STRATEGIC SOURCING

  

 Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. In a production environment, it is often considered one component of supply chain management. Strategic sourcing techniques are also applied to nontraditional areas such as services or capital.

      
         Strategic sourcing is the first rung of the ladder. And once it's combined with strategic supplier management and effective day-to-day purchasing activities, the outcome is true supply advantage. A business or organization does what it does. It provides a service or it makes things for sell. The service it provides or the manufacture of the goods is its core business. It’s reason for being. During the course of it’s business, the organization will have to pay for things including labor, premises, raw materials, services etc. and traditionally, the sourcing of these goods and services was done in response to the identification of an individual business need. Business needs could be local or global and as a result of a nonaligned procurement policy, the organization may have found itself with many suppliers for the same category of goods or services and paying a wide range of prices. Without a strategic approach, no overall view of the sourcing costs and efficiency is taken and the profits of the business are effected.

    Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. Strategic sourcing requires analysis of what an organization buys, from whom, at what price and at what volume. Strategic sourcing differs from conventional purchasing because it places emphasis on the entire life-cycle of a product, not just its initial purchase price. Strategic sourcing software modules can facilitate the approach by standardizing sourcing requirements and providing users with federated data technology with which to share information about products, markets and business needs. The systems on the market that enable strategic sourcing are still often labeled as procurement software, sold within enterprise resource planning  (ERP) systems, supply chain management systems or standalone products.

What is Kanban?

Kanban is a new technique for managing a software development process in a highly efficient way.

 Kanban   underpins Toyota's "justtime" (JIT) production system.

 Although producing software is a creative activity and therefore different to mass producing cars, the underlying mechanism for managing the production line can still be applied.

Kanban became an effective tool in support of running a production system as a whole, and it proved to be an excellent way for promoting improvement. Problem areas were highlighted by reducing the number of kanban in circulation.One of the main benefits of Kanban is to establish an upper limit to the work in progress inventory, avoiding overloading of the manufacturing system.

 Other systems with similar effect are for example CONWIP.

Kanban also is a method for managing knowledge work with an emphasis on just-in-time delivery while not overloading the team members. In this approach, the process, from definition of a task to its delivery to the customer, is displayed for participants to see and team members pull work from a queue.

Kanban can be divided into two parts:

Kanban-A visual process management system that tells what to produce,when to produce it,and how much to produce.

The Kanban method –

 An approach to incremental, evolutionary process improvement for organizations.

A software development process can be thought of as a pipeline with feature requests entering one end and improved software emerging from the other end.

Inside the pipeline, there will be some kind of process which could range from an informal process to a highly formal phased process. In this article, we'll assume a simple phased process of:

 (1) analyse the requirements, (2) develop the code, and (3) test it works.

The Effect of Bottlenecks

A bottleneck in a pipeline restricts flow. The throughput of the pipeline as a whole is limited to the throughput of the bottleneck.

Using our development pipeline 

as an example: if the testers are only able to test 5 features per week whereas the developers and analysts have the capacity to produce 10 features per week, the throughput of the pipeline as a whole will only be 5 features per week because the testers are acting as a bottleneck.

If the analysts and developers aren't aware that the testers are the bottleneck, then a backlog of work will begin to pile up in front of the testers.

The effect is that lead times go up. And, like warehouse stock, work sitting in the pipeline ties up investment, creates distance from the market, and drops in value as time goes by.

Inevitably, quality suffers. To keep up, the testers start to cut corners. The resulting bugs released into production cause problems for the users and waste future pipeline capacity.

If, on the other hand, we knew where the bottleneck was, we could redeploy resources to help relieve it.

 For example, the analysts could help with testing and the developers could work on test automation.

What is Inventory Management?

Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.

Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.

Calculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in case an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be interrupted due to a lack of essential parts in the operation supply inventory.

Inventory management is not limited to documenting the delivery of raw materials and the movement of those materials into operational process. The movement of those materials as they go through the various stages of the operation is also important. Typically known as a goods or work in progress inventory, tracking materials as they are used to create finished goods also helps to identify the need to adjust ordering amounts before the raw materials inventory gets dangerously low or is inflated to an unfavorable level.

Finally, inventory management has to do with keeping accurate records of finished goods that are ready for shipment. This often means posting the production of newly completed goods to the inventory totals as well as subtracting the most recent shipments of finished goods to buyers. When the company has a return policy in place, there is usually a sub-category contained in the finished goods inventory to account for any returned goods that are reclassified as refurbished or second grade quality. Accurately maintaining figures on the finished goods inventory makes it possible to quickly convey information to sales personnel as to what is available and ready for shipment at any given time.

In addition to maintaining control of the volume and movement of various inventories, inventory management also makes it possible to prepare accurate records that are used for accessing any taxes due on each inventory type. Without precise data regarding unit volumes within each phase of the overall operation, the company cannot accurately calculate the tax amounts. This could lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an independent audit.

CUSTOMER SATISFACTION

CUSTOMER SATISFACTION IS IMPORTANT IN QUALITY IMPROVEMENT

Based on the observation that most organizations compete based or on quality and customer satisfaction. companies in industries such as automotive manufacturing industry , banking , consumer electronics , and health care priority is customer satisfaction and quality. Indeed , as we move closer to the twenty-first century , companies rely on quality results and customer satisfaction as the best and preferred way to gain market share and maintain a competitive edge in and outside the country.Now most of the companies are competing for customer satisfaction is not competing to develop the technology available is seen now.While the matter was clearly seen in Malaysia or in abroad.

For example, quality and customer satisfaction are also important for the future of the United States as competitors around the world . The government expects significant growth in exports in the 1990s played a key role in addressing the trade balance and bring the economy out of recession into a period of sustained long-term growth . For this scenario to be true, American companies must change the way in which they compete .

The importance of quality worth it for many reasons. With an interest in quality, everyone benefits eg customers, employees, management , shareholders, and the nation. For example , a comprehensive and effective management of the supply channel quality and efficiency by purchasing translate into increased manufacturing flexibility , competitive advantage based on technology , protection from price competition in finished products , and competitive advantage based on a long term time.

Actually just quality not enough, quality can only be assessed by the clients. all other opinions are considered irrelevant. For example, how do organizations purchase function can only relevant in relation to how services and product suppliers to meet or exceed customer (user) expectations. mean improvement in quality is important not only for the company but it is important to get the customer care satisfaction.For the short term, to double profit company should put a high price compared to other competitors.If the increase in quality, the market will rise and it will be able to has created a a good environment for economic growth and for suppliers.

Purchasing activities

   Purchasing is primarily responsible for inbound flows into an organization, whereas logistics spans both inbound and outbound relationships and material flows.

   Purchasing was once looked upon primarily as a service function. As such, its responsibility was to meet the needs of the manufacturing function or other internal functions for which it was buying. It was not the responsibility of purchasing to question those needs,long-term relationships with suppliers, or to understand the needs of the end customer.

   This perspective severely limited the contribution that purchasing could make to the firm. Further, purchasers had to focus primarily on a narrow set of activities to serve, the needs of the internal interlaces, such as production, marketing, operations, and others who needed to procure something from outside the organization. The scope of purchasing activities was defined and limited by those inside the organization.

   Purchasing focused on getting the right product or service, to the right place ,at the right time, in the right quantity, in the right condition or quality, and from the right supplier at the right price.

   Typically, purchasing was not seen as an activity of strategic importance. It involved following a series of prescribed steps, which included writing up a purchase order, contacting suppliers for pricing, and sometimes following up on a supplier who failed to deliver.

   The Role of Purchasing in the Supply Chain is an integration of business processes from end user through original suppliers that provide products, services, and information that add value to customers and make customers feel satisfied with the services provided through the purchase which carried out.

  The strategic role of purchasing is to perform sourcing-related activities in a way that supports the overall objectives of the organization. Purchasing can make many contributions to the strategic success of the organization through its key role as one of the organization's boundary-spanning functions.

   1. Access to external markets. Through external contacts with the supply market, purchasing can gain important information about new technologies, potential new materials or services, new sources of supply, and changes in market conditions. By communicating this competitive intelligence, purchasing can help reshape the organization's strategy to take advantage of market opportunities.

   2. Supplier development and relationship management. Purchasing can help support the organization's strategic success by identifying and developing new and existing suppliers. Getting suppliers involved early in the development of new products and services or modifications to existing offerings can reduce development times. The idea of time compression getting to market quickly with new ideas -can be very important to the success of those ideas and perhaps to the organization's position as a market leader or innovator. Among the primary purchasing activities that influence the ability of the firm to achieve its objectives are supplier selection, evaluation and ongoing management (sourcing), total quality management, and purchasing planning and research.

   3. Relationship to other functions. Virtually every department within an organization relies on the purchasing function for some type of information or support. Purchasing's role ranges from a support role to a strategic function. To the extent that purchasing provides value to other functional areas, it will be included in important decisions and become involved early in decisions that affect purchasing. Being well informed allows the purchasing function to better anticipate and support the needs of other functional areas. This support in turn leads to greater recognition and participation.

   Purchasing often has the same functional reporting relationship as logistics, which is helpful for coordinating material's management. Purchasing and logistics need to work closely in coordinating inbound logistics and associated material rows.