Strategic sourcing PBL 1: data management

Uliana Belonogova
Sep 6, 2018 · 4 min read

Problem: What are the good practices in Spending analysis and Purchasing portfolio model?

Learning objectives

  1. What are spend analysis and purchasing portfolio model? How to apply them into the supply chain management?

A key part of supply chain management is segmenting the vendor base. From there, organizations can match design supplier relationship management strategies against this map of suppliers. The Kraljic Matrix is one of the most effective ways to deliver accurate supplier segmentation.

Spend analysis is one of the key tools that procurement organizations use to proactively identify savings opportunities, manage risks and optimize the organization’s buying power. It is often regarded as the fundamental foundation of sourcing. It is a tool that sourcing executives can utilize to engineer superior performance. Data from spend analysis can improve visibility into corporate spend, as well as drive performance improvement, contract compliance, and most importantly, cost savings.

The spend cube is a unique way of taking a look at spend data because it is projected in a multidimensional cube. It refers to the three dimensions of the cube — Suppliers, Corporate business units, and Category of item. The dimensions could include subcategories of the different units across the organization, from suppliers, categories and cost centers.

2. What types of tools there are for data (purchasing) management? What are the advantages and problems associated with each tool’s usage? These are the manufacturing systems, so SAP and ERP are from the buying point of view, and manufacturing systems are from the selling point of view.

Materials Requirements Planning

MRP makes available purchased and company-manufactured components and subassemblies just before they are needed by the next stage of production or for dispatch. This system enables managers to track orders through the entire manufacturing process and helps purchasing and production control departments to move the right amount of materials at the right time to production-distribution stages.

+)An MRP system appears to work best for companies with mass-production assembly lines. Some managers report that MRP has helped them in reducing inventories, improving labor and space utilization, and streamlining scheduling and receiving operations.

-) MRP requires tremendous amounts of data inputs and is complex. It assumes unlimited capacity in all work centers, whereas in reality some work centers always behave as bottlenecks. This contradiction destroys the accuracy of MRP scheduling logic and makes it ineffective for capacity planning and control.

Kanban: Just-in-time

To Japanese managers, kanban or the just-in-time system is an approach for providing smoother production flows and making continual improvements in processes and products. Kanban attempts to reduce work in progress to an absolute minimum. In addition, the system constantly attempts to reduce lead times, work-in-process inventories, and setup times.

+) The kanban approach keeps the setup times and costs at negligible levels. In addition, the company’s suppliers are supposed to act like extended storage facilities of the company itself.

-)Not every application of kanban is a success story. U.S. users are also encountering many problems in implementing the approach; for example, faraway suppliers, poor quality of parts, unreliable freight systems, and resistance from workers.

Optimized Production Technology

The OPT system calculates the near-optimum schedule and sequence of operations for all a manufacturing company’s work centers, taking into account priorities and capacities. Advocates claim it can simultaneously maximize the use of critical resources and the plant output and minimize work-in-process inventories and manufacturing lead times or throughput times.

So far, most of OPT’s success stories come from its developers or from a few enthusiasts. To be objective and confident about any evaluations, we must wait several years for limitations to surface. As time passes, more and more user companies will certainly report them.

Flexible Manufacturing Systems

Several machine builders in Japan, the United States, and Europe are trying to develop flexible manufacturing systems.These systems are supposed to incorporate planning and control of their machinery operations within their computerized integrated-control data systems. These data systems have built-in production planning routines; FMS parts-programming routines; and materials-handling routines for parts, tools, and accessories; and stock control in the form of separate modules. Parts programming and scheduling may, in turn, include subroutines like alternative routing of batches, statistical quality monitoring and control, and balancing of assembly tasks among individual FMS stations.

Each of these installations is at most only a few years old. The companies have invested millions of dollars in each FMS and are supporting them enthusiastically. Most users’ reports are positive.

Sources:

Purchasing tools:

Spend analysis:

Purchasing portfolio model:

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