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Global Supply Chain
Learning Path
Sponsored by:
John Long, CSCP, is the principal consultant and
president of NMT Company LLC. He has 15 years
of success in strategic global sourcing and supply
quality management in North America, Europe, and
Asia-Pacific Rim countries. He is a subject matter
expert in developing processes, plans, and
approaches to generate lucrative international
business opportunities. Long served in the APICS
Tulsa chapter as Vice President of Membership and
Development. He also served as the
Communications Chair of NAPM-Tulsa, which
received the Affiliate of the Year Award in 2008. He
holds a bachelor's degree from Xi'an Jiaotong
University and an MBA from Oral Roberts
University, Tulsa, Oklahoma.
Strategic Sourcing for Optimal
Supply Chain Management
John Long,
President & Principal
Consultant of NMT Company, LLC
Learning Path
Achieving a globally integrated supply chain is a
transformation process and an ongoing journey.
While the voyage is challenging, it can be
fruitful, resulting in rising profitability, enhanced
customer satisfaction, reduced costs, and
heightened competitive advantage—if you
implement strategic sourcing. In this
presentation, you will learn to identify, select,
and maximize resources in emerging markets,
as well as how to connect both sides of the
supply chain for significant progress.
Fragmented Global Supply Chain
What does it look like?
…..
M
ore time is spent managing the lengthy
process
rather than leveraging
suppliers
Confusion regarding objectives
Lack of resources & infrastructure
Disenfranchisement of
cross-functional teams
Overemphasis on cost as sole criteria
Technology constraints
Inconsistent sourcing methodologies
Business
disruptions
How sourcing can be typically done wrong...
What Is A Globally Integrated Supply Chain Like?
Materials:
•Electrical •Mechanical •MRO •OthersServices:
•Subcontract •Wind farm •Const/Mgmt •Vegetation Strategy Execution Strategic Sourcing Engineering Design Technology Order Creation Order Planning Order Planning Construction Maintenance Environment Communication SAP Order Execution and Settlement CollaborationDefinitions
stra·te·gic; adjective(1825)
c :of great importance within an integrated whole or to a planned effect
tac·ti·cal ; adjective(1570)
(1) :of or relating to small-scale actions serving a larger purpose (2) :made or carried out with only a limited or immediate end in view
Fad ; noun(1867)
:a practice or interest followed for a time with exaggerated zeal : CRAZE
•
In 2000, most firms had < 20% of their annual
spend allocated to global sourcing.
By 2010, it’s estimated that more than half of
firms will have a global spend of > 40%, with nearly
one-fifth of firms spending > 80% of their annual
spend in the global sourcing arena.
•
What do these Fortune 500 companies have in
common?
IBM ($50bil) Wal-Mart ($9Bil) - Shenzhen
AMAT ($2Bil) – Xi’an
•
Trade Journal, Magazine, Internet, thought leaders
•
The launch of the new APICS
Global Sourcing
Workshop Series
in September 2008
Why
Strategic Global Sourcing?
• Are you losing customers to low-cost
imports?
• Do you need to improve your bottom line by
leveraging your global presence?
• Do you need to find suppliers in lower cost
countries to help reduce your costs?
• Have you been reluctant to source globally
because of what you have heard about
quality and potential theft of intellectual
property?
• Have you always wondered how business
was conducted in a different country?
Global Supply Chain
Strategy Maps
Developing Global Sourcing Solutions
• Global sourcing
•
Cost reduction
•
Quality assurance
•
Excellence in execution
•
Cooperation & communication
• Product development
• Project management
What Drives Global Sourcing?
• Growth drivers such as differentiation of products in
terms of affordability, quality, availability, etc.
• Leverage spend global presence-economies
scale – and technology more effectively.
• Organizational directions and business strategies to
position products and services with increased agility.
• Business transformation driven by cost, product
quality, and customer service with global scalability
and flexibility.
• Advantage through reduced price points and enhanced
competition, not ‘just to cut cost’.
• Spend analysis – sort out commodities, streamline and map out corporate supply chain solutions
• Organize for the future, opportunistic approach to developing a new supply strategy, obtain business involvement & consensus • Ultimate goals and objectives alignment (the deliverables) • Review historical issues, supplier usage/performance; determine
future items & supplier requirements/expectations; and assess future state against current supplier capabilities
• Cooperation and collaboration within and across organizational boundaries (cross functional) communicating commercial issues • Increases ongoing efficiency and responsiveness of the supply
chain, interaction with supplier partners, identify their capabilities • Negotiation in CAMPish and competitive environments, negotiate
fairly but effectively
• Grow supplier relationships by requiring competitive performance and suggesting goals for continuous improvements
Strategic Sourcing Process
A Consistent Global Sourcing Strategy
Global key suppliers Market trends Supplier capabilities Regional economics Global economics Product trends Competitive analysis
Review historical issues Category Characteristics Specifications Functionality User requirements Criticality to business VA Opportunities Spend Analysis Spend by part/category Spend by region Spend by supplier Spend by business unit Spend by month/year
Total Cost of Ownership Internal costs Supplier costs Economic levers Engineering of product Performance criteria Cost Reduction STRATEGY
Align goals & objectives with reengineering cost •Understand all cost elements •Benchmarking Technical requirements and specs matched to capability •Right-source based on criticality Expending global network complexity •Reduce uncertainty •Prepare for unexpected Risk Risk Risk Yield optimal relationship •Competitive performance •Continuous improvement Rewa rd
Quality
…matters more even in
Global Sourcing
SupplierIdentifies
Defect In their facility
• Supplier submits to MRB • Parts dispositioned • Supplier corrects • Client builds trust
$1,000
FindsDefectin US Client’s Mfg. facility
• Client Writes supplier NCR • Parts dispositioned • Client or supplier corrects • Supplier capability questioned
$10,000 Rule of 10’s
Customer of Client finds Defect
at project site
$100,000
• Client writes SN • War room review • Huge $$ to correct • Supplier recovery
Product Development
• Product assemblies and subassemblies that benefit most from the lower-cost regions due to their time-consuming and labor-intensive nature. • Research, identify, and select international suppliers who are a good match
for your business, offering quality products or services meeting your specifications.
• OEM/Other industrial product specialty and knowledge to align optimal global sources for your custom engineered products.
• Developing a new product takes a broad pool of qualified business partners and suppliers throughout the world, covering a diverse range of industrial/OEM products, components, and assemblies.
• Unexpected events may surprise some, therefore always stand ready to meet them with confidence. For a product based company, transportation lead time is one of the biggest issues in international sourcing. • China - with its accession to the World Trade Organization (WTO), the Holy
Grail of distribution and trading rights is within reach.
• Trial (or pilot run) to identify the kinks before going full-scale. Find creative ways to meet requirements and deadlines and consistently assure a success for every shipment.
Project Management
Project scoping includes all details – from tooling requirements to logistics coordination – for a cost-effective and fully managed project. Required tooling and/or machinery developed in Asia is often more cost-effective, such as progressive dies for precision metal stampings or injection molds for plastics.
Operation management –the overseas production operation managed to attain full benefit from the labor and cost savings. JIT delivery –from the international supplier factory floor to delivery to Customer the international project can be as seamless as the domestic one.
Engineering Coordination –integrate valuable engineering input into overall global sourcing project, adding benefits, reducing cost, and more. Cost Reduction –combine the cost efficiencies to produce results, aligning sourcing requirements with growing network of global suppliers. TQM –quality assurance factors into every detail of the Project Management process.
GLOBAL SOURCING
THREE WAVES OF VALUE CREATION
Lev era ge H L Speed H Transf ormati on Jou rney Business Transformation (not transaction) that requires strategies = Future Cost “Cheap labor” low cost without quality Quality “Quality Process” (Quality at low cost) Efficiency “standardized infrastructure” Continuous Improvements Process Optimization Sustainable Growth Negotiation
(immediate) Tactical(short term)
Strategic (long term)
Transformational (continuous improvements)
Roadmap to Opportunity
Bid buy single transactions Multiple transactions
Work only with operations or supply chain
Collectively work with both supply chain
and operations Strategic relationship proactively
create savings opportunities
Win/Win
Process Improvement
Supply Chain Maturity and Alignment
with Strategy Map
Cost Reduction
Quality Enhancement
Value Propositions
