Appunti Supplier relationship management

AS IS SITUATION

A decreases because the EBIT decreased with more purchasing costs

Increase on service costs

Increase in the trade receivables→ →Increase of DSO increase in trade receivables (from the formula of DSO). I have to increase my short→term loan in order to finance this trade receivables (cash that I am not receiving and so that I cannot useI take a short term loan).

Increase of DPO I have more cash in hand (this is shown in cash and equivalent in the assets part)

QUESTION 3

QUESTION 4

0.4% pagato ogni 20 giorni. Proporzione 0.4 : (DPO-10) = x : 365La x è the cost of the solutionNo changes on the DPOIs it always convenient for the suppliers? – A final picture

ACTIONS FOR IMPROVEMENTS

• Spend analysis techniques and tools depict the “as is” situation (how purchases are actually managed)
• They must be the point of start (diagnostic approach) for future changes and improvements
• Strategic interventions can

be ascribed to different groups of "levers" (of internal, external and/or "interface" application)

THE PLAN

Strategic plan. In designing a strategic plan, the following questions may be answered:

• Which are the most suitable levers for different categories? You have to focus on specific categories and find the most suitable levers for each different category. Each category can have completely different levers to be implemented.
• Are there existing and evident priorities (in terms of levers to be activated and/or performance to be fixed)?
• Which is the required investment (qualitative and quantitative estimation)?
• Which are the expected benefits?
• Do the overall plan have a "make sense" rationale (alignment with the purchasing strategy)?

Example:

The circles are the level of investments required. The second and third categories refer to the kralijc matrix.

Example of Luxottica

• Multinational company
• Leader in the

1. Pietro Fiorentini S.p.A. is a group leader in advanced product and services for the distribution of natural gas.
2. The company employees around 700 people with a turnover above 250 Million €.

The problem:

• Pietro Fiorentini procurement impact has experienced a tremendous growth during last year
• Procurement department is not able to fully support a strategic purchasing management. Less than 20% of the time in the purchasing department is spent on strategic activities. There is too much time spent on operational activities.

Solutions:

• Standardize operational activities to focus on strategic tasks
• Introduce strategic teams for new trends and new activities organization design training program, competence development
• Do questionnaires to understand the pain points of the procurement and then have a growth plan

Example of DAB:

DAB PUMPS SPA is an Italian company.

multinational company, specialized in hightechnology system for watertransportation and distribution

• DAB produces in seven production plants, 5 in Italy , 1 in Hungary, 1 in China, with a total number of 1450employees, and turnover of 290 mln €

• Scouting of price level of the most important purchasing categories:
  • Pallet price level +20%
  • No negotiation activities
  • One supplier having most of the volume

Three items particularly critical (470k€)

Solutions:

• Multiple sourcing: to have a proper number of suppliers to assure economies of scale, but withouthaving too much dependency
• Electronic auctions to get benefits from stronger competition: qualification and invitation of newsuppliers

Example of Bohringer

• Boehrngre is a German pharmaceutical company, founded in 1885
• It has more that 41.500 employees worldwide, operates in 50 countries and has 142 commercial sites, for12 bln€ of revenues

The problem:

Number of purchasing orders below

1000 are incredibly high for some of the categories.

Solutions:

• Reduce the number of purchase orders, through reduction of number of suppliers. Concentration of the supply base and volume bundling
• Minimum value for each order →
• Aggregating suppliers with similar items qualification of the suppliers identifying a sourcing list of preferential suppliers
• Optimization of the supply base

Example Alitalia

• Alitalia is the Italian airline company
• More than 94 destinations and part of the SkyTeam Alliance

The problem just 4 or 5 were maybe enough in order to reach efficiency

but it is not so easy! There are several actors involved in the management of the catering

• Purchasing
• Supply Chain
• Operational catering
• Marketing
• IT
• Crew

The framework of actions for improvement

Criteria to define the purchasing strategy

9. AUCTION

e-Purchasing module structure

Which challenges for purchasing?

The electronic tools are used not only in the operational

phases.

Electronic Auction

Electronics processes where multiple sellers competes for the business of a single buyer. In most of the casesjust two suppliers are not enough because it would be a not fair competition. At least 3.

The Steps are super formalized:

1. Buyer decides which commodities are to be considered for a reverse auction. Commodities and notitems. The eAuction makes sense with standardized products.
2. Suppliers are initially evaluated and invited to participate. One of the biggest mistakes is that youhave not to evaluate the suppliers after the eAuction but before it! You have to find if the supplier isappropriate before the eAuction! Based in the qualification results, you invite the qualified suppliers.
3. Buyer writes Request For Quotation (RFQ) and sends it to all qualified suppliers.
4. Bidding process is conducted. Automatically.
5. Buyer analyzes results and rewards business to chosen supplier.

In the current situation is only done electronically.

Approaches: 2 methods.

Eni

• Close: bids are proposed without seeing bid of the others. The most convenient is selected. The buyer see everything but the suppliers do not see each other. Closer to the idea of the tender.
• Ranking: bidders do not see all bids, but only their ranking. This is the intermediate option. Each supplier could see in the ranking their positioning but they do not have any other idea of the prices that the other suppliers are offering.

• Price: 90% of the times, the only evaluation parameter is the price. Usually you check the other things like quality ecc in the qualification part.
• Multicriteria: price is weighted together with other attributes (quality, service...). More complicated, less easy to have a visibility of how the eAuction have chosen the best.

• English method: raising is allowed in a certain

period of time (hammer time) and at each round the price decreases. This is the easiest method.

The buyer proposes an opening maximum price

At each round, within a pre-defined period of time, the bidders decrease the price

The last player with the lowest offer wins

Dutch method: price is changed at regular time intervals until there is a bidder available to close the contract and at each round the price increases until either just one supplier is available or the reserved price is reached. Each round some supplier will abandon the bid because the price for them is too high.

The buyer proposes an opening minimum price and then gradually increases over time

It contains a list of items that buyers want to procure and the price rises after fixed intervals until a reserved price is reached

Before the reserved price is reached, if a supplier places a bid for the item, it is allocated to the supplier and the item closes for bidding

Japanese: price is progressively changed as long

As bidders withdraw until the last one play the game. Bidders have to accept or withdraw each price; if more than one accepts, the price decreases.

A Japanese auction is where the host of the auction states an opening price and participants have to accept that price level or withdraw from the auction.

Acceptance indicates that the participant is prepared to supply at the stated price.

When all participants reply to a certain price, the software lowers the price level by a predetermined amount and again asks participants to accept or decline at the new price level.

This kind of auction continues until there are no more participants bidding.

Aggregation:

• Combined: different batches with the possibility to bid for multiple