OMSAN LOJİSTİK
Apr 02, 2015
OMSAN LOJİSTİK
Purchase Order Management
Procurement and Supplier Relationship Management
Latin America Logistics Center
Logistics Management Series
Procurement Provides the Best Opportunity to Control
Costs …
$6,2$6,8
$3,0
$4,0
$0,0
$1,0
$2,0
$3,0
$4,0
$5,0
$6,0
$7,0
Directo Indirect
Corporate Expenses $ Trillions
U.S.
R.O.W.
• For Each $1 in sales, companies spend between 50 y 55 cents. in purchased materials
• Costs reductions in Procurement Costs transalte dollar by dollar into Revenues
Supply Chain Management
Supply Management
• Procurement is the Process of Purchasing raw materials or finished goods to satisfy Inventory needs
• Decisions Include:– Decisions of use of suppliers – Negotiation of Contracts– Supply Process Definition
ProcurementProcurement
* Select and Certify Suppliers
* Ranking of Suppliers Performance
* Negotiation of Contracts
* Evaluation of Price, Quality and Service
* Supply Products and Services
* Procurement Sequence Planning
* Negotiate Procurement Conditions
* Evaluate Value Received
* Assess Quality
* Forecast Prices
* Specify Delivery Terms
Associate Activities to Procurement:
Supply is a long process that consumes several resources in most organizations
Source: Aberdeen Group
Seek and Identify the Right Suppliers
Manage and Communicate the List of Preferred Suppliers
Develop the RFQ
Reception and Reply of RFQ
Review Proposals
Negotiate Contract
Average Cycle = 3.3 to 4.2 months
Costs are the Major Concern in Today’s Economy
“Which is the most CRITICAL concer in yout industry today?
Source: AT Kearney
CHEMICALS
Costs Competence 89%
Customer Relationships 89%
Change Management 63%
Market Changes 55%
FINANCIAL INSTITUTIONS
Customer Relationships 82%
Effective IT Use 77%
Costs Competence 63%
Change Mgmt 55%
CAR INDUSTRY
Costs Competence 78%
Customer Relationships 76%
Suppliers Relat. 63%
Effective IT 55%
COMMUNICATIONS/ELECTRONICS
Costs Competence 79%
Effective IT Use 73%
Change Mgmt 60%
Customer Relationships 79%
Activities Controlled by the Purchasing
Department
100
75
70
57
41
37
34
26
0 20 40 60 80 100 120
Purchasing Activities
Materials Studies
Market Studies
Investment Recoveries
Traffic
Inventory Control
Stores & Warehousing
Reception
Purchasing & Supply Management, Dobler & Burt, 6th Edition
Algorithm of the Purchasing Fuction
• Minimise: Total Purchasing CostsNumber of Suppliers
• Subject to: Inventory Fill Rate
Product Quality
Actual Sales+ 25%
Price+5%
LabourCosts-25%
Overhead
-33%
Puchasing-8 ½ %
Sales
Purchasing ofGoods & Services
Labor and Salaries
Overhead
Profit
$10,000,000
6,000,000
2,000,000
1,500,000
$500,000
$12,500,000
7,500,000
2,500,000
1,500,000
$1,000,000
$10,500,000
6,000,000
2,000,000
1,500,000
$1,000,000
$10,000,000
6,000,000
1,500,000
1,500,000
$1,000,000
$10,000,000
6,000,000
2,000,000
1,000,000
$1,000,000
$10,000,000
5,500,000
2,000,000
1,500,000
$1,000,000
Puchashing Impact in Doubling Profits!
ROA
10%
($9.25 millon)
($ 750,000)
($ 1.9 million) ($4.9 millon)
(2.04 veces)
(7.5%)
(15.3%)
1 Purchase is 50% of SAles
2 Inventory is 40% de Total Assets
Benefits
$500,000
Sales
$10 millon
Dividido
por
Profit Margin
5%
Invest. Turn
2 times
Multiplicado por
Inventory 2
$2 millon
Sales
$10 millon
Cost Total1
$9.5 millon
Menos
Total Assets
$5 millon
Sales
$10 millon
Dividido por
Return on Assets before and after 5 % Discount in the Purchasing Price
Purchase Order ManagementSteps
Identification
Requisition
Purchase Order
Placement
Reception
Steps in the Purchase Order
• Identifying and Evaluating Supply Needs
• Supplier Selection (Certified)
• Approval / Authorization of the PO
• Placement of the PO
• Tracking of the PO
• Reception and Evaluation of the PO
• Ex-Post Management of the PO
Evaluation of Needs
• Purchase Requisition
Requisition 004
•Items Description
•Quantity•Quality•Lead Time
Required
Price Fixing MethodsMarket Price/Value
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Product AProduct BProduct C
Price Variance day-by-day by Product
Price Fixing Methods Fixed Price
20,4 20,4 20,4 20,4
30,6 30,6 30,6 30,6
45,9 45,9 45,9 45,9
05
101520253035404550
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Channel AOptional ChannelChannel B
Supply Channel, Mandatory or Optional
Fixed Incoming Cycle, Coordinate and United
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
SKU
Wee
ks
Ship Weeks
Receive Weeks
Source: VanBodegraven
Fixed Incoming Cycle, Coordinate and United – Truckload
Assignment
1 1 1 1 1
2 2 2 2 2 2 2
3 3 3 3 3 3 3 3
4 4 4 4 4 4 4 4 4 4
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
25 29 6 3 2 28 23 18 20 1 4 9 30 15 17 16 14 11 13 5 26 19 21 22 24 7 12 27 10 8
SKU
% o
f Ful
l Tru
cklo
ad
0
1
2
3
4
Truc
kloa
d A
ssig
nmen
t
Source: VanBodegraven
Supply Control
Verify the Product Assist Suppliers and
subcontractors; technical advice, tools, etc.
Check Product Quality Update
supplier/subcontractor data after orders are completed
Supply Control
Select Subcontractors and Qualified Suppliers
Attach Specifications, Draws, Schemes, to the purchase order
Procedures to deliver to suppliers/subcontractors in relation to requisitions
Quotes Analysis Clarify with the supplier
quality assurance and control and requirements
Time Indicators in Supply
90
28 2 1
PO Entry
PO Procesing
Supplier Lead Time
Transit Time
Reception in DC
1. Total Purchase Order Cycle = Total Hours
Lead Time VarianceShort Lead Times is Good, Consistent Lead Times is Better!
LeadtimeLeadtimeLeadtime
LEAD TIME DEMAND
SAFETY STOCK
Time
Inve
ntor
y
ReorderPoint
(ROP)
Lead TimeVariability
The Perfect Purchase Order
Calculated with the right EOQ and Adjusted to Efficient Management Quantities
Communicated in Real Time to the Supplier
The Supplier has the Product Available
Reception is made in the requested time and within the assigned time windows
The shipment arrives with the right quantities of the right products
The products fulfils requested Quality
The shipment arrives with the right documentation The suppliers invoice is paid within the agreed time
99%
85%
95%
98%
98%
99%
90%
97%
= 66%
PO Placement
• Individual Orders– Costly– Time consuming
Process– Multiple
Communications– Casual Products
• Orders by Contract• Blanket Orders• Continuos
Replenishment
• Prices?– Market Price/Value– Fixed Price– Agreed Formulas by Product-
Period– Fixed time Contracts with
Fixed Prices and Discount
Electronic Order EntryHeineken - USA
Tracking of the PO
• Where?• When?• What and How Much?• Destination?• Time?• Contents?• Status?• Exception Reports ?
Tracking of the PO
Tracking of the Supplier’s Delivers