purchasing phase review cornerstones of purchase baseline

ESC Toulon - Andres GARCIA

PURCHASING PHASE REVIEW

Cornerstones of Purchase baseline


Purchasing area : a key mission in the business

Remind of main topics concerning last year

Purchasing involvement into the Tender Vet stage

The Sourcing stage for Purchasing activity

Purchasing missions during the upstream stage

Procurement activity and saving calculation


ProcurementStrategy

ProcurementStrategy


4Andres GARCIA

Alignment to business strategy and competitiveenvironmentAlignment to business strategy and competitiveenvironment

Commodity specific focusing on value creationCommodity specific focusing on value creation

Managing bought out requirements to “buy less” and “buy for less”Managing bought out requirements to “buy less” and “buy for less”

Leverage supplier relationships to maximise benefits of cost, quality and delivery in both innovation and supplyLeverage supplier relationships to maximise benefits of cost, quality and delivery in both innovation and supply

Efficient and effective planning and co-ordinationof requirements across the supply chain tominimise cycle time in supply and acquisition

Efficient and effective planning and co-ordinationof requirements across the supply chain tominimise cycle time in supply and acquisition

Lowest cost “purchase to pay” from order to deliveryLowest cost “purchase to pay” from order to delivery

Key ProcessesKey Processes

Exe

cutio

nal

Effi

cien

cy

IT and Information - effectiveness - availability

Organisation - skills - structure

Measures of Performance - process - results

Stra

tegy

SourcingObjectivesDefinition

SourcingStrategy

DevelopmentO

pera

tiona

l

Effe

ctiv

enes

s

INFRASTRUCTURE

Inno

vatio

n Supply

eg product introduction

eg continuous improvement

eg time to market eg production schedule

eg prototypes eg direct materials

Requirements Specificationand Management

Supply Base Management

Purchase Demand Planning and Control

Goods and Service Provision

Enabling infrastructure which underpinseffective processes and behavioursEnabling infrastructure which underpinseffective processes and behaviours

Procurement strategy overview

A robust procurement strategy will consider all aspects of the procurement cycle.


SupplierSelectionSupplierSelection


FLOW-DOW OF THE APPROACH ( from the request to the supplier qualification )

Request from Originator

Do we have a qualified supplier ? . If NO

SOURCING

POTENTIAL SUPPLIER

Financial - SalesAssessment

Quality SystemAssessment

Technical & industrialAssessment

Product Assessment

QUALIFICATION

SUPPLIER QUALIFIED

Supplier Questionnaire

AGREEMENT PHASE

On-site

assessment


Supplier selection methodology

Define Evaluation CriteriaDefine Evaluation Criteria

Identify Potential Suppliers ( ‘Long List’ )

Identify Potential Suppliers ( ‘Long List’ )

Screen Potential SuppliersScreen Potential Suppliers

Identify Potential Suppliers ( ‘Short List’ )

Identify Potential Suppliers ( ‘Short List’ )

Supplier Cost and Capability AssessmentSupplier Cost and Capability Assessment

Analyse Assessment ResultsAnalyse Assessment Results

Input into Supplier Measures of Performance

Input into Supplier Measures of Performance

Select SuppliersSelect Suppliers

Model Vendor Relationship & Identify Required Supplier

Characteristics

Model Vendor Relationship & Identify Required Supplier

Characteristics

A structured, standardised and repeatable approach is necessary to give consistency and objectivity to the supplier selection process.

Example


Define evaluation criteriaQUALITY COST DELIVERY TECHNOLOGY MANUFACTURING CULTURE

ITEM SCORE ITEM SCORE ITEM SCORE ITEM SCORE ITEM SCORE ITEM SCORE

Deliveredquality

Price reductionperformance

Age/occurrenceof arrears

Design facilities Manufacturingstrategy

Business &finance planning

Concessions TACperformance

Accuracy ofquantitydelivered

Testing facilities Product/processrange/capability

Projectmanagement

Rejectionresponse

Cost breakdownawareness

Accuracy ofdelivery timing

Manufacturingengineering

Maintenanceand condition offacilities &equipment

Customersupport

In-processrejects (cannotbe reworked)

Cost breakdownavailability

Documentation Design input Housekeeping Procurement

In-processrework

Internal costcontrol

Productioncontrolprocedures

Improvement /innovation

Layout Safety

Scrap cost Material costcontrol

Productioncontrol system

Design changeresponse

Datamanagement andcommunication

Industrialrelations

Quality policyandresponsibility

2nd tier costcontrol

Attitude Performancemeasurement

Absenteeism

Qualityphilosophy

Attitude Work rate/addedvalue

Developmentand training ofemployees

Quality system/proceduresAdherence tosystems andprocedures

QUALITY ITEMS MEASUREMENT ‘SCORE 5’ IMAGE SCORE

Delivered quality PPM customer rejects (i.e. not tospec. or agreed concession)

Less than 250PPM delivered defects.

Concessions No. of concessions accepted inprevious 12 months

There will have been no instances of concessions in the previous 12 months.

Rejection response Level and speed of response There will be a system in place to provide a full, detailed, acceptable responsewith documented corrective action submitted within 14 days of raising of reject.

In-process rejects (cannotbe reworked)

% reject parts produced in-process(goods in to goods out)

Less than 0.5% in-process reject rate.

In-process rework % parts reworked (i.e. nonstandard processing) in-process

Less than 2% total reworked parts.

Scrap cost Cost of scrap, as a % of sales Cost of scrap is less than 1% of total sales.

Quality policy andresponsibility

Level of detail and clarity ofquality policy and responsibilities

An appropriate quality policy should be clearly defined, documented andcommunicated. Responsibility should be clear and divorced from ProductionDept.

Quality philosophy Is the approach taken QA or QC? A quality assurance culture is evident in all aspects of the business, with pro-active preventative action taken to minimise the potential cost of quality failures.

Quality system/procedures Level of detail and clarity ofquality policy and responsibilities

The company should have policies and systems relating to quality which areappropriate and relevant to the business, well defined & documented, and whichare communicated, understood and displayed.

Adherence to systems andprocedures

Level of adherence to existingsystems

Documentary evidence exists to show that all quality systems and proceduresare in-line with policy, are adhered to and are up to date. Manual, policy andany revisions are approved, and all quality assurance/control charts are completeand up to date. Evidence exists to show all employees have been trained in thecompany quality policy.

A structured, multi-faceted assessment methodology is necessary to gain a thorough understanding of true supplier capability.


Alternative Suppliers

Non-TraditionalSuppliers

CurrentSuppliers

Screen & Reduce

General Questionnaire

Internal Knowledge

3rd Party Opinion

Etc.

Etc.

Overview Presentation Plant / List brochure

Telephone discussion / Interview“LONG LIST”

“SHORT LIST”

(For detailed cost &capability evaluation)

AlternativeSuppliers

Non-Traditional Suppliers

CurrentSuppliers

Long list pre-screening

There are many sources (both internal and external) of information available for developing a ‘long list’. Pre-screening reduces the resource requirement for detailed assessment.


SupplierPerformance

Measurement &Development

SupplierPerformance

Measurement &Development


Supplier improvement/development activity can be optimised through selection of those suppliers where greatest opportunity for improvement exists. Criteria can be weighted to reflect current business objectives and goals.

Selection of suppliers for improvement activity

ITEMScore Weight-

ingSupplier Weighted Score

Str

ate

gic

Im

po

rta

nce

Bu

sin

ess

D

eliv

era

ble

s P

erf

orm

an

ce -

S

up

plie

r R

an

kin

g

Supplier A

Supplier B1 2 3 4 5

Turnover with OEM

% of Supplier Business with OEM

Model Spread

Long-term business prospect

Attitude to supplier development

Current initiative (int’l/other OEM)

Bottom 50%

<10%

1 Only

Possible

Negative

Yes

Top 50%

10%+

Top 30%

20%+

2 or more

Probable

Indifferent

Maybe

Top 20%

30%+

Top 10%

50%+

All models

Yes

Positive

No

15

7.5

5

7.5

10

5

15

15

15

5

100

Quality

Cost

Delivery

Management

Top 10Upper

Quartile

UpperMiddle

Quartile

LowerMiddle

Quartile

BottomQuartile

Top 10Upper

Quartile

UpperMiddle

Quartile

LowerMiddle

Quartile

BottomQuartile

Top 10Upper

Quartile

UpperMiddle

Quartile

LowerMiddle

Quartile

BottomQuartile

Top 10Upper

Quartile

UpperMiddle

Quartile

LowerMiddle

Quartile

BottomQuartile

Supplier C


Example of Supplier evaluation Methodology

Data is centralised from purchasing software•Inputs from purchasing (requisition and order)

•Inputs form the goods reception (time) and the goods inspection (quality).

Each month the PSQE analyses an automatic evaluation extracted from the purchasing database

•Impact 1&2 suppliers are noted as follow:–Acceptable

–Conditionally Acceptable

–Unacceptable


Supplierevaluation

Rating methodology:


Supplier evaluation Results : SUPPLIER QUALITY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200301 200302 200303 200304 200305 200306 200307 200308 200309 200310 200311 200312

Month

% o

f s

up

pli

er

Unacceptable

Conditionally Acceptable

Acceptable


INDUSTRIAL & PURCHASING COMMITTEE / Strategic Assessment

Global Strategic assessment (max 30)

Non Acceptable <10

>21

ACCEPTABLE 15

AcceptableHihg Performance

11 to 20

0

1

2

31

2

3

4

5

6

7

8

9

10

1. POTENTIAL

Hig

h P

erf

(3

)

Ac

ce

pta

ble

(1

)

No

n A

cc

ep

tab

le (

0)

1 Financial Potential X 32 Quality Assessment X 13 Competitiveness X 14 Innovative Potential X 3

5 Industrial Potential X 1

6 International Capabilities & & Offsets X 1

7 TUS Strategic Interest for the supplier X 38 Internal Improvement Capabilities X 19 Partnership Capabilities with TUS X 0

10 Thales synergy X 1

2. PERFORMANCEPunctuality (based on DGA assesment) P1+P2 (max 20)P1 (Delays in Orders) /(Total of orders) 0%

<5%<20%>20%

P2 (weeks Delays in Orders) /(Total of orders) 0<2<4>4

CF CMS00082

Ponctuality assessment (max 20) P1 P2HIGH PERFORMANCE 16 8 8

40

40

108

Non Acceptable <10

108

Acceptable 11 to 16Hihg Performance >16

Conformity (based on DGA assesment)C1+C2 (max 20)0%

<1%<3%>3%0%

<1%<3%>3%

CF CMS00082

Conformity assessment (max 20) C1 C2ACCEPTABLE 10 4 6

C1 Rejections/Orders

C2 Non conformities

10620

10620

Non Acceptable <10Acceptable 11 to 16

>16Hihg Performance

Global Conformity assessment (max 40)ACCEPTABLE 26


INDUSTRIAL & PURCHASING COMMITTEE / Strategic Assessment

Strategic Assessment

0

5

10

15

20

25

30

0 10 20 30 40Performance

Po

ten

tial

Supplier 2

YY

Contractor 1

X4

Z6

Supplier 1

XX

ZZ

X3

Y5

EXAMPLE OF SUPPLIER PERFORMANCE PROCEDURE

PROJECT PROCUREMENT MONTHLY REPORT ( P.P.M. Report )

A strong link between Project Manager / WorkPackage Manager and Purchasing


To provide a mechanism for communicating and agreeing the status of suppliers.

To keep the Procurement Manager informed of the key supplier issues on Projects & Bids.

Monthly basis.Sent to the Project & Bid

managers


PLAN A.C.E. Achats Compétitifs en Entreprise

Méthodologie d’un Diagnostic Achats, Plan d’amélioration et Mesure de maturité Achat


L'entreprise

Politique Achat Organisation Achat

Hommes

Outils

Méthodes Fournisseurs

Qui la pilote ? Achat Amont

Achat Aval

Système d ’information Achat

Politique Fournisseurs

Nécessité de faire un état des lieux dans chaque domaine

Le diagnostic Achat


LA DEMARCHE

Le diagnostic du Plan A.C.E. est un outil d'évaluation complet du processus achat et de Proposition d ’amélioration, ainsi que de sa mesure au niveau de maturité. • conçu à l'attention des dirigeants (Comité de Direction, Direction Générale, Responsable achats) des entreprises .• pour leur donner une vision extérieure globale en soulignant les points forts et faibles de l’organisation dans le domaine des achats.


Les étapes de la démarche A.C.E.

• prendre en compte les constats ( état des lieux et niveau de maturité)

• communiquer objectivement à l'ensemble de l'entreprise le niveau atteint, les forces et faiblesses

• obtenir le soutien de tous les métiers et niveaux hiérarchiques impliqués

• proposer un plan d'amélioration (temps, ressources) en adéquation avec les orientations stratégiques de l ’entreprise

• mettre en œuvre le plan d'amélioration (suivi par la Direction et mesures de progrès) en l'intégrant aux démarches existantes

• évaluer la progression ( niveau de maturité) par des audits planifiés dans le temps, voire corriger le Plan ACE dans le cas d ’un nouveau contexte de l ’entreprise


Le processus achats type de l'entreprise

Processus de management

Processus opérationnels

l ’achat

Moyens et Finalités

Maîtrise des fournisseurs

Maîtrise du processus Achat

Recueillir les orientations

de l ’entreprise

Etablir unePolitiqueAchats

Contribuer à la Compétitivité et

rentabilité de l ’entreprise

Axes de Progrès Achats

cohérentsà la stratégie de

l ’entreprise

Procédures, Instructions,

système d'information,

ressources humaines,

Pratiques Achats

Sélection et évaluation des Fournisseurs,

Cotation fournisseurs,

marketing achat

Maturité de la fonction achat,

mesures des gains et des

‘ non dépenses ’

Reporting, outils de mesures de performances Achat

Définir les orientations stratégiques

Établir un budget et un plan opérationnel

Contrôler la performance


La dimension achat est systématiquement intégrée dans les décisions de l'entreprise

Expertise achat est reconnue et participe au business

Intégration du processus achatsdans les processus de l'Entreprise

Répétabilité du processus achats - Gestion de projet basique

Approvisionner - Gérer le quotidien

NIVEAU 5

NIVEAU 4

NIVEAU 3

NIVEAU 2

NIVEAU 1

Les niveaux de maturité


La phase d ’accompagnement achat

Préoccupations critiques achats de l'entreprise

Nouveaux enjeux :- coûts des achats- coût de la fonction- ...

Nouvelles organisations etnouveaux processus/outils :- nouveaux processus- EDI interne / externe- Réduction des fournisseurs- Partenariats ...

Démarche A.C.E.

- Formatqualitatif et quantitatif de la fonction achats

de l'entreprise

- Plan de ralliement

Un modèle de maturité achats est nécessaire pour accompagner

une telle démarche

purchasing phase review cornerstones of purchase baseline

Documents

quality systems

clarity of quality policy

quality philosophyis

quality systemprocedureslevel

quality assurance culture

supplier selection process

process rejects

process goods