Global Sourcing and Procurement Martha Angélica Vázquez Peña 1970621 Fernando Martinez Cantu 2035432 Leonardo Ari Garcia Salazar 1966703 pablo Castro Barcenas 1728215 Roberto Jorge Campos Berardi 2079625 José Antonio Calva Hernández 1918530 Edna Valeria Vega Sanchez 1967787 Kevin Garza Hernández 1980195 Enrique Sebastián Siller Hernández 1860298 Diego Ruiz Velázquez 1948246 Strategic sourcing "Strategic sourcing" refers to the practice of acquiring goods and services in a planned and strategic manner, with the aim of obtaining the best prices, terms, and quality. It involves analyzing suppliers, negotiating contracts, and establishing long-term relationships to optimize the procurement of resources necessary for an organization. Bullwhip Effect small fluctuations in consumer demand at the end of the supply chain can lead to larger inventory fluctuations along the supply chain due to lack of coordination and communication among different actors such as manufacturers, distributors, and retailers. Fabric Fabric´s warehouse X1 1 to replace the stock X2 1 for demand 1 stock Store Customer X2 1 for sells 1 stock Monthly demand X1 box Unexpected order increases demand x2 boxes for a 3 months period. Fabric warehouse Store Customer Monthly demand Month 1 (2 boxes) Month 2 (2 boxes) Mouth 3 (2 boxes) X4 Production X4 total 3 demanda 1 stock X3 total 2 demand 1 stock Mouth 4 (1 box) Consequences ● ● ● Financial instability (price increases due to high demand) Excessive inventory (Extra costs to store products) Danger of losing inventory (Groceries or perishables) Solution: Share information more directly with the origin and end of the supply chain. In technical words make use of: Reorder policies: use replenishment systems based on actual inventory level and not just projected demand by higher levels in the supply chain. Supply Chain Uncertainty Framework Basically the framework is a vision. This vision identifies, In general terms, the target market, the product line, and the core competencies and company operations. within this vision or this framework it is necessary to have a target market which is usually difficult to choose a target market, but it must be done. although you may have to remove certain options even maybe involve turning away business by eliminating a segment of customers who simply do not it would be profitable or it would be very difficult to serve given the capabilities of the company. This could enter into the uncertainty of knowing that there are times when things have to be changed. Decisions and Grainer In the realm of global sourcing management, decisions permeate every stage of the process. From supplier selection to risk management and technology adoption, each decision has far-reaching implications for an organization's supply chain efficiency, competitiveness, and overall success. Effective decision-making hinges on a blend of analytical insights, market awareness, and strategic foresight W.W. Grainger, commonly known as Grainger, is a well-established distributor of maintenance, repair, and operating (MRO) products. The company was founded in 1927 by William W. Grainger and is headquartered in Lake Forest, Illinois, USA. Grainger plays a significant role in the MRO industry, helping organizations maintain their facilities, equipment, and infrastructure by supplying a wide array of products required for day-to-day operations. Global sourcing decisions Grainger: Reengineering the China/US supply chain. W. W. Grainger, Inc., is a leading supplier of maintenance, repair, and operating (MRO) products to businesses and institutions in the United States, Canada, and Mexico. The products range from industrial adhesives used in manufacturing, to hand tools, janitorial supplies, lighting equipment, and power tools. Grainger works with over 250 suppliers in the China and Taiwan region. These suppliers produce products to Grainger’s specifications and ship to the United States using ocean freight carriers from four major ports in China and Taiwan. The contracts that Grainger has with Chinese and Taiwanese suppliers currently specify that the supplier owns the product and is responsible for all costs incurred until the product is delivered to the shipping port. These are commonly referred to as free on board (FOB) shipping port contracts. Grainger works with a freight forwarding company that coordinates all shipments from the Asian suppliers. Currently, suppliers have the option of either shipping product on pallets to consolidation centers at the port locations or packing the product in 20- and 40-foot containers that are loaded directly on the ships bound for the United States. In many cases, the volume from a supplier is relatively small and will not sufi ciently fill a container. The consolidation centers are where individual pallets are loaded into the containers that protect the product while being shipped across the Pacific Ocean and then to Grainger’s Kansas City distribution center. About 89 percent of all the volume shipped from China and Taiwan are sent directly from the suppliers in 20and 40-foot containers that are packed by the supplier at the supplier site. Approximately 21 percent are packed in the 20-foot containers and 79 percent in 40-foot containers. The 20-foot containers can hold 34 cubic meters (CBM) of material and the 40-foot containers, 67 CBM. The cost to ship a 20-foot container is $480 and a 40-foot container, $600 from any port location in China or Taiwan and to either Los Angeles or Seattle. Grainger estimates that these supplier-filled containers average 85 percent full when they are shipped. The remaining 11 percent shipped from China and Taiwan go through consolidation centers that are located at each port. At the volumes that are currently running through these centers, the variable cost is $4.90 per CBM. Material at the consolidation centers is accumulated on an ongoing basis, and as containers are filled they are sent to the port. Volume is sufficient so that at least one 40-foot container is shipped from each consolidation center each week. Grainger has found that the consolidation centers can load all material into 40-foot containers and utilize 96 percent of the capacity of the container. Grainger ships from four major port locations. Approximately 10 percent of the volume is shipped from the north China port of Qingdao and 42 percent is shipped from the central China port of Shanghai/Ningbo. Another 10 percent is shipped from Kaohsiung in Taiwan. The i nal 38 percent is shipped from the southern Yantian/Hong Kong port. Consolidation centers are currently run in each location. Grainger management feels that it may be possible to make this part of its supply chain more efficient. By using this way of shipping that makes all the process more effectively. Reducing the costs of the asian suppliers Total cost of ownership The total cost of ownership (TCO) is an estimate of the cost of an item that includes all the costs related to its procurement and use, including any related costs in disposing of the item after it is no longer useful. Depending on the complexity of the purchasing process, activities such as pre-bid conferences, visits by potential suppliers, and even visits to potential suppliers can significantly impact the total cost of the item. The costs can be categorized into three broad areas: acquisition costs, ownership costs, and post-ownership costs. Acquisition cost Acquisition costs are the initial costs associated with the purchase of materials, products, and services. Include the pre purchase costs associated with preparing documents to distribute to potential suppliers, identifying suppliers and evaluating suppliers, and other costs associated with actually procuring the item. Ownership cost Ownership costs are incurred after the initial purchase and are associated with the ongoing use of the product or material. There can also be qualitative costs such as aesthetic factors, and ergonomic factors. These ownership costs can often exceed the initial purchase price and have an impact on cash low, profitability, and even employee morale and productivity. ajor costs associated with postownership include salvage value a nd disposal costs. For many purch ases, there are established market s that provide data to help estimat e reasonable future values. Other areas that can be included are the longterm environment impact warranty and product liabilities, and the negative marketing impact of low customer satisfaction with t he item. Major costs associated with postownership include salvage value and disposal costs. For many purchases, there are established markets that provide data to help estimate reasonable future values. Other areas that can be included are the long-term environment impact warranty and product Total cost of ownership TCO is a philosophy for understanding all relevant costs of doing business with a particular supplier for a good or service. It is not only relevant for a business that wants to reduce its cost of doing business but also for a firm that aims to design products or services that provide the lowest total cost of ownership to customers. It is important that any analysis is adapted to the particular scenario. Such factors as exchange rates, the risk of doing business in a particular region of the world, transportation, and other items are often important. Depending on the alternatives, there are a host of factors, often going beyond cost, that need to be considered. Adapting this type of cost analysis and combining it with a more qualitative risk analysis are useful in actual company situations. Measuring Sourcing Performances One view of sourcing is centered on the inventories that are positioned in the system. Inventory is carried at each step, and this inventory has a particular cost to the company. It serves as a buffer, thus allowing each stage to operate independently of the others. The efficiency of the supply chain can be measured based on the size of the inventory investment in the supply chain. The inventory investment is measured relative to the total cost of the goods that are provided through the supply chain. Measuring Sourcing Performances The cost of goods sold is the annual cost for a company to produce the goods or services provided to customers; it is sometimes referred to as the cost of revenue. This does not include the selling and administrative expenses of the company. The average aggregate inventory value is the total value of all items held in inventory for the irm valued at cost. In many situations, particularly when distribution inventory is dominant, weeks of supply is the preferred measure. This is a measure of how many weeks’ worth of inventory is in the system at a particular point in time. The calculation is as follows: Weeks of supply = ( Average aggregate inventory value / Cost of goods sold ) X 52 weeks Measuring Sourcing Performance A firm considers inventory an investment because it is used in the future. Inventory ties up funds that can be used for other services, and a firm may to borrow money to finance the inventory investment. The objective is to have the proper amount of inventory and to have it in the correct locations in the supply chain. To determine the correct amount of inventory, requires an analysis of the supply chain coupled with the competitive priorities that define the market for the company's products.
