MGMT 510 Global Sourcing & Planning Class Nine

1. MGMT 510 Global Sourcing & Planning Class Nine

2. Agenda • Going into the final week • Final questions will be reviewed • Best practices & Final paper due tomorrow by 12:00 • e-Procurement • Benefits • Risks • Uses • Sun Microsystems case • Sustainability Overview

3. e-Procurement Tools

4. General Benefits of e-Procurement • - Strategic Benefits • Align Procurement strategy with procurement Goals • Strengthen Alliances for product innovation •  combining complementary roadmap capabilities in NPI and development stage. • Exchanging key suppliers with market information • - Reduces Spending and Time • 90% Conversion of spot purchasing into contract purchasing

5. e-Procurement • Reducing costs • Costs can be reduced by leveraging volume, having structured supplier relationships • Visibility of spend • Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made • Productivity • Procurement staff can be released from processing orders to concentrate on strategic sourcing and improving supplier relationships.

6. e-Procurement • Using technology • E-procurement advantages can only be fully realized when the systems and processes to manage it are in place. • Software tools are needed to create the standard procurement documentation: electronic requests for information (e-RFI), requests for proposal (e-RFP) and requests for quotation (e-RFQ). • Controls • Standardized approval processes and formal workflows ensure that the correct level of authorization is applied to each transaction and that spend is directed to draw off existing contracts. • Compliance to policy is improved as users can quickly locate products and services from preferred suppliers and are unable to create maverick purchases.

7. E-Procurement – Global Phenomena • E-Procurement is not a local phenomena but a global one, • Enabled global sourcing of goods and services • Reduction of Costs • Breaking Trade Barriers • Reduction in Agents • Benchmark Report –04 by Aberdeen Group indicates the following • Reduced requisition-to-order cycles by 66% • Cost Reduction : up to 25% or more

8. Cost Reduction Transparency Process Efficiency Core Objectives Of e-procurement Paper less environment Supports Online Reverse Auction New supplier discovery Real Time Monitoring Core Objectives of e-Procurement Streamlining Procurement processes

9. E-MARKETS: IT DESIGN ISSUES • - TECHNOLOGY limitations • Authentication and security • Electronic payment • Software architecture • Embedded Agents and lack of mobility • Scalability • Interoperability

10. eSupplier Report Card (eSRC) • - What is it? • Automation of and increased compliance to the Supplier Ranking and Rating Spec via a web-based tool • - Why is it considered innovative? • Accelerates and automates the overall SRC process • Promotes sharing of metrics (i.e. eSRC templates, questions, etc.) within and/or across teams & orgs • Extends the SRC process to more suppliers & allows input from more stakeholders • Drives spec compliance without requiring detailed knowledge or understanding of the SR&R spec

11. Online Negotiations (formerly eAuctions) • - Description: • An online negotiation capability, allowing real-time bidding by multiple suppliers, within a singular negotiation forum, that utilizes strategy and the Internet to achieve cycle time reduction and the lowest total cost.  • - Innovative features: • Uses Internet technology to create a virtual dynamic marketplace environment, providing real-time bidding info to suppliers on their position relative to the competition. Bids/ RFQ’s were previously a manual process, generally executed through e-mail or snail-mail

12. Online Negotiations Buyer’s Perspective Source : Freemarkets

13. e-Procurement • Negotiations: • Lose body language and voice inflections • Increases risky behavior, such as aggressiveness or take-it-or-leave-it approaches • Negotiators feel less accountable and are not sure WHO they are negotiating with. • Takes relationship out of the process

14. Sun Microsystems – e-Procurement • What do we know? • Spends $9B in direct mtls • Cost cutting raised GM% by 7 points • What about relationships? • What about single sourced suppliers? • Pros & Cons of e-Procurement

15. Sun Microsystems - Questions • What are the Pros and cons of using technology to manage supplier relationships? • If you moved forward with this bidding process, would you change your offering to suppliers? • - What would your recommendation be to the CEO?

16. Pros and cons to e-Procurement to manage relationships • Pros: • Dynamic bidding creates: • Cost savings • Reduce noise in the process • Reduces embeddedness • Transparency • Equalizes the information shared to suppliers

17. Pros and cons to e-Procurement to manage relationships • Cons: • Lose information available often found in negotiation process • Emphasizes price • IT complexity and alignment • Lose technology or roadmap discussions with Sourcing Professionals

18. What would you offer the suppliers? • Make the software free to all suppliers? • Provide implementation kits to all • Provide those who cooperate a preferred bidding status • Include in the scorecard measurement process

19. What would be your recommendation? • The pilot was successful • There is risk due to IT complexity • The success may differ pending commodity type • In Closing: • SUN moved forward with the recommendation • Challenge is relationships and face-to-face benefits

20. Sustainability in sourcing

21. Sustainable Sourcing • CSR: Covers several principles • Community – for you and your suppliers • Diversity – MWBE • Environment – Upstream & Downstream • Ethics – code of conduct • Financial responsibility – transparency • Human rights – avoid complicity in abuse • Safety – ISO14000

22. Sustainable Sourcing • Definition : “selecting goods and services which promote a healthier community and environment. . . . Just as importantly, sustainable purchasing is NOT simply about paying a premium for a product and service attributes. . . . But aims to find a reasonable balance” • **Easton et al.

23. Challenges & Status to Sustainable Sourcing – Sourcing Strategy • Three barriers identified - buyers • Internal Corporate barriers (lack of know-how) • Lowest cost mind-set • Time pressures & fear of change • Market barriers (pricing, quality) • Lack of choice • Premium pricing • System wide barriers (NAFTA, China vs. local) • Lack of accepted standards • Free trade and globalization emphasis

24. Challenges & Status to Sustainable Sourcing – Suppliers • Three barriers identified by suppliers • Corporate barriers • Inconsistency in value statements and practice • Weight of sustainable metrics in scorecard • Market barriers • TTM versus value goals • Framework barriers • Limited access to certifications by S-M size • Lack of industry wide standards

25. Three themes in research • - How do best practices take a sourcing strategy from “more sustainable” to “truly sustainable?” ie: continuous improvement vs. revolutionary change. • Ecocentricity - Sourcing should include “greater good” of communities • Integration of goals into day-to-day practices

26. Pagell & Wu (2009) propositions • Innovation capability is required • Management orientation toward sustainability • Part of the value or mission statement or somewhere visible • Sourcing should reach out to NGOs and competitors • Sourcing should treat suppliers as strategic partners • Metrics must be a process that includes sustainability • Develop measurement and reward systems • Align financial and environmental goals

28. Defee et al. (2009). Closed Loop Supply Chains (CLSC) • CLSC – Strategically focused on excellence of forward and reverse SCM • CLSC can lead an organization in CSR initiatives • RoHS, WEEE, Energy Star, EPEAT • Reverse SCM is critical • Views CLSC holistically not just supplier-customer “forward flows”

29. CLSC – Reverse Flow is critical

30. A system: CLSC

31. Three examples: Walk the talk

32. On the other side…..Priushttp://www.leftlanenews.com/study-prius-production-harmful-to-environment.html

33. And lastly: Shipshttp://www.cbsnews.com/stories/2006/11/03/60minutes/main2149023.shtml