ISQA 479

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ISQA 479

• Customer Value
• Smart Pricing
• Expediting

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Customer Value

• Timing and Lead Time
• Location
• Conformance to Specifications
• Information/Visibility
• Value Added Services
• Product Selection
• Price
• Long Term Relationship

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Power Shift in Manufacturing

• Contract Manufacturing
• Electronics
• Clothing
• Auto Sub-assemblies
• Jewelry
• Food
• Furniture
• Pharmaceuticals

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Locations

• Hi Tech/ Hi Quality or Cheap
• Asia
• China
• India
• Malaysia
• Indonesia
• Taiwan
• Korea
• Japan

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Locations

• Central and South America
• Brazil
• Mexico
• Maquiladoras
• Central America and Caribbean
• Africa
• Kenya
• South Africa

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Smart Pricing

• Customer Differentiation
• Timing
• Price According to Demand
• Airlines
• Hotels
• Rebates
• Surcharges

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Smart Pricing

• Differential Pricing
• Group Pricing
• Regional Pricing
• Product Versions
• Transportation Preferences
• Seasonality
• Freight and Handling

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Pricing and the Internet

• Information Availability
• Expanded Customer Base
• Expanded Supply Base
• Price
• Service
• Customer Ratings
• Look Up
• Alibaba.com
• Thomasnet.com
• Solusource.com

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Sourcing and Expediting
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Sourcing Objectives

• Fundamental Objectives
• Continuity of Supply
• Quality
• Minimize Administrative Costs

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Avoiding Problems

• Complete Specifications
• Minimize Change Orders
• Order Timing
• Order Outside Supplier Normal Lead Time
• Minimize Rush Orders
• Continuous Supplier Information Flow
• In Both Directions
• Supplier Visits

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Expediting Objectives

• Avoid surprises
• Receive Materials ON TIME
• Manage supply base
• Persuade supplier to do what was agreed
• Solve problems
• Supplier Problems
• Industry Problems
• Build supplier relationships
• Understand supply chains

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Why Suppliers Fail

• Inaccurate lead times
• Impossible sales promises
• Lead time changes
• Suppliers sources
• Overmatched supplier
• Errors
• Undercapitalized
• Logistics
• Force Majeure

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Before you place an order

• Salespersons home phone
• Managers home phone
• Other emergency numbers
• List of carriers in immediate vicinity
• Other useful information
• Organization chart
• Credit manager
• Engineering manager
• Production manager
• Purchasing manager

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Before Placing an Order

• Early Delivery Bonus?
• Sliding Pay Scale
• On Time Full Pay
• Late Deductions
• Agree on Transportation
• Mode
• Carrier
• Agree on Force Majeure
• Agree on Liquidated Damages

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After Placing an Order

• Read contract documents carefully
• Think before you act
• BE NICE but firm
• Authorize overtime
• Partial shipment
• Next closest dealer
• Next closest major customer
• Available in another form?
• Hold all new orders to supplier pending
  resolution
• Threats are ALWAYS a last resort

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Structural SteelAn Example

• Engineering Specs
• General Contract
• Sub-Contract With Installer
• Sub Orders Materials
• Local Steel Supply Firm
• Order From Supplier Bao Steel Shanghai
• Bao Steel
• Hot Roll
• Fabricate
• Deliver to Dock

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Structural Steel, Cont.

• Load on Ship (Schedule)
• Transit Time
• Discharge at Port
• Customs
• Arrange Local Trucking
• Deliver to Jobsite
• Erect

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Structural Steel

• Finalize Engineering Specs Drawings 6
• Award Contract to LCL 4
• Contract With Installer 4
• Installer Orders Materials 2
• Local Steel Supply Firm 2
• Order From Supplier Bao Steel Shanghai
• Bao Steel
• Hot Roll 2-4
• Fabricate 1-2
• Deliver to Ship 1

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Structural Steel, Cont.

• Load on Ship (Schedule) 1-2
• Transit Time 2-3
• Discharge at Port 1
• Customs 1-2
• Arrange Local Trucking 1
• Deliver to Jobsite 1
• Erect
• Total Lead Time Could Be 6 Months

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Structural Steel, Cont.

• Assume Contract w/ Erector
• Assume Steel Supplier Has Raw Material
• Still Need Fabrication Time, Transportation Time

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Expediting

• Ask Subs Does your supplier have the materials
  IN STOCK?
• If YES, is the material set aside and earmarked
  for us?
• If not in stock, what is the lead time and what
  process does sub have in place to be sure it gets
  ordered in time?
• Dont forget that transportation lead time needs
  to be included (Permits?)

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Expediting and Project Management

• This ties back to the need for prompt submittals
  and AE approvals.
• Do AE folks know what lead times are for
  materials?
• A Materials Critical Path?

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Expediting

• Backward Scheduling
• Date needed on jobsite
• Slack
• Transportation time
• Fabrication time
• Materials lead time
• AE approvals
• AE submittals

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Expediting

• Make a materials checklist that includes
  proactive checking on subs to be sure they and
  their suppliers have ordered material in time.
• Ask Subs What is your Forecast (not guess) for
  availability of materials? Why?
• Lead times change depending on economic
  conditions. Verify periodically

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Questions, Comments, Observations, Conclusions,
Arguments?