Supply Chain Design &

Management Unit II
Presented By: Mr. Vikas Yadav
Class: MBA 2.4
 Contents
• Production planning
• Fixed planning horizon
• Material and distribution requirements planning
• Connecting sales to operations
• Aggregate planning model
• Monthly sales & operations planning process
• Distribution channel strategies
• Supply chain sourcing
• Procurement strategy
• Procurement optimization
Production planning
Functions of Production Planning
 Production planning
• Production planning is the act of developing a guide for the
design and production of a given product or service. Production
planning helps organizations make the production process as
efficient as possible.
• Production planning creates an efficient process for production
according to customer and organizational needs. It optimizes both
customer-dependent processes -- such as on-time delivery -- and
customer-independent processes, such as production cycle time.
• A good production plan minimizes lead time, which is the amount
of time that passes between the placing of an order and the
completion and delivery of that order. Depending on the company
and the type of production planning necessary, the definition of
lead time varies slightly.
 Types of production planning

• Master production schedule (MPS). These are schedules

for individual, specific commodities to be produced in a
given time period. They are often generated by software,
then adjusted by users.
• Material requirements planning. MRP is a system used
for production planning, scheduling and inventory control.
MRP ensures the availability of raw materials, maintains
the lowest possible material and product levels in-house,
and plans manufacturing and purchasing activities. It is
often automated to some extent by software but can be
performed completely manually as well.
• Capacity planning. Capacity planning determines what capacity, if
any, an organization possesses to meet changing demands.
• Workflow planning. Workflow planning is the planning of a
sequence of operations performed by an employee or group of
employees.
• For example, human resources planning involves optimizing
processes that allow a company to meet their hiring and talent
demands. Other examples include the following:
• Enterprise resource planning (ERP). The integration of main
business processes into one unified system, often using software.
• Sales and operations planning (S&OP). The process for more
accurately matching a manufacturer's supply with existing demand.
 Production Scheduling
• Production scheduling is like production control. It involves
the allocation of available resources to production
processes and events and is essentially the mapping of
actual resources to the production plan built for them.
Production scheduling is for planning the use of factory
equipment and resources as well as human resources and
for planning processes and material purchasing.
• Scheduling is necessary to create a production plan.
Production plans aim to ultimately deliver on customer
demand. The goal of a production schedule is to create the
most efficient production plan possible.
 Material and Distribution Planning
• Distribution requirements planning (DRP) is a
systematic process to make the delivery of
goods more efficient by determining which
goods, in what quantities, and at what
location are required to meet anticipated
demand. The goal is to minimize shortages
and reduce the costs of ordering, transporting,
and holding goods.
• Material requirements planning (MRP) and distribution requirements
planning (DRP) calculates organization-specific net requirements from gross
requirements by evaluating:
– the master schedule
– bills of material
– sourcing rules
– supply chain bills
– scheduled receipts
– on-hand inventory balances
– production and transportation lead times
– order modifiers
• It then plans replenishments by creating a set of recommendations to
release or reschedule orders for material based on net material
requirements. These planned orders are assigned to a predefined
replenishment structure, stated in:
– discrete quantities with due dates
– repetitive build rates with first/last unit start dates
• Material requirements planning. MRP is a
system used for production planning,
scheduling and inventory control. MRP ensures
the availability of raw materials, maintains the
lowest possible material and product levels in-
house, and plans manufacturing and
purchasing activities. It is often automated to
some extent by software but can be performed
completely manually as well.
 13

Aggregate Forecasts
Firm orders
product of demand
from known
plan from random
customers
customers

Engineering Master production

Schedule (MPS) Inventory
design
transactions
changes

Material From
FromExhibit
Exhibit15.6
15.6
planning
Bill of (MRP Inventory
material computer record file
file program)
Secondary reports
Primary reports
Exception reports
Planned order schedule for Planning reports
inventory and production Reports for performance
control control
©The McGraw-Hill Companies, Inc., 2004
 Bill of Materials (BOM) File
A Complete Product Description
• Materials
• Parts
• Components
• Production sequence
• Modular BOM
– Subassemblies
• Super BOM
– Fractional options
 Connecting sales to operations
• Successful cooperation between sales and
operations is a continuous process. With a
commitment to team effort and good
communication, these departments can
successfully work together and achieve
optimum results. The three key elements are
to evaluate, communicate and commit.
Sales and Operations Planning Activities
• Long-range planning
– Greater than one year planning horizon
– Usually performed in annual increments

• Medium-range planning
– Six to eighteen months
– Usually with monthly or quarterly increments

• Short-range planning
– One day to less than six months
– Usually with weekly increments
 Exhibit
Exhibit13.1
13.1 Process planning
Long
range
Strategic capacity planning

Intermediate Forecasting
range & demand Sales and operations (aggregate) planning
managemen
t Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range
Daily workforce and customer scheduling
 The Aggregate Operations Plan
• Main purpose: Specify the optimal combination of
– production rate (units completed per unit of time)
– workforce level (number of workers)
– inventory on hand (inventory carried from previous
period)
• Product group or broad category (Aggregation)
• This planning is done over an intermediate-range
planning period of 6 to18 months
 Balancing Aggregate Demand
and Aggregate Production Capacity
10000
Suppose 10000
Supposethe thefigure
figureto
to 8000
the
theright
rightrepresents
represents 8000 7000
6000
forecast
forecastdemand
demandin in 6000 5500
4500
units
units 4000

Now
Nowsuppose
supposethis
this 2000
lower
lowerfigure
figurerepresents
represents 0
the
theaggregate
aggregatecapacity
capacity Jan Feb Mar Apr May Jun
of
ofthe
thecompany
companyto to
meet 9000
meetdemand
demand 10000
8000
8000
What 6000
Whatwewewant
wanttotodo
dois
is 6000
4000
4500
balance
balanceout
outthe
the 4000
4000
production
productionrate,
rate,
workforce
workforcelevels,
levels,and
and
2000

inventory
inventorytotomake
make 0
these Jan Feb Mar Apr May Jun
thesefigures
figuresmatch
matchup
up
 Required Inputs to the Production
Planning System
Competitors’behavi Raw material Market
or availability demand
External to
firm

External Economic
capacity Planning for
conditions
production

Current Current Inventory Activities Internal to

physical workforce levels required for firm
capacity production
 Key Strategies for Meeting Demand
• Chase

• Level

• Some combination of the two

 Aggregate Planning Examples: Unit
Demand and Cost Data
Suppose
Supposewewehave
havethethefollowing
followingunit
unit
demand
demandand
andcost
costinformation:
information:
Demand/mo Jan Feb Mar Apr May Jun
4500 5500 7000 10000 8000 6000
Materials $5/unit
Holding costs $1/unit per mo.
Marginal cost of stockout $1.25/unit per mo.
Hiring and training cost $200/worker
Layoff costs $250/worker
Labor hours required .15 hrs/unit
Straight time labor cost $8/hour
Beginning inventory 250 units
Productive hours/worker/day 7.25
Paid straight hrs/day 8
 Cut-and-Try Example: Determining
Straight Labor Costs and Output
Given
Giventhe
thedemand
demandand
andcost
costinformation
informationbelow,
below,what
what
are
arethe
theaggregate
aggregatehours/worker/month,
hours/worker/month,units/worker,
units/worker,and
and
dollars/worker?
dollars/worker?
7.25x22
Demand/mo Jan Feb Mar Apr May Jun
4500 5500 7000 10000 8000 6000
Productive hours/worker/day 7.25
Paid straight hrs/day 8 7.25x0.15=48.33 &
48.33x22=1063.33
22x8hrsx$8=$1408
Jan Feb Mar Apr May Jun
Days/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Units/worker 1063.33 918.33 1015 1015 1063.33 966.67
$/worker $1,408 1,216 1,344 1,344 1,408 1,280
 Chase Strategy
(Hiring & Firing to meet demand)
Lets
Letsassume
assumeour
ourcurrent
currentworkforce
workforceis
is77
Jan workers.
workers.
Days/mo 22
Hrs/worker/mo 159.5 First, calculate net requirements for
Units/worker 1,063.33 production, or 4500-250=4250 units
$/worker $1,408

Then, calculate number of workers

Jan needed to produce the net
Demand 4,500 requirements, or
Beg. inv. 250 4250/1063.33=3.997 or 4 workers
Net req. 4,250
Req. workers 3.997 Finally, determine the number of
Hired workers to hire/fire. In this case we
Fired 3
only need 4 workers, we have 7, so
Workforce 4
Ending inventory 0
3 can be fired.
 Below
Beloware
arethe
thecomplete
completecalculations
calculationsfor
forthe
theremaining
remaining
months
monthsin
inthe
thesix
sixmonth
monthplanning
planninghorizon
horizon
Jan Feb Mar Apr May Jun
Days/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Units/worker 1,063 918 1,015 1,015 1,063 967
$/worker $1,408 1,216 1,344 1,344 1,408 1,280

Jan Feb Mar Apr May Jun

Demand 4,500 5,500 7,000 10,000 8,000 6,000
Beg. inv. 250
Net req. 4,250 5,500 7,000 10,000 8,000 6,000
Req. workers 3.997 5.989 6.897 9.852 7.524 6.207
Hired 2 1 3
Fired 3 2 1
Workforce 4 6 7 10 8 7
Ending inventory 0 0 0 0 0 0
 Below are the complete calculations for the remaining months in
the six month planning horizon with the other costs included
Jan Feb Mar Apr May Jun
Demand 4,500 5,500 7,000 10,000 8,000 6,000
Beg. inv. 250
Net req. 4,250 5,500 7,000 10,000 8,000 6,000
Req. workers 3.997 5.989 6.897 9.852 7.524 6.207
Hired 2 1 3
Fired 3 2 1
Workforce 4 6 7 10 8 7
Ending inventory 0 0 0 0 0 0

Jan Feb Mar Apr May Jun Costs

Material $21,250.00 $27,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00 203,750.00
Labor 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 53,958.62
Hiring cost 400.00 200.00 600.00 1,200.00
Firing cost 750.00 500.00 250.00 1,500.00

$260,408.62
 Level Workforce Strategy (Surplus and
Shortage Allowed)
Lets
Letstake
takethe
thesame
sameproblem
problemasas
before
beforebut
butthis
thistime
timeuse
usethe
the
Level
LevelWorkforce
Workforcestrategy
strategy Jan
Demand 4,500
This
Thistime
timewe
wewill
willseek
seektotouse
use
aaworkforce
workforcelevel
levelof
of66workers
workers Beg. inv. 250
Net req. 4,250
Workers 6
Production 6,380
Ending inventory 2,130
Surplus 2,130
Shortage
 Below
Beloware
arethe
thecomplete
completecalculations
calculationsfor
forthe
theremaining
remainingmonths
monthsin
inthe
thesix
six
month
monthplanning
planninghorizon
horizon

Jan Feb Mar Apr May Jun

Demand 4,500 5,500 7,000 10,000 8,000 6,000
Beg. inv. 250 2,130 2,140 1,230 -2,680 -1,300
Net req. 4,250 3,370 4,860 8,770 10,680 7,300
Workers 6 6 6 6 6 6
Production 6,380 5,510 6,090 6,090 6,380 5,800
Ending inventory 2,130 2,140 1,230 -2,680 -1,300 -1,500
Surplus 2,130 2,140 1,230
Shortage 2,680 1,300 1,500

Note,
Note, ifif we
we recalculate
recalculate this
this sheet
sheet with
with 77 workers
workers
we
we would
would havehave aa surplus
surplus
Below
Below are
are the
the complete
complete calculations
calculations for
for the
the
remaining
remaining months
months inin the
the six
six month
month planning
planning
horizon
horizon with
with the
the other
other costs
costs included
included
Jan Feb Mar Apr May Jun
4,500 5,500 7,000 10,000 8,000 6,000 Note,
Note,total
totalcosts
costs
250 2,130 10 -910 -3,910 -1,620 under
underthis
thisstrategy
strategy
4,250 3,370 4,860 8,770 10,680 7,300 are
areless
lessthan
than
6 6 6 6 6 6 Chase
Chaseat at
6,380 5,510 6,090 6,090 6,380 5,800 $260.408.62
$260.408.62
2,130 2,140 1,230 -2,680 -1,300 -1,500
2,130 2,140 1,230
2,680 1,300 1,500

Jan Feb Mar Apr May Jun

$8,448 $7,296 $8,064 $8,064 $8,448 $7,680 $48,000.00 Labor
31,900 27,550 30,450 30,450 31,900 29,000 181,250.00 Material
2,130 2,140 1,230 5,500.00 Storage
3,350 1,625 1,875 6,850.00 Stockout

$241,600.00
 Distribution channel strategies

• Say you have a great product or service that meets a

pressing need.
• That’s all well and good — but a million-dollar idea has
no path to becoming a million-dollar revenue-generator
if you can’t get your products or services in front of
consumers and your target market. This is where
distribution channel strategies come into play to offer
solutions.
• A well-planned distribution channel strategy is
specifically designed to increase the sales of your
products or services as they enter the market.
• There are two basic types of distribution channels:
• Direct: Consumers buy the product or service directly from
your business, whether through a physical storefront or an e-
commerce website.
• Indirect: Consumers buy the product or service through an
intermediary, like a big-box retailer you have distribution
agreements with or a broker agent you partner with.
• Channels can also be defined as short or long. A short channel
involves the fewest steps possible between producer and
customer, like with direct marketing. A long channel includes
other intermediaries like wholesalers and retailers.
 Distribution Channel Strategy vs. Supply Chain Management

• An important distinction to make is that channel

distribution strategy does not equal supply chain
management. Supply chain management involves the
sourcing and routing of materials and products through
the manufacturing and distribution processes. Channel
distribution is often the final stage of the chain —–
delivering final products to end users.
• Channel distribution is solely about getting your product to
the market, whereas supply chain management relates to
sourcing the parts or materials that make your product as
well as delivering final products to where they need to be.
Fundamentally, distribution is the process of getting a
product or service in front of the end consumer.
 How to Develop a Distribution Channel Strategy

• 1. How Do Our Potential Customers Find Us and Our Products

and/or Services?
• The channels your potential customers use to find you will naturally
point toward the channels to target in your distribution strategy. You
need to plan your demand better, so analyze how social media,
search engines, direct marketing, partner sales, industry
recommendations and other channels perform in generating
customers.
• Customers of a millennial beauty products company will have a
much different purchasing path than a B2B buyer of network
infrastructure. Identifying your main channels is a bit like looking at
the channels with your highest level of brand awareness, and then
fitting your strategy to maximize performance in those channels.
• 2. What Is Our Scale and Size?
• One reason why long channels exist is that not every business has
the relationships or expertise to handle logistics. An energy drink
company might develop a new formula that tests great with
consumers but lacks the means to ship the product to nutrition
stores nationally. That’s where relationships with distributors,
wholesalers and retailers become a competitive advantage, and
sometimes a necessity.
• Distributors can fulfill orders for whole pallets of energy drinks,
while wholesalers can find retail buyers to get the product in stores.
Established businesses that benefit from enterprise-scale are often
able to condense channels or acquire or integrate horizontal
business units to take care of logistics and other distribution needs.
• 3. What Future Business Goals Do We Have?
• Always be prepared for new channels.
• If your aim is to expand into a new market or territory,
determining your channel strategy is an integral part of defining
your over go-to-market strategy. If you have no relationships with
a regional retailer, your product launch may suffer when trying to
grow in that locality. Channel partners, however, can be leveraged
to efficiently scale up and expand.
• On the other hand, opening up more direct channels may be your
best option for increasing brand awareness or profit per sale. Long
channels mean higher costs and more cooks in the kitchen; a
direct channel can lead to a better customer experience or brand
impression.
• Retail
• Need a way to reach more consumers? Placement in a retail store is
your best bet for broadening your customer base. But you can’t just
walk up to the nearest Walmart or Target and ask for them to
feature your product on their shelves. Retailers buy from distributors
and wholesalers, meaning you’ll need to pursue longer channels.
• Direct Marketing
• Want to cut out the middlemen and reach out to consumers
yourself? A direct marketing campaign can help connect you with
potential customers, as well as provide them the means to make a
purchase directly. Such channel strategies often manifest as product
catalogs, marketing calls, emails or face-to-face sales. While direct
channels mean greater engagement and profit, they also require
more resources and effort from the brand to manage direct
marketing.
• Dealer Network
• Don’t have an especially large or skilled sales force? You can
essentially outsource those functions to a network of dealers,
brokers and agents who do the selling for you. This
arrangement is particularly advantageous if you have a
specialized product or lack deep industry connections.
• Insurance companies, for example, often rely on a vast
network of brokers to find customers and sell them policies
offered by the business. A dealer network still needs support,
however, as you’ll need to provide agents with literature,
marketing collateral and other resources. You’ll also need to
negotiate commissions and fees.
• Website Store
• The advent of the internet age has opened up a whole
new channel for B2C and B2B brands alike, as well as
large and small companies. Startups without channel
relationships can sell directly to consumers through
inbound marketing, cultivating brand loyalty and
lowering their go-to-market costs.
• For instance, without the cost of a long channel, you
may be able to offer special discounts or promotions on
sales that can be traced from a Facebook or Twitter link.
• Wholesale Distribution
• Long channels of distribution are not innately bad. In fact,
they can deliver tangible competitive advantages when
working with the right wholesale or distribution partners.
What’s the difference? Distributors are basically wholesalers
that offer a greater scope of services.
• Wholesalers will purchase and resell your goods in bulk,
fulfilling orders to retailers — distributors do all that and more
as an effective sales agent of the company. Wholesalers are in
it for their own business and margins, whereas distributors
work much more closely on a strategic level. Both can help lift
your brand’s profile and sales.
• E-Commerce Site
• Online markets like Amazon, Zappos and Etsy have become go-to channels
for sellers of physical goods. Merchants can leverage the established base
of online customers as well as marketplace tools, allowing them to reach
end users with high intent. E-commerce sites operate in a different way
than direct online stores, so you’ll want to ensure your ads and product
pages are branded in a way that fosters a consistent customer experience.
• Value-Add Resellers
• VARs, as they’re called, buy inventory from companies, and then make
upgrades or package it with their own services. The symbiotic relationship
can help you meet goals like expanding your footprint or securing
recurring revenue from a VAR buyer. This exclusive channel of distribution
works particularly well for companies that have a specialized product, as
it’s not about casting the widest net.
 What Is the Right Mix of Channels?

• In reality, most businesses will employ a multi-channel

marketing mix that makes use of both direct and indirect channels,
when available to them. The same craft brewery that has to work
with distributors, wholesalers and retailers can also sell to customers
directly at an on-site taproom. Even agricultural producers can sell at
farmer’s markets in addition to working with distributors that get
fresh produce to the groceries across the nation.
• When sitting down to hammer out a distribution strategy, always be
open to the different combinations that can be made with direct and
indirect channels.
• Keep all this in mind when developing your strategy. But always be
aware that unique factors like the industry in which you operate will
be influential to your decision-making.
 Supply chain sourcing

• Sourcing is an upstream part of the supply chain: It's the process

of strategically choosing the right services and goods that a
company needs to run their business. Sourcing is also the act of
buying goods, including seller selection, contract negotiation and
measuring the long-term performance of your suppliers.
• Sourcing greatly impacts an organization’s operations, so
establishing long-term relationships will help companies gain a
competitive advantage. Because after all, suppliers impact a
company’s operations on many levels: finances, inventory levels,
quality of goods and timely arrival. A stable sourcing process
ensures your inventory levels will meet market supply and
demand.
 Sourcing Functions Include

• Acquiring raw materials

• Decisions on outsourcing or in-house performance
• Supplier selection
• Contract negotiation—request for quote (RFQ), request for proposal (RFP)
and request for bid (RFB)
• Product design
• Manufacturer collaboration
• Procurement
• Understanding cost of goods sold (COGS)
• Inventory controls/turnover
• Product quality
• Financial impacts
• Reshoring or offshoring
• Effective sourcing ensures quality and cost-effective manufacturing and also
maintains control of inventory levels and overhead costs. Sourcing is an
important aspect of your supply chain management (SCM) strategic planning
—done right it improves efficiencies and lowers risk in your supply chain. As
previously mentioned, sourcing is an upstream process that is critical to
effective downstream processes.
• Flexibility is important due to the complexities of SCM, along with
transparency, allowing for oversight concerning forecasting, inventory,
shipping, transportation and warehouse management, all areas that add
costs to the shipping process.
• Having a complete picture of all costs at every level will help determine
profitability. Without proper sourcing and an understanding of how it
impacts the bottom line, a company cannot be successful and effectively
compete in a global market.
 Procurement strategy

• A procurement strategy is a sustainable source of

added value for the company. It guarantees
company's overall performance by setting objectives
for purchasing and spending for the supply of the
company's goods and services.
• A procurement strategy is a sustainable source of
added value for the company. It guarantees
company's overall performance by setting objectives
for purchasing and spending for the supply of the
company's goods and services.
 The keys for a good Procurement Strategy

• The Quality, Cost, Delivery triangle

• Sourcing, outsourcing and negotiation are just some of the
ways the buyers can influence supply costs. In the collective
mind, the Procurement function has often been associated
with a pressing need to reduce costs. This is actually only half
the story. Even though optimizing costs is an integral part of
the department’s mission, its effectiveness can also be
measured through its effect on the supply chain. It needs to
be flexible in order to deal with unexpected events or
disruptions within the supply chain. By developing special
relationships with industrial suppliers, Procurement effectively
helps meet deadlines and continuously improve quality.
• Supplier relationships
• These days the Procurement function is responsible for
finding the industrial suppliers best suited to the
company’s needs. Sourcing requires a proactive approach
to market analysis, benchmarking, auditing various
industrial clients and rationalising the panel. In truth, this
is a very complicated exercise involving a number of
factors: price, the technicality of the desired products,
risk, competitive environment, etc. When selecting its
panel of suppliers, the organization looks primarily at the
compatibility of their respective strategic views.
• Innovation
• Over the past few years, an increasing number of companies have
decided to add innovation to the duties of the Procurement
function. Its strategic position allows it to detect their partner’s
innovative potential. They are then able to match their internal
needs (equipment renewal, reducing industrial maintenance times,
etc.) with their suppliers’ expertise, who, in exchange, could benefit
from a test environment dedicated to product development. This
new type of partnership makes it possible to share the risks and
benefits of innovation between all the stakeholders. This is known
as co-innovation.
• To guarantee the long-term success of this kind of venture, it is
essential that all stakeholders share a common strategic outlook.
• CSR
• Corporate Social Responsibility (CSR) is becoming
increasingly important for Procurement strategies.
Integrating a “CSR charter” fulfils the company’s dual
objective of compliance and reputation with its end
customers.
• To address this, teams can audit Tier 1 suppliers and
higher to examine: the origin of the raw materials, the
shipping method, the work conditions, etc. To tackle this
sourcing issue, some companies don’t hesitate to
integrate this CSR charter into their supply contracts.
 Setting objectives and priorities for Procurement Strategy

• Setting priorities is about finding the right balance

between the global vision, the available resources, the
potential opportunities for growth and the obstacles you
might face. Some of the most common priorities include:
• Cost reduction
• Supply chain risk management
• Optimizing supplier relationships
• CSR
• Improving sourcing activities
• Total Quality Management (TQM)
• Procurement teams can gain a better understanding of their goals by using a
SMART approach. This acronym refers to a set of criteria which must be met by
all the elements of a strategy to ensure its sustainability.
• Specific: goals must be detailed and in line with the company’s specific needs.
They address the issues brought up during the previous analysis phase.
• Measurable: operators must have measurable goals in order to monitor their
progress and modify their strategic trajectory, if necessary.
• Assignable: a set number of stakeholders must be assigned to each goal and
be responsible for seeing it through. This is when the supply chain is organized
and operators take responsibility.
• Realistic: corporate objectives should be ambitious, but also realistic and
achievable.
• Time-related: it is important to establish a chronological framework
(beginning, end and key dates) for each objective in order to guarantee its
implementation.
 Procurement optimization

• What Is Procurement Optimization?- Definition.

Procurement optimization refers to a holistic
approach rather than an individualistic one. It
refers to the process of attaining optimum value
creation using people, processes, and technology.
• An approach to procurement optimization could
be- Initial scoping, data collection and analysis,
improvement and implementation, and follow up
and monitoring.
 Six Steps to Procurement Optimization
• Information/Insight/Intelligence It all begins with data. Make sure you
have a solid handle on analytics/data across the entire enterprise. Quality
data is the foundation for any successful procurement organization.
• Strategy/Policy A defined policy must be established to ensure your
procurement organization is strategic in its sourcing efforts. This policy
must be adopted cross-functionally across the entire organization.
• People/Culture Are you staffed adequately and do you have the right
people in the right positions? It’s important to review staff expertise levels
and conduct a skill-level assessment to identify gaps or overlaps in these
resources.
• Process/Organization Look closely at the operational design and
organizational structure of the procurement function. All things must be
aligned so that people, process and technology are optimized toward
efficiency.
• Technology AdoptionThis includes p-card utilization,
P2P automation and e-commerce initiatives. An
effective e-procurement system can significantly
improve process efficiencies by eliminating paperwork,
expediting contract fulfillment and controlling
compliance.
• Monitoring and ControlsOrganisations must identify
ways to monitor and measure these efforts in order to
determine ROI. This ROI should be benchmarked against
business objectives to drive cost containment, revenue
enhancement and performance metrics management.