SOURCING MANAGEMENT PRACTICES IN LOADSTAR (PVT) LTD

Group Members Thisaru Kaumadi Sujith Perera Rusiru Perera H.N.D Fernando Yasith Weerasinghe

Presentation Outline
Introduction to Sourcing Sourcing Cycle/Process

Sourcing Management Process Requirement Specification and Value Analysis

Supplier Scoring and Assessment New Vendor Development and Enlistment Negotiation and Supplier Selections Contract Management and Supplier Relationship Management Risk Management in Sourcing and Strategic Sourcing Legal aspects of Sourcing and Environmental Procurement

Introduction to Sourcing
Sourcing refers to a number of procurement practices, aimed at finding, evaluating and engaging suppliers of goods and services

There are two major forms of purchasing 1. Tactical Purchasing 2. Strategic Sourcing

Global Sourcing is a term used to describe practice of sourcing from the global market for goods and services across geopolitical boundaries.

Critical Item (STRUKTOL 40 MS) STRUKTOL 40 MS improves the homogeneity of elastomers of different polarity and viscosity. STRUKTOL 40 MS is added to the polymers within the mixing cycle.

Sourcing Cycle/Process
Loadstar (Pvt) Ltd has developed a Global Sourcing Process (GSP). This ensures a selection of premium suppliers and to secure the purchasing segment strategy implementation for critical items.

Segment Strategy

Data Collection

Identify Potential Suppliers

Initial Negotiation

Quotes Evaluations

RFQ

Prepare Supplier Choice

Final Negotiation & Implementation

Requirement Specification and Value Analysis

1) Compressed Gas Cylinders (CGCS) Non returnable or Disposable Cylinders 2) Chemical Enforcement Administration (CEA) Listed Chemical and highly controlled compound It should follow the requirements of Stanford Universitys Controlled substances and Precursor chemical program. 3) Chemical Management Services (CMS) Provide Additional Controls. It provides more Security. Limited access. Use rigorous inventory control.

Schill and Seilacher Group is a reliable partner for Chemicals. Superior Quality On time delivery. Competencies in manufacturing process. Comparison
Supplier Schill & Seilacher Group China Rubber Industries Supply Value CIF 1500/ per ton CIF 1800/ per ton Lead Time 2 weeks 3 weeks

Sourcing Management Process

Procurement policy is an integral part of procurement process. It will drive for transparency, adherence to laws, standards and continuous improvements To get the best price and quality regulations, minimum

To use the existing preferred supplier lists available in order to decrease the number of used suppliers and utilize already existing agreements
To make sure that your company is legally protected

To have a professional approach to your suppliers

To get increased cost control Avoidance of long discussions around why and how to source

Principles Health and Safety Fair business practices Environment protection Human rights Local community and development

Supplier Scoring and Assessment

An enterprise should measure supplier performance because:

You cant manage what you dont measure.

If you measure suppliers, they will improve. You can uncover and remove hidden waste and cost drivers in the supply chain. You can facilitate supplier performance improvement, thus improve performance of the whole supply chain You can make informed business decisions that impact the enterprise.

Supplier assessment at Loadstar

Supplier assessment is a responsibility of the sourcing team of Loadstar,

They have to measure the performance based on a pre-designed criteria and document it. After a particular supplier is selected, their performance is assessed quarterly. supplier assessment is done in the begging of the relationship to identify potential suppliers. Often times the same tools are used to measure their performance continuously as well.

The criteria used consist of; Right Time and Right Quantity - On time delivery in full- how well the delivery dates are met with the required full quantity Right Quality - First pass yield - the rate of passing the sample test for each of the lot imported-, Right Price - Last purchased price- the rate of hike are considered Right Time - Full filling Purchase order requirements- sending completed shipping documents and quality certificates in time Number of other discrepancies and complains about the product.

These components are given appropriate weights as per the decision made by the sourcing team .

New Vendor Development and Enlistment

Generally supplier development can be divided in to 3 categories within this organization, 1. Basic supplier development Seek and find suppliers who has the capacity for the continuous supply Test lab scale sample In plant 1st trial sample test In plant 2nd trial sample test sourcing from the same vendor Evaluating the supplier on performance and communicate it to the supplier supplier qualification 2. Moderate supplier development 3. Advanced supplier development

Negotiation and Supplier Selections

The criteria mainly consist on components such as; On time delivery in full- how well the delivery dates are met with the required full quantity First pass yield the rate of passing the sample testing for each of the lot imported

Rejection of material- rate of rejection due to quality issues

Last purchased price- the rate of hike are considered Full filling Purchase order requirements- sending completed shipping documents and quality certificates in time Number of other discrepancies and complains about the product. The module used for the same is Material Management (MM) module.

Contract Management and Supplier Relationship Management

Successful supplier relationships require recommendations, metrics and incentives.

two-way

information,

Most companies focus on what suppliers can do for them rather than on what they can do with the supplier to lower costs.

A true partnership leverages the total production cost to both parties' advantage.

At Loadstar, the volume ordered by loadstar is very minimal; it has very little bargaining power.

But Loadstar always tries to keep a very good relationship with these suppliers and their Sri Lankan agents.

Information sharing practice- the suppliers also tend to be more cordial and close in their partnership with Loadstar.

Loadstar always seeks advice and assistance in developing its processes; whenever there is a process improvement they involve the supplier agents.

Risk Management in Sourcing and Strategic Sourcing

Risk Management Process in Loadstar can be presented as follows;
Establish the Context

Identify the Risks

Analyze Risks

Monitor and Review

Risk Management Plan

Evaluate & Prioritize the Risks

Treat Risks

Steps in a strategic sourcing process Assessment of a company's current spends (what is bought where?) Assessment of the supply market (who offers what?) Total cost analyses (how much does it cost to provide those goods or services?) Identification of suitable suppliers Development of a sourcing strategy (where to buy what considering demand and supply situation, while minimizing risk and costs) Negotiation with suppliers (products, service levels, prices, geographical coverage, etc.) Implementation of new supply structure Track results and restart assessment (continuous cycle)

Legal aspects of Sourcing and Environmental Procurement

Global sourcing managers must stay abreast of tariffs, trade regulations and geopolitical landscapes that are constantly in flux. Sourcing managers to have a solid understanding of the Harmonized System (HS) Code and International Commerce Terms (Inco-terms). Green' procurement is the selection of products and services that minimize environmental impacts. Currently Loadstar is considering green procurement countries to source their all requirements for manufacturing tyres.