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publishing as 7-1
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Objectives
Be able to:
Identify and describe the various steps of the strategic sourcing
process.
Perform and interpret the results of a simple spend analysis.
Use portfolio analysis to identify the appropriate sourcing strategy
for a particular good or service.
Describe the rationale for outsourcing and discuss when it is
appropriate.
Perform a simple total cost analysis.
Show how multicriteria decision models can be used to evaluate
suppliers and interpret the results.
Understand when negotiations should be used and the purpose of
contracts.
Describe the major steps of the procure-to-pay cycle.
Discuss some of the longer-term trends in supply management
and why they are important.
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Q: What is Sourcing Management?
The broad set of activities carried out by
organizations to analyze sourcing opportunities,
develop sourcing strategies, select suppliers,
and carry out all the activities required to
procure goods and services.
Procurement
Sub component
Product produced from RMs but it is not
a finished goods yet. It is going to be the
supporting part of the finished goods in the
final assembly process.
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1. Global Sourcing
Competition against global competitors
and their supply chains.
Advances in information systems have
helped.
Table 7.1
2. Screening supplier
3. Supplier selection
4. Negotiate or Competitive
bidding and agreement
Make-or-Buy decision
Table 7.6
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The Make-or-Buy Decision (Core competency)
Table 7.7
Table 7.8
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Make or buy decision (Total cost analysis)
Example: A product requires 1.3 square feet of sheet metal,
and the cost of sheet metal is $0.90 per square feet,
the direct cost of the sheet metal is:
$0.90 x 1.3 feet = $1.17
Cross Dual
sourcing sourcing
2. Management capability
Table 7.11
Table 7.13
VS Contracting
Competitive
bidding
2. Follow up
& Expediting
3. Receipt &
Inspection
5. Records 4. Settlement
Maintenance & Payment
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The Procure-to-Pay Cycle
Ordering
Purchase order A document that authorizes a
supplier to deliver a product or service and includes
the terms and conditions of the sale.
Follow-up and expediting
Receipt and inspection
Statement of work (scope of work) Terms and
conditions for a purchased service.
Settlement and payment
May be paid through Electric Funds Transfer (EFT)
Records maintenance
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Sustainable Supply
Becoming more conscious of the importance of
being environmentally friendly and using
environmental performance in selecting
suppliers.
Ensuring compliance with regulations.
Reducing packaging, promoting recycling,
reducing costs.