Product Sourcing

8/13/2019 Product Sourcing

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Sourcing Group Assignment

Group C



Introduction

• Product

– Surf CA-20 (Ceteth-20)

• a chemical, which is used for hair care products

• Fatty alcohol polyoxyethylene ether

• Uses – Emulsifying Agent

– Solubilizing Agent

– Surfactant

– Surfactant - Cleansing Agent

– Surfactant - Solubilizing Agent



The process of sourcing

• It commonly involves

(1) purchase planning

(2) standards determination

(3) specifications development

(4) supplier research and selection(5) value analysis,

(6) financing

(7) price negotiation

(8) making the purchase

(9) supply contract administration(10) inventory control and stores

(11) disposals and other related functions.



Objective of Sourcing

• Develop and implement purchasing plans forproducts and services that support operationsstrategies

• Continuity of the company’s core activities • Control and Reduction of all sourcing costs

• Reduction of Risk exposure in relation to

Supply markets.• Contribution to product and process

innovation



Sourcing Cycle

• Receiving a requisition

• Selection of Supplier

•

Placing the Order• Monitor orders

• Receive orders



Selection

Profile the CategoryThis is the initial most time taking step of the cycle.

We have to analyze : – Currently what is the price we spend for this item: For our selected

Item Average USD 4.00/ Kg.

– What type of results we expect from this ingredient in our finalingredient? ( Thickening & ability of the Hair Conditioner Product.)

– What type of characteristic it should have (technical and physical) ?

– Standard data of this particular item as per the R&D and laboratoryrequirements.

– Study the current competitive situation of this product.

– (Comparatively there are few suppliers in the world market for thisitem.)



Selection

Search and identify the potential suppliers.

For this productCroda Co.-UK

Jeen International Co.-USA

Luen Chiang Co.- China

Generate the supplier portfolio.

None of potential supplier will discard at this stage.Infomation such as Price, MOQ, Country, Mode of Transport,Lead-Time, technical data are used and analysised to createthe portofolio



Selection

• Select the implementation path

Obtain the product specification details such asTechinical Data Sheets, quality standards

Obtained from these suppliers.• Negotiate and select suppliers

• Integrate suppliers

When we change the old supplier to new one weshould plan in time according to the changedfeatures of the new supplier considering



New Vender Development and

Enlistment

• Supplier Capability , Trustworthiness

• Capacity

• Minimums

• Lead-Time/ Geographical location

• Payment terms

• Reliability

• Price competiveness

• Flexibility




Enlistment

• Establishing the supplier screening process – Understanding the supplier capabilities

–

Commitments – On time / correct assortment delivery fulfillment

– Flexibility to adjust the supply, based on the customerdemand

– Maintaining Price competiveness

– Service Prompt

• Continue supplier research




EnlistmentItem Supplier Country Price /Kg Payment MOQ (Kg) Mode of

Transport

Lead time

Ceteth 20 Croda Co. UK EURO 5.75 TT-CIF Col. 600 Sea 4 Weeks

Jeen

International

USA USD7.00 L/C-CIF Col. 1000 Sea 5 Weeks

Luen Chiang

Co.

China USD 3.75 CAD-CIF

Col.

400 Sea 3 Weeks

The selected supplier Luen Chiang co for the Surfer CA-20 is offering the best Price

, Lead time, Minimum in comparison to the rest of the global suppliers



Supplier Selection and Negotiation

• Supplier selection

Though the single supply Luen Chiang

could provide the best price it can

create a supplier monopolistic situation,

also it increase the risk

• Negotiation

Obtaining the best bargaining surplus

also to consider a win win situation





• Risk mitigation

Different manufacturing locations has help to overcome the chemical shortage in the market.

Country of manufacturing was not changed the final product cost

• Long-term cost savings

Long term planning & demand forecasting help to reduce the cost of operations

• Contract/consistency in compliance

Consistency in chemical concentration / following the correct packing methodologies has avoid

compliances issues

• Competitive advantage through innovations

Working together to introduced high performing hair care chemical solutions gives the marcket

edge

• Supplier Performance and speed initiativesSupply to the demand with high consistency have reduced the inventory & write offs

• Increases understanding the business requirements

Created a relationship to synchronize the company needs to get the maximum benefits



• Why Important ?

– Hair care chemical products is one of the nichesegments of the chemical industry

–critical to make sure the product range should bewith top highest standards

– directly in touch with the most critical part of thehuman body

– highly competitive and fragmented, with largenumbers of small/big and specialized suppliersscatted around the world

Contract Management



• How to overcome such issues?

Key areas of contract

• Environment Regulations

• Government Policies and Governing laws – In-Country Policies

– Export Policies

• The price, Payment terms & Foreign Currency hedging

•Clear description of the goods – Chemical concentration

– Chemical composition & component dynamics

– molecular Biology & molecular dynamics

– Chemical liquidity ratio

– Qty per bottle

– Colour of the bottle

– Number of bottles in a pack

– Number of packs in Shipping Box

• The duration of the contract and specific delivery dates

• Testing parameters & performance frequency

• Quality Standards and acceptance criteria

• Compliance

• Rights of termination



Strategic Sourcing & Risk

Management in Sourcing

Risk Ways of overcome risk

Price increase due to cost inflation in china With strong relationship able to reduce the

inflation by split the orders with different geo

locations.

New development in conflict regulation Developed high performing product but with

the government regulations we cannot

procure the requirement. Modification with

reduced concentration sort the issue

High risk product

High sensitive Product

Need to be extreme careful when handling

High tendency to get expire if its not in the correct condition



Risk Ways of overcome risk

Logistical limitation Agreements with the logistic partners to

specify the space for the consignments in all

cases

Inaccurate formulation calculation analysis Incorrect purchasing than the government

regulations will make conflict and government

can destroy the consignment. With

understanding the requirements well all the

agreements with in the regulations

Inaccurate forecasts Preplanned demand management mechanism

to overcome the uncertainty

Manage supply chain uncertainties Regular risk assessment and have redundancy

built in





Environmental or green procurement

• Environmental or green procurement is

defined as the purchase of products and

services which have less impact on the

environment and human health comparedwith competing products or services that

serve the same purpose.



Environmental or green procurement

• This comparison may consider the source of raw materials, production,manufacturing, packaging, distribution, potential for reuse and recycling,operation, maintenance, or disposal of the product.

These may include:

• Energy-efficient and greenhouse friendly products

•

Products that are water efficient and reduce water use• Less toxic products to reduce health effects

• Products using less packaging or with a provision for packaging

take- back

• Products that use fewer resources or in other ways create reducedenvironmental impacts

• Throughout their life cycle; Products made from recycled materials, suchas recycled road construction materials

• Recycled green organics and recycled plastic products.



Documents

Product Sourcing