Delivering Customer Value through Procurement and Strategic Sourcing - Tài liệu tham khảo | Đại học Hoa Sen

Delivering Customer Value through Procurement and Strategic Sourcing
A Professional Guide to Creating a
Sustainable Supply Network Walter L. Wallace Yusen Xia
Part of the Financial Times Operations Management Series
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Walter L. Wallace has dedicated this book to his three loving daughters:
Katherine E. Evans, Virginia L. Wallace-Falck, and Shannon Xue.
He would also like to acknowledge three individuals who were instrumental
in the development of his understanding of corporate governance:
W. Gordon Kay, Edward S. Heys, and Chuck Hansen.
Yusen Xia has dedicated this book to his family—
Liping, Maggie, and Matthew—for their support of this book. Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chapter 1 Purchasing, Procurement, and Strategic Sourcing . . . . .5
Strategic Sourcing Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Supplier Relations and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Chapter 2 Managing Sourcing and Procurement Processes . . . . .19
Step 1: Determine the Type of Purchase and Level of Investment. . . . 20
Step 2: Perform the Procurement Process . . . . . . . . . . . . . . . . . . . . . . . . 21
Step 3: Evaluate the Effectiveness of the Strategic
Sourcing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Supplier Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Use of the Tradeoff Analysis for Supplier Selection . . . . . . . . . . . . . . . . 27
Procurement Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
The Procurement Team and Its Contribution . . . . . . . . . . . . . . . . . . . . 32
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Chapter 3 Strategic Sourcing and Delivering
Customer Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Delivering Customer Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Defining Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
The Impact of “Out of Stock” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Value Creation and Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
It’s the Totality of the Offer that Delivers Customer Value. . . . . . . . . . 41
Market-Driven Supply Chains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Identifying Customers’ Service Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Defining Customer Service Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
The Cost Benefit of Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Setting Customer Service Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Setting Service Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Chapter 4 The Size of the Organization Spend
and Financial Significance . . . . . . . . . . . . . . . . . . . . . . . .59
Organizational Spend and Its Significance . . . . . . . . . . . . . . . . . . . . . . . 60
Return on Investment Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Profit-Leverage Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Reduction in Inventory Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Supply Side Contribution to the Organization . . . . . . . . . . . . . . . . . . . . 64
The Mission, Vision, and Strategy of the Organization . . . . . . . . . . . . . 67
The Size of the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
The Financial Strength of the Organization . . . . . . . . . . . . . . . . . . . . . . 69
The Reputation of the Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Chapter 5 Understanding Buyer-Supplier Relationships. . . . . . . .71
Trusting a Single Source. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
An Apple of an Idea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
A Calculated Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Keeping the Complex Simple! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
A Foolproof Strategic Procurement System . . . . . . . . . . . . . . . . . . . . . . 75
Managing the Strategic Sourcing Decision: Buyer-Supplier
Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Chapter 6 Value Creation for Global Procurement
Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
Spotlight on Procurement Performance . . . . . . . . . . . . . . . . . . . . . . . . . 93
The Strategic Sourcing Decision: The Best Value Chain Wins . . . . . . 101
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Chapter 7 Procurement under Raw Material
Price Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
Raw Materials and Commodity Procurement Contracts
and Trading Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Raw Materials and Commodities Price Forecasting. . . . . . . . . . . . . . . 107
Commodity Procurement Strategies when Forecasted
Prices Are Increasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
In Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Chapter 8 Supply Processes and Information Technology. . . . . .125
The Supply Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Technology-Driven Efficiency and Effectiveness . . . . . . . . . . . . . . . . . 131
Building Application Layer Security into the Supply Chain . . . . . . . . 150
Information Technology Implications for Strategic Sourcing . . . . . . 152
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Contents v
Chapter 9 Creating a Sustainable and Environmentally
Compliant Supply Network . . . . . . . . . . . . . . . . . . . . . .163
A Greener Manufacturing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Initial Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Considerations for a Greener Supply Network . . . . . . . . . . . . . . . . . . . 175
Big Picture Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Why Sustainability? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Green Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
A Green Strategic Sourcing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Building a Competitive Advantage through Collaborative
Sustainability Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Chapter 10 Time-Based Strategic Management. . . . . . . . . . . . . . . .197
Supplier Lead Times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Quantity, Delivery, and Lead Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Time Has a Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
A Shift in Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Logistical Lead-Time Network Management . . . . . . . . . . . . . . . . . . . . 208
Eliminating Waste through Streamlined Flow . . . . . . . . . . . . . . . . . . . 210
Throughput Time Element Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Operational Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
Chapter 11 The Use of Emission Permits in
Strategic Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .215
Top-Down Trading System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
Bottom-Up Trading System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Linking Different Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Further Thoughts on the Subject of Emissions-Trading
Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
In Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Glossary of Related Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Chapter 12 Visibility as an Attribute to Becoming
Customer-Centric and Demand-Driven . . . . . . . . . . . .233
Big Data, Greater Visibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Greater Visibility: What More Can We Do? . . . . . . . . . . . . . . . . . . . . . 238
Building Visibility in the Inbound Supply Chain . . . . . . . . . . . . . . . . . 239 vi Contents
Visibility on a Cloud-Based Supply Chain Network. . . . . . . . . . . . . . . 243
Event Sourcing Software Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Dell’s Information Visibility System . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
Crate & Barrel’s Vision for Global Supply Chain Visibility. . . . . . . . . 247
A Well-Implemented Visibility Solution . . . . . . . . . . . . . . . . . . . . . . . . 249
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Chapter 13 Understanding the Supply Chain Risk Profile. . . . . . .253
Managing Supplier Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
The Hidden Risks of Supply Chain Innovation. . . . . . . . . . . . . . . . . . . 256
Growing Threats to Supply Chains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Mitigating Risk by Gaining Visibility in the Global Network . . . . . . . 261
Mapping the Organization’s Internal Risk Profile . . . . . . . . . . . . . . . . 263
Managing Supply Chain Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274
Chapter 14 Reshoring: Revolution or Evolution . . . . . . . . . . . . . . .277
Offshoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Improving the Outsourcing Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . 287
Reshoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
Nextshoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291
Proximity to Demand: Localization and Postponement . . . . . . . . . . . 291
Made in America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292
Outsourcing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
Benefits and Risks of Outsourcing Services. . . . . . . . . . . . . . . . . . . . . . 293
Outsourcing Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294
Classification of Business Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296
Offshoring’s Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Chapter 15 Supply Chain Network Design and Analysis . . . . . . . .301
Responsiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301
Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .325 Contents vii Acknowledgments
We very much appreciate the work of Dr. Louis St. Peter, one of our colleagues at the
Robinson College of Business, for making this book possible. He has supported various
aspects of preparing this book for publication. We would also like to acknowledge Ms.
Joy Yuan, Mr. Drew Matthews, and Ms. Jewel Denson for their diligent work in the preparation of the text. About the Authors
Walter L. Wallace is an instructor in the Robinson College of Business, Georgia State
University. He received his MBA in Supply Chain Management from the Brock School of
Business at Samford University and his undergraduate degree in Industrial and Systems
Engineering from Mississippi State University. He has 30+ years of expertise in heavy
manufacturing industry and service (fabrication and distribution) industries, with an
emphasis in corporate governance, strategic operations planning, marketing, operations,
logistics and transportation. He has been researching in the areas of strategic sourcing
and procurement, service operations management, and supply chain management. He
has published papers in journals such as International Business Research, Teaching and
Practice and Operations Management Education Review. He has been awarded twice by
the National Sciences Foundation (NSF) for research. He teaches Operations Manage-
ment, Service Operations Management, Operations Strategy, Supply Chain Management
and Logistics & Operations Planning.
Yusen Xia is an associate professor in the Robinson College of Business, Georgia State
University. He received his PhD in Supply Chain and Operations Management from the
McCombs School of Business at the University of Texas at Austin in 2004 and has been
working at Georgia State University since then. He researches in the areas of the inter-
faces between operations and marketing, and managing uncertainties and risks in supply
chains. He has published papers in various journals such as Manufacturing & Service Operations Management , O
perations Research, Production and Operations Management,
Naval Research Logistics, IIE Transactions, Decision Analysis, Decision Sciences , etc. His
research has been supported by grants from the National Sciences Foundation (NSF) and
companies such as Amazon.com, Ryerson Inc. etc. He teaches Operations Management,
Project Management, and Supply Chains. Introduction
I n 1983, McKinsey & Co. consultant Peter Kraljic published a pioneering paper 1
advocating the active engagement of purchasing in supply management and the
expansion of procurement organization roles to a more systematic and strategic
management of the supply base. Back then, purchasing was primarily a back office activ-
ity focused on communicating and expediting purchase orders.
Fast-forward to today, over 30 years later, and things have certainly progressed. With
the support of outside consultants, post-procurement professionals have both formalized
and centralized their strategies and processes, with particular focus on strategic sourcing
methodologies to help rationalize the supply base. The bargaining power of the buyer
has become much more analytical, quantitative, and accountable to the organization.
Has procurement truly become a transformative agent of strategic supply management,
leading to the redesign and orchestration of multitier supply organizations beyond their
primary roles as negotiators, cost cutters, and contract managers? Unfortunately, in the
supply chain, the answer is “no” in too many organizations. This sentiment is shared in the following quote:
Despite well-publicized advancements in procurement for many high-profile
firms, until recently “procurement” for the bulk of the marketplace has been
perceived as a tactical organization without a “seat at the table.” As the strategic
ability of procurement to impact earnings and to enhance the supply chain is
more widely recognized, the spotlight is shining on this historic area of under-
investment. This has triggered rapid change in the role and makeup of pro-
curement teams in many companies with mixed results. And big challenges
remain as these organizations attempt to take their place at the table as a strategic function. 2
—Tom Beaty, President and CEO, Insight Sourcing Group
“Strategic Procurement: Rapid Evolution and Continuing Challenges” 1