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With the support of new IT solutions, P2P integration is becoming a reality in order to free more resources for strategic procurement activities like global sourcing, contract management or supplier development
we are using SAP MM,SRM,CRM... its fun and user friendly
Depending on the size of procurement, integration of Supply Chain, Logistics, Procurement/Purchasing, inventory management and Accounts Payable, if separated from each other need to be closely integrated. This needs a very effective ERP System. By using an effective system, procurement costs, lean inventory without the risk of shortages and so on.
negotiating the purchase price, the sale of products lead time, law enforcement 20/80
A comprehensive list of objectives for purchasing and supply management personnel would include:
• to support the firm’s operations with an uninterrupted flow of materials and services:
• to buy competitively and wisely (achieve the best combination of price, quality and service);
• to minimize inventory investment and loss;
• to develop reliable and effective supply sources;
• to develop and maintain healthy relations with active suppliers and the supplier community;
• to achieve maximum integration with other departments, while achieving and maintaining effective working relationships with them;
• to take advantage of standardization and simplification;
• to keep up with market trends;
• to train, develop and motivate professionally competent personnel;
• to avoid duplication, waste, and obsolescence;
• to analyze and report on long-range availability and costs of major purchased items;
• to continually search for new and alternative ideas, products, and materials to improve efficiency and profitability; and
• to administer the purchasing and supply management function proactively, ethically, and efficiently.
Strategic Supply Chain Framework-(operation of supply chain Strategies through all functions of business)
The Supply Chain Council (SCC) has established what it calls the SCOR Project Roadmap, which is a kind of methodology. This methodology suggests an order in which specific SCOR activities could be accomplished, for which Process Pad is a key tool.
Phases in the SCOR Methodology
1. Review Corporate Strategy.
This isn’t so much a project phase, as a decision to consider whether an existing supply chain can be improved. Once this decision is taken, a team is set up, trained in the SCOR methodology if necessary, and set to work.
2. Define the Supply Chain Process.
SCOR provides a common vocabulary which is totally consistent with the use of ProcessPad for defining the major processes that make up supply chains. The first phase the team undertakes is the actual analysis of the existing process. This effort includes decisions about the number and scope of the supply chain processes to be examined.
3. Determine the Performance of the Existing Supply Chain.
Once you have captured the existing supply chain process in ProcessPad, You can use historic data to define how the existing supply chain is performing. In addition, you can compare the performance of your supply chain with benchmarks to determine how your process stacks up against similar processes in similar industries.
4. Establish Your Supply Chain Strategy, Goals and Priorities.
Once you have hard data on the performance of your existing supply chain, and benchmark data, you are in a position to consider if your supply chain strategy is reasonable. You are also in a position to identify how it might be improved, or consider alternative targets for improvement and determine how they might improve the company’s performance. Similarly, you can identify which changes would yield the highest return and prioritize any improvement efforts in ProcessPad.
5. Redesign Your Supply Chain As Needed.
Enable the Redesign and Implement. Once you have used ProcessPad to complete your SCOR design, you can implement the redesign using BPM and human performance improvement techniques. Then you may manage the new supply chain and gather data to determine if you are, in fact, meeting your new targets.
Supply chain management can be divided into three main flows:
The Product flow includes moving goods from supplier to consumer, as well as dealing with customer service needs.
The Information flow includes order information and delivery status.
The Financial flow includes payment schedules, credit terms, and additional arrangements.
The Storage flow includes a warehouse where goods are stored, and where they may be catalogued, shipped, or received, depending upon the type of products. The principal operation of the place is receiving, getting in new products, and shipping out products already stored. Another important part of maintaining a good warehouse is keeping inventory of what products are presently in the warehouse, what has been shipped and what has been received. This process is again largely automated.
The control and creation of added value
Value analysis is a systematic effort to improve upon cost and/or performance of products (services), either purchased or produced. It examines the materials, processes, information systems, and the flow of materials involved. Value Analysis efforts began in earnest during WW II by General Electric, concerned with the difficulties in obtaining critical materials needed to produce war material, GE assigned an engineer, Lawrence D Miles to the Purchasing department. His mission was to find adequate material and component substitutes for critical materials to manufacture needed war equipment. In his search, Miles found that each material has unique properties that could enhance the product if the design was modified to take advantage of those properties.
Miles discovered that he could meet or improve product performance and reduce its production cost by understanding and addressing the intended function of the product. His method was – Blast (dissecting products to discern key competitive advantages), Create (detailed analysis of the disassembled products, identifying those functions of concern and soliciting ideas for improving), Refine (selecting the most value adding, cost-effective ideas and preparing a business case for the implementation of the proposals).
Implemented diligently, value analysis can result in –
reduced material use and cost
reduced distribution costs
reduced waste
improved profit margins
increased customer satisfaction
increased employee morale
There are benefits to both the firm and the environment – these include:
Cost savings
Enhancing corporate image
Ensuring compliance with legislation
Conserves natural resources
Reduces pollution
Reduces the amount of waste sent to landfill
Simple steps to environmental purchasing:
When making purchasing decisions consider whether you can purchase a product that:
Is made partly or wholly from recycled material
Can be recycled once it has been finished with
Is energy efficient – purchase electrical appliances that have an A or B energy rating
Do not include excess packaging
Are sourced from local suppliers
SUPPLY ORGANIZATIONS AND STRUCRURES
Definition and assessment of organizational structure
Organizational structure – is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate to achieve an organization’s goals.
Your task as a manager is to create an organizational structure and culture that:
1. Encourages employees to work hard and to develop supportive work attitudes
2. Allows people and groups to cooperate and work together effectively.
Structure and culture affect:
1. Behavior
2. Motivation
3. Performance
4. Teamwork and cooperation
5. Inter-group and Interdepartmental relationships
Grouping Organizational Activities
Differentiation – is the grouping of people and tasks into functions and divisions to produce goods and services.’
Function – is a set of people who work together and perform the same types of tasks or hold similar positions in an organization.
Centralized Organization
Centralized purchase exists and the responsibility for the purchasing function is assigned to a single group and its manager. This person is accountable to management for proper performance of the purchasing function regardless of where the actual buying takes place. Centralized purchasing can be entirely satisfactory in a multi-plant organization if the plants are manufacturing similar products from similar materials.
Decentralized Organization
In a single plant company decentralization of purchasing exists when operations, marketing, finance, engineering do their own buying. This tends to produce duplication of effort, inefficiency and waste.
Departmentalized Organization
Neither completely rigid centralized nor loose decentralized of purchasing seems to meet the needs of all firms. A large company may have a Vice president, a director or a Manager of purchasing and a number of division or plant purchasing managers. Responsibilities at the different levels vary, but a compromise between centralization and decentralization is usually employed in an attempt to gain advantages of both and to minimize their disadvantages.
Strategic Planning
In an environment characterized by many unknowns, purchasing professionals must assist general management by providing purchasing expertise for strategic decisions. Purchasing can assist in calculating the probable impact of outside factors on supply, quality and price. Key areas of strategic forces include economic concerns, regulatory issues, environmental and ecological influences, Changes in the organizations, financial factors, technology assessments and general changes in the nature and structure of competition.
SPECIFYING AND MANAGING QUALITY
What is quality?
If a product fulfils the customer’s expectations, the customer will be pleased and
consider that the quality is of acceptable or even high quality. If his or her expectations are not fulfilled, the customer will consider that the product is of low quality. This means that the quality of a product may be defined as “its ability to fulfill the customer’s needs and expectations”.
Among popular alternative concepts of quality are;
Quality if fitness for use.
Quality is doing it right the first time-and every time.
Quality is the customer’s perception.
Quality provides a product or service at a price the customer can afford.
You pay for what you get (quality is the most expensive product or service).
For example these may be:
Dimensions, such as length, diameter, thickness or area;
Physical properties, such as weight, volume or strength;
Electrical properties, such as resistance, voltage or current;
Appearance, such as finish, color or texture;
Functional qualities, such as output or kilometer per liter;
Effects on service, such as taste, feel or noise level.
STANDARDIZATION BENEFITS
Cost Reduction
• Purchasing costs reduced through purchasing leverage
• Inventory cost reduction
• Floor space reduction
• BOM/MRP/ordering expense avoided when common parts are simply drawn as needed from spontaneous resupply
• Overhead cost reduction
Quality:
• Product quality
• Continuous Improvement
• Vendor reduction
Flexibility:
• Eliminating setup
• Inventory reduction
• Simplify supply chain management
• Internal material logistics
• Breadtruck deliveries
• Flexible manufacturing
Responsiveness:
• Build-to-Order
• Parts availability
• Quicker deliveries from vendors
VARIETY REDUCTION
Definition:
The deliberate elimination of the number of variants in a PRODUCT range or line in order to improve efficiency and secure scale economies.
VALUE ANALYSIS AND VALUE ENGINEERING
Value Engineering
Value analysis is a systematic effort to improve upon cost and/or performance of products (services), either purchased or produced. It examines the materials, processes, information systems, and the flow of materials involved. Value Analysis efforts began in earnest during WW II. GE, concerned with the difficulties in obtaining critical listed materials to produce war material, assigned an engineer, Lawrence D Miles to the Purchasing department. His mission was to find adequate material and component substitutes for critical listed material to manufacture needed war equipment. In his search, Miles found that each material has unique properties that could enhance the product if the design was modified to take advantage of those properties.
Miles discovered that he could meet or improve product performance and reduce its production cost by understanding and addressing the intended function of the product. His method was – Blast (dissecting products to discern key competitive advantages), Create (detailed analysis of the disassembled products, identifying those functions of concern and soliciting ideas for improving), Refine (selecting the most value adding, cost-effective ideas and preparing a business case for the implementation of the proposals) – the VA Tear Down Analysis. The key element in Miles’ work is that he separated Function (what it must do) from the characteristics of the design (how it does it). Value = Function/Cost (esteem value – want, exchange value – worth, utility value – need).
Why is it important?
Implemented diligently, value analysis can result in –
reduced material use and cost
reduced distribution costs
reduced waste
improved profit margins
increased customer satisfaction
increased employee morale
Value Engineering
Value engineering (VE) is a systematic method to improve the “value” of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.
VE follows a structured thought process that is based exclusively on “function”, i.e. what something “does” not what it is. For example a screw driver that is being used to stir a can of paint has a “function” of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. Value engineering uses rational logic (a unique “how” – “why” questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.
Value engineering is often done by systematically following a multi-stage job plan. plan.” One modern version has the following eight steps:
1. Preparation
2. Information
3. Analysis
4. Creation
5. Evaluation
6. Development
7. Presentation
8. Follow-up
THE TOOLS OF QUALITY MANAGEMENT
Statistical process control
Statistical Process Control (SPC) is an effective method of monitoring a process through the use of control charts. Control charts enable the use of objective criteria for distinguishing background variation from events of significance based on statistical techniques. Much of its power lies in the ability to monitor both process center and its variation about that center. By collecting data from samples at various points within the process, variations in the process that may affect the quality of the end product or service can be detected and corrected, thus reducing waste as well as the likelihood that problems will be passed on to the customer. With its emphasis on early detection and prevention of problems, SPC has a distinct advantage over quality methods, such as inspection, that apply resources to detecting and correcting problems in the end product or service.
Histograms
A histogram is a specialized type of bar chart. Individual data points are grouped together in classes, so that you can get an idea of how frequently data in each class occur in the data set. High bars indicate more points in a class, and low bars indicate fewer points.
The strength of a histogram is that it provides an easy-to-read picture of the location and variation in a data set.
Pareto Charts
Vilfredo Pareto, a turn-of-the-century Italian economist, studied the distributions of wealth in different countries, concluding that a fairly consistent minority – about 20% – of people controlled the large majority – about 80% – of a society’s wealth. This same distribution has been observed in other areas and has been termed the Pareto effect.
The Pareto effect even operates in quality improvement: 80% of problems usually stem from 20% of the causes. Pareto charts are used to display the Pareto principle in action, arranging data so that the few vital factors that are causing most of the problems reveal themselves. Concentrating improvement efforts on these few will have a greater impact and be more cost-effective than undirected efforts.
Flowcharting
Flowcharts are maps or graphical representations of a process. Steps in a process are shown with symbolic shapes, and the flow of the process is indicated with arrows connecting the symbols. In quality improvement work, flowcharts are particularly useful for displaying how a process currently functions or could ideally function. Flowcharts can help you see whether the steps of a process are logical, uncover problems or miscommunications, define the boundaries of a process, and develop a common base of knowledge about a process. Flowcharting a process often brings to light redundancies, delays, dead ends, and indirect paths that would otherwise remain unnoticed or ignored. But flowcharts don’t work if they aren’t accurate, if team members are afraid to describe what actually happens, or if the team is too far removed from the actual workings of the process.
Fishbone diagrams
Ishikawa diagrams (also called fishbone diagrams or cause-and-effect diagrams) are diagrams that show the causes of a certain event. Common uses of the Ishikawa diagram are product design and quality defect prevention, to identify potential factors causing an overall effect.
Causes in the diagram are often categorized, such as to the 4 M’s, described below. Cause-and-effect diagrams can reveal key relationships among various variables, and the possible causes provide additional insight into process behavior.
Causes can be derived from brainstorming sessions, successively sorted through affinity-grouping to collect similar ideas together.
The original 4 M’s
• Machine (Equipment)
• Method (Process/Inspection)
• Material (Raw,Consumables etc.)
• Man
TQM
Total Quality Management is the organization-wide management of quality. Management consists of planning, organizing, directing, control, and assurance. Total quality is called total because it consists of two qualities: quality of return to satisfy the needs of the shareholders, or quality of products.
As defined by the International Organization for Standardization (ISO):
“TQM is a management approach for an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society.” ISO 8402:1994
One major aim is to reduce variation from every process so that greater consistency of effort is obtained.
In Japan, TQM comprises four process steps, namely:
1. Kaizen – Focuses on “Continuous Process Improvement”, to make processes visible, repeatable and measurable.
2. Atarimae Hinshitsu – The idea that “things will work as they are supposed to” (for example, a pen will write).
3. Kansei – Examining the way the user applies the product leads to improvement in the product itself.
4. Miryokuteki Hinshitsu – The idea that “things should have an aesthetic quality” (for example, a pen will write in a way that is pleasing to the writer).
A ‘Total Quality Organization’ generally benefits from having an effective Quality Management System (QMS). A Quality Management System is typically defined as: “A set of co-coordinated activities to direct and control an organization in order to continually improve the effectiveness and efficiency of its performance.” Customer expectations inevitably drive and define ‘performance’ criteria and standards. Therefore Quality Management Systems focus on customer expectations and ongoing review and improvement.
TQM requires that the company maintain this quality standard in all aspects of its business. This requires ensuring that things are done right the first time and that defects and waste are eliminated from operations.
Criteria for Supplier’s Evaluation
This focuses on obtaining and interpreting the following supplier information:
-Organization;
– Core business;
– Capability and reputation;
– Working procedures related to the service
-Requirement;
– Finances;
– Capacity; and
– Track record.
Obtaining Information
A request for proposal (referred to as RFP) is an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. A bidding process is one of the best methods for leveraging a company’s negotiating ability and purchasing power with suppliers.
RFPs often include specifications of the item, project or service for which a proposal is requested. The more detailed the specifications, the better the chances that the proposal provided will be accurate. Generally RFPs are sent to an approved supplier or vendor list.
Request for Quotation (RFQ) is used when discussions with bidders are not required (mainly when the specifications of a product or service are already known) and when price is the main or only factor in selecting the successful bidder. An RFQ may also be used as a step prior to going to a full-blown RFP to determine general price ranges. In this scenario, products, services or suppliers may be selected from the RFQ results to bring in to further research in order to write a more fully fleshed out RFP.
RFP is sometimes used for a request for pricing.
Request for Qualifications (RFQ) is a document often distributed before initiation of the RFP process. It is used to gather vendor information from multiple companies to generate a pool of prospects. This eases the RFP review process by preemptively short-listing candidates which meet the desired qualifications.
Best and Final Offer (BAFO).The bidders return a proposal by a set date and time. Late proposals may or may not be considered, depending on the terms of the initial RFP. The proposals are used to evaluate the suitability as a supplier, vendor, or institutional partner. Discussions may be held on the proposals (often to clarify technical capabilities or to note errors in a proposal). In some instances, all or only selected bidders may be invited to participate in subsequent bids, or may be asked to submit their best technical and financial proposal, commonly referred to as a Best and Final Offer (BAFO).
For improved competitiveness, integration of - Operations; Logistics; Procurement & IT is imperative.
Procurement & Purchasing are functionally the same and are basically different terms for the same function used by Government departments and manufacturing organizations respectively. These are functions in the supply chain.
From the question, it appears that the existing system is a stage1 supply chain and needs to be upgraded.
ERP based systems are very important for integrating accounts payables with the supply chain. However, only integrating accounts payable with the supply chain is not sufficient for improving competitiveness.
Treat all functions of the supply chain as individual cost centers and maximize overall value generated rather than profit in an individual area. Concentrate on functions where the core competence lies.
Agility and flexibility (responsive supply chain) would improve the overall competitiveness.
By Implementation computerized system for Procurement and get your peoples training time by time, so that your organization will become more effectively and efficiently.
The best way to manage the transactional side of procurement exercise is to implement a logical P2P ( PROCUREMENT TO PAY SYSTEM ) administered through ERP ( Enterprise resource Plan ) software where the transactional aspects of procurement , bottleneck of process and transparency of importance and end to end visibility is maintained all across the supply chain process
YOU CAN DO IT BY PROGRAMS LIKE (SAP, ORACLE)
