Sourcing & Procurement

Supply Chain Management

Alex Capri, NUS Business School
 Agenda

What is Sourcing and Procurement

Global Trends & Markets

Sourcing Ecosystems & Structures

The Sourcing and Procurement Process

Critical Systems, Data and Documentation

Risk Management: Social Responsibility

 Sourcing & Procurement

Whats Involved:

Identifying Material and Support Needs

Locating and Selecting Suppliers and Collaborators

Negotiating Contractual Terms

Monitoring Supplier/Partner Compliance, Quality and Services

Applies to: Direct Materials versus Indirect Materials (capital equipment, maintenance, repair,
operating equipment, office supplies)

Alex Capri
 Global Sourcing Trends
1980s Present

OffShoring NearShoring NextShoring

1980s1990s 1990s 2000s 2010Present

Laborcostarbitrage Proximitytodemand
Laborcostsnolonger
Extendedsupply primarycriteria Proximityto
chains innovation
Shorter,multifaceted
Regulatoryarbitrage supplychains Virtualnetworks

Fartherfrom Productioncloserto TalentPools

demand demand
Shortsupplychains
Economiesofscale Multifaceted
model(lowvariety) innovationanddesign Flexibleproduction
footprints
FarfromR&Dand Diverse,fragmented
InnovationCenters Robustglobal markets,products
networksofsuppliers
Increasedsupplychain Agile,evolving
risks Moreproduction
variety Sustainable,socially
IP/Transferof accountable
technologyrisk Lowersupplychain
risks

AlexCapri
Sourcing and Procurement Ecosystem
Collaborators&ServiceProviders

Collaborators
Financial
Customers
Co.

Service Providers

Procurement
SourcingCo.
Co.
(3rd Party)
(RelatedParty)

ITProviders Procurement Consultants

Team
Product Direct
DesignCo. Suppliers

Logistics
Co.

Government
Research&
Regulatory
Development
Bodies

Alex Capri
 Supplier Criteria

Commercial Collaborative
PriceandPaymentTerms? SystemIntegration?
Credit,LeaseandRental? Supplier/Partner DataSharingandTransparency?
SharedDesignandR&D? Exclusive/PreferentialArrangement?
Assists,Proceeds,Discounts? SharedLiability?
Risk&TitleTransfer,INCOTerms? CSRandSustainabilitycompliant?
DurationofContract CompetitiveRisk/IPRisk?

ProductSpecs Capability Compliance AfterSalesService

Quality Productioncapacity Anticorruption

DesignSpecs FInancialHeath Warranties
Localregulations
Obsolescence Timelinessofdelivery Repaircapabilities
IndustryCertifications
Technicalparameters leadtimerequirement Training
Customsandtaxes
Reliability Flexibility Sparepartsavailability
CustomerConnectivity

AlexCapri
SourcingStructures
B2B Market Place

Sourcing
Agent
(3rd Party)

Procurement
Company ESourcing
(RelatedParty)

BuyingTeam

Direct Consortium
Suppliers Markets

Note: Intregration,transparencyarekeyforsuccesful collaboration.ManyCo.s sharetheirsupplierbasedataandpublish

metrix results.Example:Levi Strauss,minethegap.com.

LogoCompany AlexCapri
 Procurement Scenarios
Outsource or In-House?

Sub Exch.

Knowledgeofsupplierbase/leverage
Language&cultureadvantage
RPM SourcingCo. Establishedtrackrecord
Factories
Nopermanentestablishment(tax)
OutsorceSupplierKPIs,Vetting

Fullydedicatedinhouseteam
HandsonQ/C
Brand X. Procurement 3PLs Permanentestabishment?
Office
(relatedparty) TransferPricingstructure
Geographicproximitytosource

Nomiddleman
Vendors
FullaccesstoSCM?
Geograpjhicproximity
FC Direct Ecommerceenabled?
Supplier Relatedparty?

Sub. RPM

Factors: Company size, network compatibility, contractual terms, geography, new technologies.

Alex Capri
Demand Aggregation, Centralized &
Independent Sourcing
B2B

Common
Requirements

Modularized
Production Strategic
Parts
SourcingStrategy
Aggregated Arbitragecostsversusstrategicandfinancialrisks.
Affiliated Demand
Companies HighVolume/
Standarized
Sourcing Centrally
Pricu Procured StrategicItems
Strategy Supplierbaseisconsolidated.

Global
Suppliers
Small NonStrategic
text
Volumes Decentralized,delgatedtolocaloffices.
Procured
Independently

AggregatedDemmand
Local Sharedrequirementsacrossrelatedoperatingentitiesand
text
Suppliers affiliates
Non
Standarized

Alex Capri
ProcurementEnvironments
B2B

Buyer/Supplier ConsortiumDriven
DrivenMarket MarketPlaces
Places EProcurement
Reverseauctions
Buying
SpotBuys
Strategy
Secondarymarkets
(excesscapacity/space)

DiscountSearchEngines

ECatalogues

NeutralMarket SMEsversusFortune
Places 5000

DiscussionExamples:Walmart,Intel

AlexCapri
 SourcingandProcurementProcess

Supplier
SupplierSpecifications ProposalVetting
Evaluation RFP/RFQ Negotiations
Criteria

ProductDescriptions DeniedParty/Sanctioned
Dimensions/Weights PartyTest
DesignFeatures ISOCertified
PerformanceParameters FinancialStability
Functions Reputation/References
Price/cost Qualityguarantee
Warranties Systemsintegration
Health&Safety Transparency
Sustainability Warranteeprogram
SociallyResponsible AfterSalesService
Schedules&Costs
Volumes
Providerequestfor
proposal/quotetopre
screenedcandidates
OutsourceRFPto3rd
party?
IssuePublicRFPviavirtual
Network
Providekeyrequirements,
includingspecs,and
evaluationcriteria.
Finalistsaresubjectto
Evaluateproposalsbased
negotiationsre:
onSpecsandCriteria
Reduceapplicantsdownto
Price
ashortlist
Volume
Followupvetting,demos,
Integration/Transparency
testproducts,simulations
Maintenance&Support
DurationofContract
ImprovementClauses
Deadlines
SpotPurchase/LongTerm
purchase

AlexCapri
 MonitoringSupplierPerformance

Audits&Reviews
Complianceauditsby3rdparties 4 ProcessImprovement
TransactionalSpotChecks
OperationalAssessments AdaptsleanSCMmethods
KPIReportCards&Ranking Embraceseducation/training
Collaborateswithnewpartners
Implementsnewtechnologies
3 Participatesinpilotprograms

Transparency
SupplierKPIs
3rdParties/subcontractors
countryoforiginofmaterials
BOMs/directandindirectcosts
productlocationandmovement
2
DataAnalyticalTools
Cloudenabled
IoT
Gapanalysis(KPIvsbestpractice)
Predictiveanalysis
Trendspotting
Realtimedataassessment
1 Realtimefeedback

OverallSupplierRanking/ReportCard

BasedonKPIs,Suppliersaregivenweightedaveragerankings.Performanceisrewardedbasedonrankings.
Weekperformersarediscontinued. Example:GeneralMotorsSupplierMetrix

AlexCapri
 SOURCING:GLOBALSUPPLYCHAINS
GlobalTradeManagement

TrackingKeyData
VettingTouchPoints

Flow of Goods

RVC,CountryofOrigin, Freightcosts, Returnedproducts,

royalties,assists, warehouse/DCcosts, spareparts,repairs,
sellingcommissions, customsbroker refurbishment,
Suppliers Data HTSnumbers,Denied management,express warranties,sales Data Customers
partyScreening, consignment,lastmile samples,rebates,
GST/VAT fulfilment proceeds,postentry
priceadjustments

Transactions

Duties/VAT Logistics Customer

Service

Procurement Team

Alex Capri
 Key Data & Documents

Key Documents Key Documents

Spec Sheets Packing lists

Export Certificates Airway Bills
BOMs Manifests
Certificates of Origin Freight cards
Invoices 3PL Invoices
P.O.s Delivery Receipts
Forecasting Notes Customs Entries

ERP*

Key Documents
Key Documents
BOMS
P.O.s
Capital equipment lists
Invoices
Equipment depreciation
Debit/Credit notes
Blueprints
L/Cs, Bank drafts/ receipts
Overhead costs
Warranties
Labor costs sheets
Sales Contracts & IP/ Royalty Agreements
Spec Sheets

* Oracle, SAP, Microsoft etc.

Alex Capri
 SourcingandProcurement
SustainabilityandSocialResponsibility

Procurement
Child/Forced Hazardous
Center
Labor Materials

Freedomof
Discrimination
Association

Wages& Occupational
Benefits Working Safety
Hours

Alex Capri
 MINDMAP
ProcurementManager

Economicorderquantity&price?
Forecast capitalrequirements?
Sourcinglocations,staging/storage
Leadtimes?

Cyclical&seasonalinventory?
SafetyInventory?
Inventory
Bespoke,adhoc,specialorder?

Customsduties,fees,VATandtaxes?
GTM Exportcontrolsandlicensing?
Optimal FTAs,FTZs,specialprograms?

Purchase
Freight,transportation,movement?
Logistics Warehouse,DC,3PL,floorspace?
Customerfulfilment,returns,input?

Corruption/Antibribery?
BusinessEthics Sanctions/Deniedparties?
ConflictMinerals,geopoliticalrisk

LaborStandards,WorkEnvironment?
Sustainability CarbonFootprint?
SustainablePractices?

Alex Capri