PMAP – Purchasing Management Association of Philadelphia

1. PMAP – Purchasing Management Association of Philadelphia Tuesday December 18, 2007 - Tuesday Dinner Presentation

2. The Buyer of the Future –What Skills Will You Need? Who Do You Gotta Be? What Do You Need To Know?

3. Presenter: • Marilyn Gettinger, C.P.M. • New Directions Consulting Group • 908-709-0656 • mgettinger@aol.com

4. Topics For Tonight • 1. The Business World • 2. Before Materials Management • 3. Materials Management • 4. On Our Way To Today • 5. Supply Management • 6. Supply Chain Management • 7. The Global Supply Chain • 8. The Organization of the Future • 9. Knowledge and Skills • 10. What Do We Need to Know, What Do We Need To Do, What’s It Going to Take?

5. A Little Background Music • The Business World Today? • Global Challenges and Impacts? • Our Competitive Environment? • Drivers of Better, Faster, Cheaper?

6. Global Wide generational spread Continuous change Greening of the organization Sustainability Dow Jones Social Responsibility ISO 26000 Continual cost reduction opportunities Regulatory demands Lack of qualified staff Greater risk possibilities Customer base Supplier integration Leadership Innovation and creativity Outsourcing Our BusinessWorld

7. Before Materials Management CEO Purchasing Inventory Transportation Warehousing Production Planning

8. Before Materials Management • Lack of communication between materials areas • Excess inventory • Functional focus • Duplication/redundancy • Conflicting goals • Lack of clear understanding of the impact of one function on another • Competition for approval from CEO • Focus on what was best for the function/department not the organization or the smooth flow of materials or the ultimate customer

9. 1. An integrated approach to managing materials and the people and resources that support the efficient use of materials 2. Functions involved in the managing of materials are integrated under one manager. Materials Manager VP of Materials Materials Management

10. 3. Functions integrated Purchasing Inventory Control and Management Transportation Customer Service Forecasting Production Planning and Control Warehousing including Receiving Shipping 4. All decisions made based on trade-offs Those decisions that were best for the organization and the lowest ultimate cost of managing materials Materials Management

11. Materials Management CEO FINANCE MARKETING MATERIALS MANAGEMENT QUALITY SALES Transportation Purchasing Production Planning Scheduling Customer Service Inventory Warehousing

12. Materials Management • Reduction in inventory • Improved communication • Better decisions • More focus on the management of materials • Reduced costs of production • Positive impact on the bottom line

13. Materials Management • Focus on managing materials at the lowest ultimate cost • Not yet end-customer focused • Not integrated into other non-material functions

14. Materials Management • Focus on managing materials at the lowest ultimate cost • Not yet end-customer focused • Not integrated into other non-material functions

15. On Our Way To Today • Stockless Purchasing • P-Cards • VMI • Consignment • Group purchasing arrangements • Contractual language • E-Commerce • Internal relationships • Strategic sourcing • Optimizing the supply base • Tactical to strategic thinking • Quality emphasis

16. Supply Management • The forecasting, planning, sourcing, acquisition, storing, managing, and disposing of materials used or for potential use to support the organization’s production, distribution, and customer service. • Institute For Supply Management (ISM) • Formerly the National Association ofPurchasing Management (NAPM)

17. Supply Chain Management • The supply chain is a series of organizations that jointly create value for ultimate customers. • Supply chain management is the proactive management of supply chain links that are critical to an organization’s operations. • A systems approach to managing flows of information, materials, and services from raw materials suppliers through factories and warehouses to the end-customer.

18. The Internal Supply Chain Engineering Purchasing Transportation R&D Finance A cross-functional team focusing on the design, implementation, and management of a series of activities that provide the ultimate customer with what they want. • The design and management of seamless, value-added processes across departmental boundaries to meet the real needs of the end customer.

19. Moving Downstream Customer Customer Marketing The Internal Supply Chain Finance Ultimate Customer Customer Customer Production Distribution

20. Moving Upstream Tier 3 Tier 3 Tier 2 Tier 1 SCM Team Tier 2 Tier 3 Tier 3 Tier 2 Tier 3

21. The Total Global Supply Chain Upstream partners Enterprise Downstream partners The entire supply chain from cradle to grave including returns management, transportation providers, and other types of providers.

22. SCM encompasses all activities associated with the flow and transformation of goods from the raw materials stage through to end users, as well as the associated information flows The networks, or chains of suppliers, producers, and customers involved in producing and marketing particular products. Supply Chain Management

23. Supply Chain Objectives • Reduce or share risks • Improve performance • Reduce cycle time • Reduce costs • Improve customer service/satisfaction • Generate new income • Increase profits

24. Supply Chain Management • Includes systems management, operations and assembly, purchasing, production scheduling, order processing, inventory management, transportation, warehousing, and customer service. • AT EVERY TIER OF THE SUPPLY CHAIN Supply Tiers Internally Customer Tiers

25. Supply Chain Management • Identify the processes necessary to meet customer expectations • Engineer SCM processes as the core of the business • Move from a silo to a team philosophy • Integrate internal processes • Define metrics • Operate the internal supply chain • Measure performance • Integrate the internal supply chain with the supply chains of other organizations

26. The Global Supply Chain • Expands to include upstream suppliers anywhere in the world • Expands to include downstream customers anywhere in the world • Expands to an internal supply chain that may produce in global sites owned by the organization

27. The Global Supply Chain France Raw Materials Canada China United States Mexico Transportation Brazil Korea Raw Materials Seamless, value-added processes across organizational /country boundaries

28. Global Sourcing • The ability of an organization anywhere in the world • To purchase materials anywhere in the world • To produce anywhere in the world • To transport materials anywhere in the world • To store anywhere in the world • To sell anywhere in the world

29. Portfolio Management • An organization’s analysis and cost structure for buying, producing, transporting, storing, and selling their products at various locations including transportation costs • A cost matrix implemented and maintained so that decisions can easily be made on how best to manage the entire physical chain of products in the face of potential or real risk disruptions

30. The Supply Chain Language • Core competencies • Stakeholders • Enterprise • Downstream and upstream channel members • Best tiering • Best shoring • Tier management • Off shoring • Low cost country sourcing • The bullwhip effect

31. 20th Century Stability and predictability Size and scale Command and control Rigidity Rules and hierarchy Guarded information Vertical integration Domestic market 21st Century Continuous improvement Speed and responsiveness Leadership for everyone Virtual organizations Information sharing Creativity and intuition Proactive Interdependence Collaborative advantage International focus Business models The Organization of the Future

32. The New Rules • 1. Don’t play by the dominant rules of your industry. • 2. Get innovative or get dead. • 3. Reexamine your organization for hidden strategic assets, then leverage the heck out of them. • 4. Create a bias for speed and action in your company. • 5. Be proactive and experimental.

33. The New Rules • 6. Break barriers. • 7. Use all of your people, all of their skills, all of the time. • 8. Globalize your perspective and knowledge base. • 9. Admit that the eco-industrial revolution is well and truly upon us. • 10. Turn organizational learning into a corporate religion. • 11. Develop strategic performance measurement tools. • From: The Eleven Commandments of 21st Century Management • Matthew J. Kiernan

34. Materials Management All of the functions in the MM area Communication and conflict management Relationship management Project management Tactical manager Strategic thinker Human relations Supply Chain Professional Collaborative mindset Team orientation Facilitation of teams Manager of diverse relationships Subject expert Financial understanding Risk manager Trade-off manager Global expert Change management End-to-end thinking Total cost perspective Revenue generator Profit generator Cultural expert Technology understanding Knowledge and Skills

35. The Buyer of the Future Cost Managers Asset Managers Risk Managers Relationship Managers Profit Managers/ Generators Revenue Managers Generators Tradeoff Managers

36. The Supply Chain ProfessionalThe Buyer of the Future • Walking up and down the organization’s internal and external supply chains • = • An understanding of how it all works • Value to all relationships

37. Supplier Relationship Management • Moving from arms’ length to partnerships, alliances, and collaborations • This includes divisions

38. Customer Relationship Management • Customer segmentation • What do they need and want?

39. Alignment • Successful global supply chains align with business/organizational strategies. • Global supply chains are successful if the cross-functional supply chain team understands the mission, goals, objectives, and challenges of the organization.

40. True internal costs Total Landed Costs Unit Price +Inland transportation +Port fees +Export licensing +Export documentation +Maritime insurance +ocean/Air freight costs +Container screening +C-TPAT +Inspection +Customs duties +Customs document review +Bonded warehousing +Harbor fees +Import documentation +Customs Broker fees +Port fees +Import licensing +Letters of Credit +Special packaging +Inland transportation +Pipeline inventory +Communication +Travel Global Supply Chain Analysis

41. Global Supply Chain Analysis • Country Study Template • Government • Infrastructure • Potential employee base • Laws and regulations • Raw materials • Transportation capabilities • Business culture • Country culture • Unions and other employment practices

42. Emerging Markets • Countries that are potential sources of materials and outsourcing opportunities • Viet Nam • Latin America • Cambodia • Easter block nations • Malaysia • Scotland • Ireland

43. The Successful Global Supply Chain • All stakeholders are focused on the ultimate customer. • On-demand, real-time data as to exactly what is happening anywhere in the supply chain available to all stakeholders • Total trust between channel members • A supply chain that produces just what and how much is needed, when it is needed, and where it is needed • Metrics that align with business and supply chain priorities • Strategies are put before technology. • Risk management portfolio for the entire supply chain • Collaborative internal, supplier, and customer relationships • Flexibility built into the supply chain. • Inventory in the right format at the right location in the supply chain • An end-to-end focus by all channel members • A cross-functional supply chain mindset

44. The Successful Global Supply Chain - Adaptive Preparedness Market entrance capability Supply network development Product design flexibility Look-ahead planning Pattern Recognition Demand pattern Supply bases Technology cycle Product life cycle Supply Chain Structure Supply and manufacturing bases Outsourcing relationships Distribution channels New markets and customers

45. The Successful Global Supply Chain - Agile Supplier Integration Efficient Logistics Information Integration Responsiveness to uncertain demands, Robust to unexpected external disruptions Design for Postponement Contingency planning Inventory/capacity buffering

46. The Successful Global Supply Chain - Aligned

47. The Unsuccessful Supply Chain • Lack of understanding at all levels • Lack of senior management buy-in • Silo mentality • Too many measurements and focus on the wrong measurements • Lack of alignment between business, supply chain, and internal functions • Inventory held at every tier • Transactional activities • Lack of tier management

48. 1. The existing organizational culture 2. Level of trust at all levels and with suppliers/customers 3. A change management process Introduction of trust A supply chain awareness training Steps in undoing wrongs from the past A champion for change A strategy for moving the masses to supply chain thinking Steps in Getting There

49. Lean Thinking Value Value stream Value stream mapping Flow the value stream From push to pull Continuous Improvement Six Sigma A particular goal of reducing defects to near zero 3.4 errors in a million tries Getting a Little Help From Other Concepts

50. Six Sigma • Genuine focus on the customer • Data and fact-driven management • Process focus, management, and improvement • Proactive management • Boundary-less collaboration • Drive for perfection, tolerate failure