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Your quick guideSupply Chain Optimization for procuringindustrial suppliesLean Procurement Streamlining the procurement processReducing the dollars spentCreating accountability
Supply Chain Optimization - definedSupply chain optimization is the application of processes and tools toensure the optimal operation of a manufacturing and distribution supplychain. This includes the optimal placement of inventory within the supplychain, minimizing operating costs (including manufacturing costs,transportation costs, and distribution costs). This often involves theapplication of mathematical modelling techniques using computersoftware.Approaches and solutions - The classic supply chain approach has been totry to forecast future inventory demand as accurately as possible, byapplying statistical trending and "best-fit" techniques based on historicdemand and predicted future events. The advantage of this approach isthat it can be applied to data aggregated at a fairly high level (e.g. categoryof merchandise, weekly, by group of customers), requiring modestdatabase sizes and small amounts of manipulation. Unpredictability indemand is then managed by setting safety stock levels, so that for examplea distributor might hold two weeks of supply of an article with steadydemand but twice that amount for an article where the demand is moreerratic.Whilst most software vendors are offering supply chain optimization as apackaged solution and integrated in ERP software, some vendors arerunning the software on behalf of their clients as application serviceproviders.Source: Wikipedia defining Supply Chain OptimizationSupply Chain Optimization is “The process of making the supply chainfunction as effectively as possible from the supplier to the customer.” Thisincludes: a streamlined procurement process, extended communication,reduced spending and measured accountability utilizing statistics andsimple technology.By Kenn Fischburg
The Lean Procurement StrategyHow does it helpSupply Chain Optimization?Supply ChainOptimizationLean ProcurementIt fits right in!Specifically directed towards procuring industrial suppliesThe Lean Procurement strategy delivers a comprehensive onlineprocurement solution that optimizes your process for procuring awide range of packaging, industrial and office supplies.The results are, you receive a streamlined procurement process,reduced spending on a “best-fit" list of supplies and measurableaccountability utilizing simple statistics and eCommerce.Lean Procurement helps you dramatically reduce what you spendon supplies, in time and money.The Lean Procurement strategy is the name of the registeredTrademarked Service of Consumers Interstate Corporation
TheThe subjectssubjects1. Why is Supply Chain Optimization so important?1. Why is Supply Chain Optimization so important?Optimization delivers significant reductionsOptimization delivers significant reductions2. Supply Chain Management (SCM) defined2. Supply Chain Management (SCM) definedThe overall management of materials from origin to end userThe overall management of materials from origin to end user3. Supply chain functions need aligned goals3. Supply chain functions need aligned goalsDepartmental goals need to support each otherDepartmental goals need to support each other4. The technological solutions4. The technological solutionsCompanies are out sourcing to web-based solutionsCompanies are out sourcing to web-based solutions5. Three considerations for Supply Chain Optimization5. Three considerations for Supply Chain OptimizationThink globally, core strengths and collaborationThink globally, core strengths and collaboration6. How does Lean Procurement fit in? What is it?6. How does Lean Procurement fit in? What is it?An integral part of Supply Chain OptimizationAn integral part of Supply Chain Optimization7. What is the mission of Lean Procurement?7. What is the mission of Lean Procurement?Helping you reduce what you spend on supplies, in time and moneyHelping you reduce what you spend on supplies, in time and money8. What is the best culture for Lean Procurement?8. What is the best culture for Lean Procurement?A total company culture, a re-design and re-thinkingA total company culture, a re-design and re-thinking9. How do we streamline your procurement process?9. How do we streamline your procurement process?A Value Stream Map illustrates the wasted steps in the processA Value Stream Map illustrates the wasted steps in the process10. How can web technology reduce spending?10. How can web technology reduce spending?A budget is displayed online “right at the point of ordering.”A budget is displayed online “right at the point of ordering.”11. How do we reduce the cost of supplies?11. How do we reduce the cost of supplies?Review all supplies using the “best-fit” cost effective standardsReview all supplies using the “best-fit” cost effective standards12. What’s inside the Lean Procurement strategy?12. What’s inside the Lean Procurement strategy?Team support with executive sponsorsTeam support with executive sponsors13. How does it fit into the principles of Lean Manufacturing?13. How does it fit into the principles of Lean Manufacturing?The same principles of common sense and simple technologyThe same principles of common sense and simple technology14. How do we implement the Lean Procurement strategy?14. How do we implement the Lean Procurement strategy?As a team with experts and the stakeholders at both companiesAs a team with experts and the stakeholders at both companies15. Which departments are improved with Lean Procurement?15. Which departments are improved with Lean Procurement?Executive, financial, operations, purchasing, end usersExecutive, financial, operations, purchasing, end users16. The results?16. The results?More time to focus on more valuable projects and reducedMore time to focus on more valuable projects and reducedspending on suppliesspending on suppliesHelping you on the journey to Supply Chain OptimizationHelping you on the journey to Supply Chain Optimization
1. Why is Supply Chain Optimization so important?Manufacturers have been forced to evolve or perish when it comesto optimizing their processes as well as navigating the new toolsand best practices for Supply Chain Management.Companies need effective Supply Chain Management. Improvingoperational efficiency to support their corporate growth strategy,improve gross profit margin and offer new and differentiated valueto customers is vital for sustaining a leadership position.An optimized supply chain can stay lean, reduce costs and respondto customers’ needs whenever demands change.Optimization is driven by internal and external factors. Internal factorso Responsive customer service, delivery and working capitaloptimizationo Having the right inventory correctly positionedo New product introductions, changes in demand and newsuppliers External factorso Tax benefits, trade concessions, labor costs, capital subsidies,reduced logistics cost and customer proximityOptimization delivers significant reductions
2. Supply Chain Management (SCM) definedSupply Chain Management (SCM) is the overall management ofmaterials and the flow of goods and services within and betweencompanies, including finance and information.All departments are involved. Flow of goods - The movement and storage of raw materials,work-in-process inventory, and finished goods from point oforigin to point of consumption Information flow - forecasting, product demand, inventory onhand, transmitting orders and updating the status of delivery The financial flow - of credit terms, costs and payment schedulesSupply chain is a connection of many links; suppliers, organizations,people, activities, information, and resources involved in the flow ofgoods from the point of origin to the customer.CIC optimizes procurement for this group of industrial suppliesLow-value, repetitive supplies need to be optimized
3. Supply chain functions need aligned goals3. Supply chain functions need aligned goalsSupply chain optimization requires that the goals for the multipleSupply chain optimization requires that the goals for the multiplefunctions in the chain be aligned. Otherwise, conflicts arise. “Salesfunctions in the chain be aligned. Otherwise, conflicts arise. “Saleswant more inventory, finance wants less and purchasing is stuck inwant more inventory, finance wants less and purchasing is stuck inthe middle.”the middle.”Alignment is optimal and can produce significant reductions inAlignment is optimal and can produce significant reductions insupply chain costs and major improvements in service levels.supply chain costs and major improvements in service levels.Sales, purchasing, finance, warehousing and delivery all need toSales, purchasing, finance, warehousing and delivery all need tohave goals that align. Since functions overlap, goals should as well.have goals that align. Since functions overlap, goals should as well.The overall objective is an increased service level, responsivenessThe overall objective is an increased service level, responsivenessand on-time delivery while judiciously balancing working capitaland on-time delivery while judiciously balancing working capitalneeds.needs. Often, individual (function-specific) goals and company goals are Often, individual (function-specific) goals and company goals arenot well defined or aligned.not well defined or aligned. Different functions work on their individual goals, often Different functions work on their individual goals, oftenachieving their optimization while adversely impacting theachieving their optimization while adversely impacting theoverall supply chain performance.overall supply chain performance. As a result the costs associated with certain service levels could As a result the costs associated with certain service levels couldbecome a concern.become a concern. Conflicting optimization goals by functions lead to suboptimal Conflicting optimization goals by functions lead to suboptimalsupply chain performance.supply chain performance.Functional goals need to be in sync to avoid conflictsFunctional goals need to be in sync to avoid conflicts
4. The technological solutions4.4. TheThe technologicaltechnological solutionssolutionsTechnological solutions with sophisticated software systems onswith erfaces solutionsarecompetingtoprovide partor all ofsystemsthe alloftheSupplyChain Management (SCM) service for companies who rent theirChainChain ManagementManagement (SCM)(SCM) serviceservice forfor companiescompanies whowho rentrent theirtheirservice.service.service.Some SCM applications are based on open data models thatSomearebasedonthatSome SCMSCMapplicationsarebothbasedon openopendata modelsmodelsthatsupportthe applicationssharing of datainsideand dataoutsidethe idetheenterprisesupportthe sharingof dataenterprise,both ise(thisis calledthe extended(thisextendedenterprise,includeskey(this isis calledcalled thetheextendedenterprise,andincludeskey suppliers,suppliers,manufacturers,andend customersof ofaspecificcompany).manufacturers, and end customers of a specific company).By sharing this data "upstream" (with a company's suppliers) andBydataaa company'ssuppliers)andBy sharingsharing thisthis(withdata "upstream"company's(withclients),SCM ),SCMapplicationshave"downstream"a company'sclients),applicationshavethepotential to (withimprovethe time tomarketSCMof products,reducethetoimprovetimetoreducethe potentialpotentialtoallimprovethetimeto marketmarketofproducts,reducecosts,and allowpartiesthein thesupplychainoftoproducts,better ttermanagecosts, andallow allpartiesin thesupplychain to better managecurrentresourcesandplan forfutureneeds.currentcurrent resourcesresources andand planplan forfor futurefuture needs.needs.Increasing numbers of companies are turning to websites and umbersofcompaniesaresolution.turning toto websiteswebsites andand webwebbasedapplicationsasofpartof the SCMbasedapplicationsaspartoftheSCMsolution.based applications as part of the SCM solution. Planning applications use advanced algorithms to determine the bestPlanningapplicationsusePlanningapplicationsuse advancedadvanced algorithmsalgorithms toto determinedetermine thetheway tofill an order.bestwaytofillanorder.best way to fill an order. Execution applications track the physical status of goods, the ion nstatus ofof goods,goods,the allof ls,andfinancialinformationinvolvingmanagement of materials, and financial information involving allallparties.parties.parties. This shared data may reside in diverse database systems, or data warehouses,Thismayindatabasesystems,This sharedshared datadatamay resideresidein diversediversedatabasesystems, oror datadataat severaldifferentsites companies.warehouses, at several different sites and companies. Collaboration with suppliers and customers has risen in importance.CollaborationCollaboration withwith supplierssuppliers andand customerscustomers hashas risenrisen ininimportance.importance. Lean Procurement provides a web-based solution for procuringLeanLean ProcurementProcurementprovides aa web-basedweb-based solutionsolution forfor procuringprocuringindustrialsupplies providesindustrialsuppliesindustrial suppliesCompanies are turning to web-based solutionsCompaniesCompanies areare turningturning toto web-basedweb-based solutionssolutions
4.technologicalsolutions5.Threeconsiderationsfor5. TheThreeconsiderationsfor SupplySupply ChainChain isticatedsoftwaresystems andThink–– Thisisis notonlyreference.Think globallygloballyThiswithnotonly aa geographicgeographicreference.web interfacesarecompetingtoprovidepartorallofthe SupplyStandardizeStandardize processesprocesses andand alignalign SupplySupply ChainChain goalsgoalsChain Management(SCM)service for companies who rent theirthroughoutenterprise.throughout youryourenterprise.service. UseUse leanlean thinkingthinking supplierssuppliers whowho cancan handlehandle ions are basedon openindatamodelsthat SCMCompaniesCompanies increasinglyincreasingly mustmust thinkthink in termsterms ofof globalglobalsupportopportunitiesthe sharing ities for procurementprocurement ofof goodsgoods andand services.services.(this is called the extended enterprise, and includes key suppliers,manufacturers,and end customers of a specific company).FocusFocus onon corecore strengthsstrengths OutsourceallOutsource all otherother activities.activities.By sharingthisdata"upstream"(witha company'ssuppliers)and ManyMany organizationsorganizations trytry toto dodo tootoo manymany thingsthings oror don'tdon't SCMapplicationshavethatthat theythey cancan outsourceoutsource repetitiverepetitive tasks.tasks.the potentialtoimprovethe timeto market of products,reduce OftenitseemsasthoughOften it seems as though anan organization’sorganization’s internalinternal resourcesresourcescosts, areandableallow allparties in jobthe supplychain to bettermanageare able toto dodo aa betterbetter job inin thethe shortshort run.run. MostMost often,often, bybycurrentresourcesandplan for futureneeds.provider, a better valuerelyinguponaspecializedthird-partyrelying upon a specialized third-party provider, a better valuewillwill bebe realizedrealized inin thethe longlong term.term.Increasingnumbersofcompaniesare turningto websites and helpweb Focusingonyourorganization’scoreFocusingon yourorganization’score competenciescompetencies willwill helpbased youapplicationsaspartoftheSCMsolution.you increaseincrease revenuerevenue andand profitability.profitability. Planningapplications use advanced algorithms to determine theImproveImprove collaborationcollaborationbestwayto fill an order. BetweenBetween Manufacturer/SupplierManufacturer/Supplier andand RetailerRetailer forfor ement.Data DrivenForecastingandphysicalInventoryManagement. Executionapplicationstrack thestatusof goods, the Helpreduceinventory,improvefulfillmentratesand ngand productproductmanagement of materials, and financial bilityatpointofpurchase.parties. EnsureEnsure aa leanlean supplysupply chain,chain, improvingimproving marginsmargins andand Thisprofitability.shared data may reside in diverse database systems, or dataprofitability. Today,myriadopportunitieswarehouses,at y, technologytechnologyprovidesmyriadofopportunities forforcollaboration.collaboration. Collaboration with suppliers and customers has risen inimportance. Lean Procurement provides a web-based solution for procuringindustrial suppliesGlobalisis alsothinkingCompaniesare turningtocomprehensiveweb-based solutionsGlobal thinkingthinkingalsocomprehensivethinking
6.6. HowHow doesdoes LeanLean ProcurementProcurement fitfit in?in?LeanLean ProcurementProcurement helpshelps youyou reducereduce whatwhat youyou spendspend onon supplies,supplies, inintimeandmoney.time and money.TheThe journeyjourney towardstowards SupplySupply ChainChain OptimizationOptimization departments.streamlining the processes in multiple departments. OneOne importantimportantprocessprocess isis forfor thethe procurementprocurement ofof aa multitudemultitude ofof repetitiverepetitive suppliessuppliesneededneeded toto runrun youryour business.business.WhatWhat isis thethe LeanLean ProcurementProcurement strategy?strategy?TheThe LeanLean ProcurementProcurement strategystrategy deliversdelivers aa comprehensivecomprehensive angeby optimizing the procurement of a wide range ofof low-valuelow-valuerepetitiverepetitive industrialindustrial suppliessupplies usedused toto runrun youryour businessbusiness everyevery day.day.ThisThis high-velocityhigh-velocity repetitiverepetitive groupgroup ofof suppliessupplies includes:includes: officesupplies.janitorial, safety, breakroom and office supplies.TheThe procurementprocurement ofof thesethese commoditiescommodities consumesconsumes anan ue.Yourprocurementamount of time relative to their value. Your procurement teamteamshouldshould bebe freedfreed upup toto devotedevote moremore timetime onon higherhigher valuevalue projectsprojectslikelike rawraw materials,materials, freight,freight, etc.etc.BeingBeing aa low-risklow-risk groupgroup ofof commodities,commodities, successfullysuccessfully optimizingoptimizing thetheprocurementprocurement ofof thesethese suppliessupplies isis aa goodgood firstfirst stepstep towardstowards achievingachievingSupplySupply ChainChain Optimization.Optimization.TheThe LeanLean ProcurementProcurement strategystrategy optimizesoptimizes thethe largelarge groupgroup hatyouindustrial supplies helping to dramatically reduce what you spend.spend.It’sIt’s anan integralintegral partpart ofof youryour SupplySupply ChainChain OptimizationOptimization
337.is theLeanMissionof Lean Procurement?6. WhatHow doesProcurementfit in?7.Whatis the Missionof Lean Procurement?Theis “helpingreducethey spendonLeanMissionProcurementhelpscompaniesyou reducewhat whatyou spendon supplies,inTheMissionis “helpingcompaniesreducewhatthey supplies in both time and money.”Thisgroup oftowardsrepetitivelow-valuesuppliesincludes:The isgroup ts.streamliningthe processesin multipleOne rtments.and office products.process is for the procurement of a multitude of repetitive suppliesTheLeantoProcurementstrategy helps you in your journey towardsneededrun your business.TheLeanProcurementstrategy helps you in your journey towardsSupplyChainOptimization.Supply Chain Optimization.What is the Lean Procurement strategy?Here is how it helps.Here is how it helps.The Lean Procurement strategy delivers a comprehensive solution Streamlines your procurement process - provides yourtheyourprocurement of a processwide rangeof low-value by optimizingStreamlines- providesyourprocurementteamprocurementwith more time to focuson morevaluablerepetitiveindustrialsuppliesused etimefocusonmorevaluablecore materials and projects.core materials and projects.This high-velocity repetitive group of supplies includes: packaging, janitorial,Reducesyourbreakroomcost of supplies– optimizingsafety,and officesupplies.your list of supplies ostof suppliesbased on the “best-fit” standards ensuring hatthemostcostproductsare used.The effectiveprocurementof thesecommodities consumes an inordinateeffectiveproductsareused.amount of time relative to their value. Your procurement teambe freedup to devotemore timea onhigherspendingvalue projects shouldReducesspending– implementingmonthlybudget like rawReduces– implementinga monthlyspendingbudgetmaterials,etc. constrainsoverordering.online for each buyer that dramatically constrains overordering.Beinga low-riskgroup of commodities,optimizingthe Providesmeasurableaccountabilitysuccessfully– online reportsmeasure nereportsmeasureof thesesuppliesis a goodstepAndtowardsachievingthe company’sspendingversustheirfirstbudget.a dasupplierSupplyChainOptimization.representative provides strategic advice and data at scheduledrepresentativeprovidesstrategicadvice and data at scheduledexecutive businessreviewmeetings.The executiveLean Procurementoptimizes the large group ofbusiness strategyreview meetings.industrial supplies helping to dramatically reduce what you spend.It’s an MoreintegralpartyourvaluableSupply ChainOptimizationtimeforofmorepurchasingMore time for more valuable purchasing
8. What is the best culture for Lean Procurement?8. What is the best culture for Lean Procurement?The culture required is a philosophy that embraces continuousThe culture required is a philosophy that embraces continuousimprovements.improvements.Supply Chain Optimization affects multiple departments. OldSupply Chain Optimization affects multiple departments. Oldrelationships and previous processes are changed. This may not berelationships and previous processes are changed. This may not beeasy for everyone.easy for everyone.Respect for the decision, the participants and the objective isRespect for the decision, the participants and the objective isimportant to sustain morale.important to sustain morale.The improvement culture is good and tough.The improvement culture is good and tough.The goodThe good It’s a total company culture, a re-design and re-thinkingIt’s a total company culture, a re-design and re-thinkingTotal team support for improvements at all levelsTotal team support for improvements at all levels“All the fish” swimming in the same direction“All the fish” swimming in the same direction“Can do” positive attitudes are exciting“Can do” positive attitudes are excitingLooking forward is helpfulLooking forward is helpfulThe toughThe tough Trivial distractions by negative members need to be eliminatedTrivial distractions by negative members need to be eliminatedBreaking the strategy of “doing things the way we always doBreaking the strategy of “doing things the way we always dothem”them”Some long-term employees may find the changes difficultSome long-term employees may find the changes difficultOld relationships may endOld relationships may endIssues are opportunities to solve, not problems to complainIssues are opportunities to solve, not problems to complainaboutaboutEmbrace continuous improvementsEmbrace continuous improvements
779. How do we streamline your procurement process?9. How do we streamline your procurement process?All the steps in the process are reviewed.All the steps in the process are reviewed.Our teams examine all the steps “end to end” in your currentOurteams examineallfortheindustrialsteps “endto end”andin yourcurrentprocurementprocesssuppliescreatea better ea better onethat is streamlined.that is streamlined.We use a Value Stream Map to clearly illustrate the steps and timeWeuse a ValueMapjustto toclearlyand timeassociatedwithStreameach step,placeillustratean ordertheforstepsan rforanindustrialsupply item. Starting with “I need” to “the invoice is paid,” thesupplyStarting with“I end.need” to “the invoice is paid,” theprocessitem.is measuredend toprocess is measured end to end. The Procurement Process TheProcesso ProcurementA “Value StreamMap” illustration shows all the stepsoo AEliminate“Value StreamMap”showsall the stepswasted stepsillustrationthat have novalueoo Eliminatewasted stepsthat ishaveno valueA new streamlinedprocessproposedusing eCommerceo A new streamlined process is proposed using eCommerce Consolidate and eliminate Consolidateeliminateo Eliminateandlow-valuesuppliersoo Eliminatelow-valuesuppliersConsolidate invoicing activitiesoo ConsolidateinvoicingactivitiesLess paperwork,fewerdeliverieso Less paperwork, fewer deliveries Calculate the time saved - 50-85% Calculatetheprocesstime saved50-85%o Currentvs a-newstreamlined processoo CurrentprocessvsanewstreamlinedCalculate the time spent on all orders inprocessa monthoo Calculatethe timespent onfewerall ordersin afewermonthsteps andOne supplier,one process,orders,o Onesupplier,oneprocess,fewerorders,fewersteps andjust one monthly invoicejust one monthly invoice Time equals money Timeequals moneyo Assuming 30/hour cost in time plus benefits (avg.)oo Assuming 30/hourcost inantimeplus(avg.)fromThe total costto processordercanbenefitsbe reducedo Thetotalcosttoprocessanordercanbereducedfrom 110 to 15* 110 to 15*A Value Stream Map illustrates wasted stepsA Value Stream Map illustrates wasted steps*Actual data from the Lean 101 seminar – GCI Engineering*Actual data from the Lean 101 seminar – GCI Engineering
10. How does CIC’s technology reduce product spending?10. How does CIC’s technology reduce product spending?The Silent Supervisor is your online stop sign. It displays yourThe Silent Supervisor is your online stop sign. It displays yourbuyer’s monthly spending budget “right at the point of ordering”. Itbuyer’s monthly spending budget “right at the point of ordering”. Itadjusts after every order is placed and lets your buyer know exactlyadjusts after every order is placed and lets your buyer know exactlywhat is available and where they stand towards their monthlywhat is available and where they stand towards their monthlybudget.budget.It is a proprietary online technology developed by ConsumersIt is a proprietary online technology developed by ConsumersInterstate Corporation for use on www.SuperSupplies.com.Interstate Corporation for use on www.SuperSupplies.com. A budget is defined as “the total amount of money allocated orA budget is defined as “the total amount of money allocated orneeded for a particular purpose or period of time.”needed for a particular purpose or period of time.”o You can reduce what you spend by setting reduced monthlyo You can reduce what you spend by setting reduced monthlyspending budgets.spending budgets. How is the reduced budget for supplies established?How is the reduced budget for supplies established?o A benchmark is created based on previous annual spendo A benchmark is created based on previous annual spendo The reduced budget is established in collaboration witho The reduced budget is established in collaboration withyour procurement team, your executive and your supplieryour procurement team, your executive and your supplier The budget can be adjusted during the year based on The budget can be adjusted during the year based onrevenue and forecastsrevenue and forecasts How does the online budget work?How does the online budget work?o Each buyer’s monthly spending budget is entered intoo Each buyer’s monthly spending budget is entered intoSuperSupplies.comSuperSupplies.como The budget displays online “right at the point of ordering”o The budget displays online “right at the point of ordering” What dollars remain available to spend What dollars remain available to spendo It recalculates after each order is placedo It recalculates after each order is placedo A “stop sign” warning is displayed when approaching theo A “stop sign” warning is displayed when approaching themonthly budgetmonthly budget How do you know how the buyers are doing?How do you know how the buyers are doing?o A performance report is available 24/7 onlineo A performance report is av
13. How does it fit into the principles of Lean Manufacturing? The same principles of common sense and simple technology 14. How do we implement the Lean Procurement strategy? As a team with experts and the stakeholders at both companies 15. Which departments are improved with Lean Procureme
