk
Management in Sourcing
Risk Ways of overcome risk
Price increase due to cost inflation in china With strong relationship able to reduce the
inflation by split the orders with different geo
locations.
New development in conflict regulation Developed high performing product but with
the government regulations we cannot
procure the requirement. Modification with
reduced concentration sort the issue
High risk product
High sensitive Product
Need to be extreme careful when handling
High tendency to get expire if its not in the correct condition
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Risk Ways of overcome risk
Logistical limitation Agreements with the logistic partners to
specify the space for the consignments in all
cases
Inaccurate formulation calculation analysis Incorrect purchasing than the government
regulations will make conflict and government
can destroy the consignment. With
understanding the requirements well all the
agreements with in the regulations
Inaccurate forecasts Preplanned demand management mechanism
to overcome the uncertainty
Manage supply chain uncertainties Regular risk assessment and have redundancy
built in
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Environmental or green procurement
• Environmental or green procurement is
defined as the purchase of products and
services which have less impact on the
environment and human health comparedwith competing products or services that
serve the same purpose.
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Environmental or green procurement
• This comparison may consider the source of raw materials, production,manufacturing, packaging, distribution, potential for reuse and recycling,operation, maintenance, or disposal of the product.
These may include:
• Energy-efficient and greenhouse friendly products
•
Products that are water efficient and reduce water use• Less toxic products to reduce health effects
• Products using less packaging or with a provision for packaging
take- back
• Products that use fewer resources or in other ways create reducedenvironmental impacts
• Throughout their life cycle; Products made from recycled materials, suchas recycled road construction materials
• Recycled green organics and recycled plastic products.
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