Global Sourcing

         Global Sourcing is a procurement strategy in which a business seeks to find the most cost efficient location for manufacturing a product even if the location is in a foreign country. For example, if a toy manufacturer finds that manufacturing and delivery cost are lower in a foreign country due to lower wages of foreign employees, the company might close the domestics factory and use a foreign manufacturer. See also outsourcing, international procurement organization(IPO)

         Common examples of globally sourced products or services include: labor-intensive manufactured products produced using low-cost Chinese labor, IT work performed by low-cost programmers in India and Eastern Europe. While these examples are examples of Low-cost country sourcing, global sourcing is not limited to low-cost countries.
        Majority of companies today strive to harness the potential of global sourcing in reducing cost. Hence it is commonly found that global sourcing initiatives and programs form an integral part of the strategic sourcing plan and procurement strategy of many multinational company.
       Global sourcing is often associated with a centralized procurement strategy for a multinational, wherein a central buying organization seeks economies of scale through corporate-wide standardization and bench marking. A definition focused on this aspect of global sourcing is: "proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing.
       The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing, beyond low cost, include:

•  learning how to do business in a potential market,
•  tapping into skills or resources unavailable domestically,
•  developing alternate supplier/vendor sources to stimulate competition, 
• increasing total supply capacity.

 Some key disadvantages of global sourcing can include: 

• hidden costs associated with different cultures and time zones, 
• exposure to financial and political risks in countries with (often) emerging economies,
• increased risk of the loss of intellectual property, 
• increased monitoring costs relative to domestic supply. 

For manufactured goods, some key disadvantages include 

• long lead times,
• the risk of port shutdowns interrupting supply,
• the difficulty of monitoring product quality. 

       International procurement organizations (or IPOs) may be an element of the global sourcing strategy for a firm. These procurement organizations take primary responsibility for identifying and developing key suppliers across sourcing categories and help satisfy periodic sourcing requirements of the parent organization. Such setups help provide focus in country-based sourcing efforts. Particularly in the case of large and complex countries, such as China, where a range of sub-markets exist and suppliers span the entire value chain of a product/commodity, such IPOs provide essential on-the-ground information.

         Over time, these IPOs may grow up to be complete procurement organizations in their own right, with fully engaged category experts and quality assurance teams. It is therefore important for firms to clearly define an integration and scale-up plan for the IPO

Strategic Outsourcing

Assalamualaikum w.b.t

         Today we want talk about the strategic outsourcing in one company. Outsourcing can be defined as the complete transfer of a business process that has been traditionally operated and managed internally to an independently owned external service provider. Complete transfer means that the people, facilities, equipment, technology and other assets are no longer maintained internally once the business process is outsourced. Then outsourcing also sometimes thought to be similar to subcontracting, joint venturing and contract manufacturing. Outsourcing consider, firms are evaluating whether or not to reverse a prior decision to make. Outsourcing reshapes a firm’s boundaries.

Why the organizations do outsourcing business process? Lower operational and labor costs are among the primary reasons why companies choose to outsource. When properly executed it has a defining impact on a company’s revenue recognition and can deliver significant. Some generic strategic benefits of outsourcing are:

1.       Cost minimization

-          Accomplished by reducing direct operating costs, eliminating overhead costs and transforming fixed costs into variable costs.

2.     Refocusing the organization to its core competencies

-          Accomplished by focusing what the organization does best and/or transforming the business to focus on new products and services.

3.       Improvement in operating performance

-          Increasing quality, increasing productivity and obtaining new capabilities technologies from external sources.

4.       Increased market share and revenue

-          Assessing the providers’ network and accelerating expansion into new markets.

Specific benefits of outsourcing:

1.       Reduce and control operating costs.

2.       Improve quality.

3.       Change company focus.

4.       Acquire external capabilities.

5.       Refocus scarce resources for alternative uses.

6.       Reduce cycle time.

7.       Obtain cash infusion.

8.       Reduce risks.

The element of startegic outsourcing is 5 steps. It is:

1.       Strategic evaluation.

2.       Financial evaluation.

3.       Supplier selection and sourcing model.

4.       Managing relationships.

These steps can and should be modified to fit the spesific organization and outsourcing objectives. This steps is important in order to achieve continuous improvement and communication between the required outsourcing activities. The strategic evaluation and financial evaluation is before the company outsource. Supplier selection and contracting is during outsource and transition to external sourcing model and managing relationships is after the company outsource.

First step is strategic evaluation. That is a discussion of the make-or-buy decision will be helpful in analyzing what may or may not be good strategic candidates for outsourcing. The make-or-buy decision is to understand the strategic importance(value) of the activity or system.

Second step is financial evaluation. That is critical to ensure that outsourcing makes short-term and long-term financial sense. Many cost are only relevant when considering international sourcing alternatives or are only pertinent when considering the outsourcing of manufacturing activity.

Third step is supplier selection and contract development. The supplier selection is identify and investigate a potential supplier is for the buying firm to compile supplier profiles for each potential supplier. Knowledgeable about all potential supplier and aware of how they are rated by each function within the buying firm. The buying organization should clearly establish expectations for the potential suppliers and discuss the scope of work and the appropriate pricing for the outsourcing activity. The contract development is key to effective governance of the relationship between the two independent firms.

Step four is transition to external sourcing model. The transition will be 3 criteria. That is:

1.       Communication criteria – how should the external initiatives be communicated to the affected and unaffected employees.?

2.       Personnel criteria – what packages will be offered to affected and unaffected employees.?

3.       Transition criteria – when will the activities and resources be moved to the supplying organization.?

The last step is relationships management. That is the organizations work together using their specialised resources innovatively to achieve goals and objectives. Then the organization should be active in monitoring and evaluating performance and solving problems.
   If any constructive ideas can be added in the spaces comment below.That all.

RADIO FREQUENCY IDENTIFICATION ( RFID )

WHAT IS RFID ?

Radio Frequency Identification or RFID is a term to any technology that uses radio waves to identify or track items. For example items are a container, an automobile, an animal or a person can all be automatically identified and tracked through RFID technology.

HOW DOES IT WORK ?

The RFID technology can be constructed in many ways, but the most common procedure is to store a serial number on a microchip and attach it to a coiled antenna. It is called inlays.

EXAMPLE COMPANY THAT USE RFID ?

Wal-Mart had required its top 100 suppliers to use RFID technology in shipping cases and pallets. But before it is announced, everyone questioned whether it really worked or not. Wal-Mart believes that it has the answer.

ADVANTAGE OF RFID

An RFID system provides many advantages for companies, suppliers and retailers. Below is a list of the benefits RFID can offer:

• ·        Reduced labor cost
• ·        Simplified business processes
• ·        Improved inventory control
• ·        Increased sales
• ·        Reduced shrinkage

ADVANTAGES OF RFID THAN BARCODE SYSTEM

• ·        A no contact, no-line-of-sight reading and tracking system
• ·        Reduction in the need for the manual scanning of products
• ·        Reduction the time required for labor-intensive duties
• ·        Reduce overall labor costs for companies
• ·        Reduce labor required for monitoring goods movement and inventory flow
• ·        RFID rags can be read through snow, fog, ice, paint and crusted grime
• ·        RFID tag also can be programmed to hold information such as the item’s serial number, color, size and current price

DISADVANTAGE OF RFID

• ·        RFID readers need high cost for company to implement.
• ·        RFID tags also quite expensives.
• ·        Active tags which use a battery to improve range and other capability also need higher costs.

RFID IMPLEMENTATION

Before implement the RFID system, companies should ask some question to themselves. Below are the example questions:

• ·        Does the company need RFID to keep pace with its competitor?
• ·        Will RFID offer a competitive advantage for the company?
• ·        Will RFID save the company money eventually (long term)?
• ·        Will RFID cost-effectively improve the ability of the company to serve its customers?
• ·        Will the company have the power to manage its business without accurate information about its processes and inventory that could be gained from RFID?
•     To integrate an RFID system successfully, a company must have a strong understanding of the basic elements of the system.

Supplier Selection and Evaluation

Assalamualaikum.

How a lovely day today is. We hope all of you are in the pink of health. Now, our group need to continue our task today which needs to submit the blog related to the purchasing. Our topic today is about Supplier Selection and Evaluation. In this topic, I will stress more about the Pure Supply Management Relationships. However, in this subtopic, there are four relationships which are Counterproductive, Competitive, Cooperative and Collaborative.

Firstly, counterproductive relationships. Counterproductive relationships are each organization buying and supplying is so focused on getting what is best for it each puts the other at a disadvantage. We can see that in this relationship does not have a good relationship with others. This type of relationship is undesirable because it does not promote a positive feedback or service between supplying and buying firms. Neither of these companies will achieve their goal. This relationship also discourages future dealing between the organizations. This relationship make both companies lose-lose situation.

Besides, competitive relationships. It is also known as a transactional relationship. This relationship which both buying and supplying firms to strive to get the very best arrangement possible in their negotiation and fail to see the benefits of both organizations obtaining their goals and objectives. Usually, the organization who has more power between those companies will win against the weak company. It is similar what we called a parasite. In transactional relationship, the buying and supplying firms will stop at nothing to make sure that they come out on top and do not care about the other organization’s situation.

Next, cooperative relationships. This relationship recognizes the potential value of both organizations getting what they want. It is also maximize the potential of having a long term relationship. This relationship make both companies in win-win situation. This relationship also give full cooperation between them to achieve their goals. They will struggle enough to achieve their goal to be fulfil. They also will come out the best or right decision for their organization. Besides, they have a strong relationship together.

Last but not least, collaboration relationships. It is usually found with the buying firm’s strategic supplier. It is almost same with the cooperative relationship. In collaboration, the two organizations truly realize the benefit of working together. It also wants to optimize outcomes for both organizations. They also will support each other. That is why they have more to long term relationship together. The two firms work together to develop a strategy to deliver a high-quality product or service on time and also under budget.

In conclusion, there are so many type of relationships can be creating by two or more organization. This relationship is made to achieve companies goals or companies mission and vision.

EDI system

Bismillahirrahmanirahim….

Assalamualaikum w.b.t

        Have a great day today, How you feel today ??  In this era of Globalisation, many things to be done quickly and easily. The emergence of the cyber world has been transfigured. This causes all the things that were previously difficult now been simplified. In business are also using technology that hass been created. Today, I will explain a new technology system that facilitates a business to get information from company@customer. In purchase,the system may be able to facilitate customers to communicate with the seller and usually used for the electronic transmission of orders, invoices, and payment betwwen buyer and seller. It is “EDI” system. Do you know what is EDI system ? most of the company are using this system in the present.

What is EDI ?

       EDI or Electronic Data/Document Interchange is the direct computer transmission of orders and other transaction  information. The main elements of an EDI system are computer hardware, software, computer compability between the sender and receiver, and subscription to a common network.

What the benefit of using EDI system ?

  There are many benefit to using EDI. For a smaller company, EDI may help keep a valued trading partner or customer or even gain. New ones, For larger firm, the main benefit is generally the cost savings, or to be known as a leading-edge company.

What the risk of using EDI system ?

   There are also have some risk when using EDI system that should be  considered. EDI is not inexpensive. The machine and training cost will add up to a large amount and cutting corners may cost a company more thanit saves. Security is also an issue. Procedural safeguards have not kept up with technology in this area. The problem is exposure to outside users, which opens up a doorways to false messages. These messages may come in the format a person who is not a supplier sending data or the data being interrupted and/or altered. Operational procedures need to have safeguards in place in order to avoid such situation. Buyers and sellers must interactively communicate, especially if a questionable transaction is received. An obvious risk is that current trading partners may refuse to use EDI. This is a situation that must be addressed by company policy. A decision must be made whether to trade singularly through EDI or use both EDI and traditional methods.

      If any constructive ideas can be added in the spaces comment below.That all.

THANK YOU for read 

MATERIAL MANAGEMENT

    The definition of material management is an approach for planning, organizing, and controlling all those activities principally concerned with the flow of materials into an organization.

   Although that involve about combined with labor, information, technology and capital. Furthermore, the five function of inventory are:

1. Pipeline inventories.
2. Cycle inventories.
3. Buffer stock.
4. Seasonal.
5. Decoupling.

       The most objectives of the Materials Management function ,often called the famous 5 Rs of Materials Management,

• Right quality
• Right quantity
• Right time
• Right source
• Right price

      Customer satisfaction that managers of integrated material system and have two objectives, which are customer satisfaction and minimum total material costs. There have element of satisfaction that following.

       Material availability its firm makes a products to order , customer service is measured by the which products are completed and shipped as promised.

     On-time shipment its has to do with the delivery promise made, and the quality of total products as a promised.

     On-time receipt which is customer place orders based on needs dates. Than calls to the supplier are answered with explanation about the product has been.

     Complete shipment its done delivery the products and customer will expected receive all items at the same time. Customer should be given the choice of split shipment or rescheduling of the order when the order cannot be shipped.

     Quality of receipt is the quality of material that between the time it leaves the production floor and the time it arrives at the customer's storeroom. The purpose of receiving inspection is to determine damages and begin the procedure to replace, repair, or claim compensation.

       Flexibility it is based on the customer want, supplier can accommodate a customer request. the need to be flexible blurs the distinction between make-to-stock and make-to-order.

        Responsiveness to inquiry customers want assurances that their order are on schedule, especially as the shipping date near.

         Customer satisfaction it is to fulfill customer requirements. although that summarize about:

• Short lead time
• Good quality.
• High value
• Customized products
• Post sale service

   The conclusion and purpose of material management in support the transformation of raw material and component part into the shipped goods and finished goods inventory. The function that include as (Material planning and control, Production scheduling, receiving, stores, traffic, disposal of scrap, quality control, and inventory control.

THANK YOU. 

The Legal Aspects of Purchasing

Bismillahirrahmanirrahim ...

Assalamualikum w.b.t

      how are you today ?? Today we want to share about  "The Legal Aspects of Purchasing". For example, Hasbi as a purchasing agent want to buy fax machine for his Murni Logistics Company. He buy 10  fax machine on behalf of his company with the Heng Sheng company. So, in this situation it involve 3 parties for this transaction between principal of Murni Logistics company, Purchasing agent(Hasbi) of Murni Logistics company and Heng Sheng company(seller). Based on the example given above the contract consider valid when it involve 3 parties in one transaction. The purchasing manager administers the purchasing function. The purchasing function consists of many tasks within the business entity, including supporting the company with the required
(1) Material
(2) Supplier
(3) Service

Authority of purchasing manager

  purchasing agent have three type of authority involve in purchasing. Firstly,express authority. Second, implied authority. Third, emergency authority.

Express Authority
   express authority is conferred to the purchasing manager by the principal. This authority usually occurs automatically when the purchasing manger is appointed.

Implied authority
   Implied authority is implied by the law at teh time the prinsipal grants express authority to the purchasing agent.Agent has the implied authority to negotiate the term of the contract. This include :

       - The Quantity
       - The Quality and other specification
       - The Delivery Condition
       - The Price
       - The Payment Date

Emergency Authority
  Emergency authority is used only when the purchasing manager must protect the principal's right or property When principal is imposible at the time we need.Furthemore, the purchasing agent does not have express or implied authority.


THE EXECUTION OF CONTRACT

The purchasing official has no personal liability providing that the following requirement are met:

1- name of the principal
2- all parties know that purchasing agent act on behalf on their company.
3- the agency relation is shown on the contract.
4- the purchasing agent act on scope authority given.

ESSENTIAL OF PURCHASE

- Passing title
- Buyer
- Seller
- Agreement of a contract.

THE REQUIREMENT OF CONTRACT

1.The parties must be capable
  - both parties must know what they are doing. The persons who enter into a contract must not insane person, alcoholic and drug addict.

2.Subject matter must be legal and valid
  - The contact must not against the law. The contract must be legal and not against public policy.

3.Consideration
  - something of value passes from one party to a second party in exchange for a promise of the second party.

4.The parties must reach an agreement by offer and acceptance
 - seller usually makes an offer and a buyer accepts,negotiates or rejects the offer.