PURCHASING TRENDS 1 - 6

1. PURCHASING TRENDS1 - 6 Presented by Dana L. Marsh, Amanda Orosz, and Jami Parsons March 19, 2002

2. Future of Purchasing & Strategy • eCommerce • Strategic Cost Management • Strategic Sourcing • Supply Chain Partner Selection & Contribution • Tactical Purchasing • Purchasing Strategy Development

3. Trend 1: eCommerce • Overview • Using applications such as Internet, Intranets and Extranets to facilitate purchasing processes. • Issues • Security • Using eCommerce strategically rather than tactically • Opportunities • Timeliness • Value of Data Capture • Implications • Makes the revenue-producing role of purchasing even more important

4. Trend 2: Strategic Cost Management • Overview • To increase competitive advantage in marketplace companies must reduce costs • Issues • Supply chain participants’ willingness to cooperate & “open doors” to trading partners • Opportunities • Create multi-win scenarios rather that traditional win-win or win-lose situations • Implications • If a company doesn‘t adopt a strategic view of cost management, they will lose ability to stay competitive in their marketplace • Going forward companies will be able to take this strategy to the next level and reach 2nd & 3rd tier suppliers.

5. Trend 3: Strategic Sourcing • Overview • Looking not only at prices a supplier can provide but also their total performance such as on-time delivery, value provided to company, etc. • Issues • Complexity of supply chain increases so any system of metrics doesn’t overly tax the company’s resources • Devising appropriate metrics for each individual supplier • Opportunities • Close working relationships with suppliers, ideally long-term relationships • Implications • Assessing the performance of the suppliers will be more complex yet it will be essential because this will drive supply chain management initiatives

6. Trend 4: Supply Chain Partner Selection & Contribution • Overview • Improving supply chain efficiencies by looking at long-term partners, not just suppliers who can provide what a company is seeking at this point • Issues • Assess the value suppliers bring to the company • Opportunities • Creating relevant metrics to track this value by setting mutually-beneficial goals and assessing supplier performance • Implications • Interdependence among supply chain participants • As business functions expand, supply chain partners selection becomes more critical

7. Trend 5: Tactical Purchasing • Overview • Separating the tasks of tactical purchasing from strategic purchasing by having separate job functions and processes • Issues • Most relevant when considering low-value, non-critical commodity items • Opportunities • Creating automated systems or outsourcing tactical functions so as to cut supply chain inefficiencies • Implications • Although day-to-day purchasing functions will be automated, purchasing departments will not be completely eliminated

8. Trend 6: Purchasing Strategy Development • Overview • Increased linkages between supply chain strategies and company strategies • Issues • Supply chain managers will be required to develop strategic alliances with both key suppliers and key customers • Opportunities • “Convergent Strategies” – looking for suppliers whose strategies are leading them toward a similar “future point” • Implications • Full pull systems will be used, reducing cycle time • Insourcing/outsourcing decisions will be made as part of strategic sourcing • Supply chain performance will be measured more effectively • Link between executive performance and supply chain performance