Procurement and Supply Management

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Procurement and Supply Management

• BLOG 597K
• Spring 2002
• Dr. Dawn M. Russell

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Relationship Management
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Relationship Management

• Why do we care about relationship management?

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Relationship Management
Corporate Culture The way we do things around
here to
ensure success.
Box 6-2 Corporate Culture
Actuality
Collaborative
Control
Impersonal
Personal
Cultivational
Competency
Possibilities
Which cultures work? In what environment(s)? Why?
What mix of cultures works? In what
environment(s)? Why?
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Relationship Management
Box 6-3 Personality Styles
Doers Task oriented, focused on getting things
done.
Talkers Relationship builders. Tendency to get
off-track
Guardians Take comfort in the way things have
been in the past.
Thinkers Visionaries. Think about what could
be.
How do we start to understand this? What do we
do with this understanding? Which combinations
work well? Which are you? In what situations?
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Relationship Management
How prevalent is the practice of creating this
type of communication plan?
Box 6-3 Communication Plan
Communicate What? (summaries, meeting notes,
etc.) To Whom? (managers, peers, internal
external customers and suppliers) When? (weekly,
monthly, as needed, etc.) How? (email,
newsletter, focus groups,etc.) Why? (what is the
purpose for sharing the information obtain
input, information, approval/support, etc.)
How do you create and manage such a plan?
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e-Procurement Strategy
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e-Procurement Strategy (Smeltzer Carter, 2001)

• The new must be born out of the old?
• e-procurement tools and techniques (the new)
  must grow from and be integrated with
• classic supply strategies (the old).
• Do you agree with this notion?

Smeltzer and Carter, 2001
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e-Procurement Strategy

• Approach
• Segment supply
• tactical, leverage, critical, strategic
• Assess the infrastructure
• Organization, Information Technology, Employee
  Capabilities, Current Purchasing Practices
• Segment the marketplace
• Marketplace, buyer-centric, seller centric,
  integrated planning
• Determine total cost components that apply
• Determine implementation costs
• Identify most effective e-procurement tool

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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 1 Supply Segmentation Categories
Critical
Strategic
Components providing a competitive edge Form
strategic alliances and partnerships
Unique and over specified Reduce or eliminate
Risk or Exposure
Leverage
Tactical
Basic production materials,
packaging Standardize and consolidate volumes
MRO, Administrative Streamline acquisition
process
Cost/Value
Adapted from Smeltzer and Carter, 2001
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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 2 Buyer/Seller-Centric Models
Few
Buyer-Centric
Integrated Planning
Strategic buyer-supplier relationship. Earlier
supplier involvement. Concurrent
design. Integrated supply chain planning and
execution
Buyer invites suppler to serve its
community. Catalog content and pricing managed by
buyer.
Number of Buyers
Seller-Centric
Marketplace
Supplier attracts buyers to its web
storefront. Catalog content and pricing managed
by supplier.
3rd parties mediate buyer-to-supplier
transactions. Exchanges match supply and demand
of commodity type items to set price.
Many
Many
Few
Number of Sellers
Adapted from Smeltzer and Carter, 2001
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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 3 Value Propositions for the Model
Few
Buyer-Centric
Integrated Planning
Concurrent design leading to reduced cycle-time
and improved manufacurability. Supply Chain
integration tools improve customer service and
reduce supply chain costs.
Common platform for applications and catalogs
across suppliers. Process efficiency
Number of Buyers
Seller-Centric
Marketplace
Low up-front cost (minimal technology
requirements) Immediate access. Supplier manages
content
Low up-front cost (fewer transactions)
Aggregation reduces transaction costs
Many
Many
Few
Number of Sellers
Adapted from Smeltzer and Carter, 2001
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Supply Segmentation
Example Hospital Purchases
Critical
Strategic
High

• Radiology equipment
• Lab equipment

Highly specialized surgical devices
Risk or Exposure
Leverage
Tactical

• Standard surgical
• instruments
• Bedding
• Hospital Gowns

• Gauze
• Bandages
• Thermometers
• Paper products

Low
Low
High
Cost/Value
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Supply Segmentation
High

• Fan Blades
• Power
• Management
• Control

• Nuts
• Bolts
• Screws

• Machine
• Cleaning
• Products
• Safety Glasses

• Brackets
• Tubes

Low
Low
High
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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 4 Benefit/Implementation Cost Framework
High
Integration
Implementation Costs
Collaboration
Exchanges
Transaction
Low
Low
High
Potential Benefit
Adapted from Smeltzer and Carter, 2001
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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 5 Three Components of Total Cost
Total Cost
Purchase Price Supplier cost structure Price
trends Product bundling Volume leverage Guaranteed
reduction Rebates
Usage Part specs Standardization Transportation S
crap Life cycle Product design
Administration P.O. processing Invoicing Payables
Inventory Receiving/handling Performance
reporting Material handling
Adapted from Smeltzer and Carter, 2001
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e-Procurement Strategy (Smeltzer Carter, 2001)
Exhibit 6 Integration of e-Procurement with
Supply Strategy
Supply Strategy
e-Procurement
Spend Analysis
Identify opportunities for pooling and
standardization
Segmentation
Identify buyer- and seller-centric orientations
Infrastructure Analysis
Identify weaknesses and strengths of
e-procurement tools
Adapt cost-benefit and buyer/seller-centric
framework
Supply Strategy Selection
Identify the costs that can be reduced through
e-procurement
Integrate supply strategies with e-procurement
tools
Adapted from Smeltzer and Carter, 2001
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B2B Strategy
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B2B Strategy (Handfield, 2001)

• What elements of the business did General Motors
  and Nortel Networks change to implement a B2B
  Strategy?

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B2B Strategy (Handfield, 2001)

• What are some lessons learned from General Motors
  and Nortel Networks B2B ventures?

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The Future of B2B (Wise Morrison, 2000)

• How are you going to help your companies answer
  the big questions?
• Which exchanges should we participate in?
• Should we form a trading consortium with our
  competitors?
• Should we demand that our suppliers go on-line?
• What software should we invest in?

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The Future of B2B (Wise Morrison, 2000)

• What does the author claim are the three fatal
  flaws in the current B2B model?

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The Future of B2B (Wise Morrison, 2000)

• Fatal Flaws (cont.)

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The Future of B2B (Wise Morrison, 2000)

• What financial industry trends could possibly
  catch-on in B2B marketplaces?

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The Future of B2B (Wise Morrison, 2000)

• What are the implications for market structure?

Wise and Morrison, 2000
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The Future of B2B (Wise Morrison, 2000)

• What does the author suggest are key survival
  skills?

Wise and Morrison, 2000