International Purchasing Course _ 2018_part I.pdf

INTERNATIONAL PURCHASING IN THE INDUSTRY By David PAYEN – Purchasing & Transport Manager at STERIMED [email protected]

CONFIDENTIAL

Avant-propos

Ce cours dresse une passerelle pragmatique entre le monde universitaire et le monde industriel en matérialisant les étapes d’une demarche achat. Son objectif est de donner aux étudiants la méthodologie d’approche de l’expression du besoin à la construction d’une demarche ordonnée et professionnelle vers la gestion et la contractualisation des engagements externes, Tout en passant par la gouvernance fournisseurs et en s’apuyant sur la stratégie de l’entreprise.

Planning CM / TD

FORMATION

INTITULE DU COURS ET PRECISIONS CM/TD/GR

SEMAINE DU …/…./…. AU …/…/….

JOUR

HORAIRES

M2 CI

INTERNATIONAL PURCHASING / CM

15JA au 21JA 2017

18JA

17h à 19h

M2 CI

INTERNATIONAL PURCHASING / CM

22JA au 28JA 2017

25JA

17h à 20h

M2 CI

INTERNATIONAL PURCHASING / CM

29JA au 04FE 2017

30JA

17h à 19h

M2 CI

INTERNATIONAL PURCHASING / CM

29JA au 04FE 2017

01FE

17h à 20h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 2

05FE au 11FE 2017

08FE

17h à 19h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 2

12FE au 18FE 2017

15FE

17h à 19h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 2

19FE au 25FE 2017

22FE

17h à 20h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 2

26FE au 04MAR 2017

01-mars 17h à 20h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 1

05MAR au 11MAR 2017

08-mars 17h à 19h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 1

12MAR au 18MAR 2017

15-mars 17h à 19h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 1

19MAR au 25MAR 2017

22-mars 17h à 20h

M2 CI

INTERNATIONAL PURCHASING / TD Groupe 1

20MAR au 01AVRIL 2017

29-mars 17h à 20h

Class in English

What about your English level?

A brief description of my education and professional career

1988 – 1990:

DUT Génie Mécanique et Productique (France)

1990 – 1992:

Bachelor of Engineering (Beng) in Mechanical Engineering Coventry Polytechnic (UK)

1992 – 1993:

Master Of Science (Msc) in General Engineering Coventry Polytechnic (UK)

A brief description of my professional career 1995 – 2000:

Project / Product Engineer at Delphi (Automotive Tier 1*) Various locations: Paris, Sandusky (Ohio, US), Cadiz (Spain) Experiences in Manufacturing Support, Product Design, Project management with customers such as Daimler, FIAT

TIER 1 Supplier Original Equipment Manufacturer (OEM) Like PSA, BMW, FIAT… Few Manufacturers

TIER 2 Supplier Like Delphi, Valeo… TIER 3 Supplier

Few Suppliers Plenty of Suppliers

Few Suppliers

A brief description of my professional career

2001 – 2004:

Supplier Quality Engineer at Delphi Paris Experiences in supplier quality development for new project launch

2005 – 2009:

Category Buyer at Delphi for Europe Various locations: Paris, Barcelona European Management of Suppliers from Sourcing to regular production in casting category.

A brief description of my professional career as a Buyer is a global Tier 1 Supplier with billions of USD Turnovers, composed of different business units … One of the products supplied by DELPHI is for example the Diesel Fuel System, part of the DIESEL Sytem Business Unit. Inside of a business unit, a purchasing organization is composed of Category (Portfolio) Buyers where each buyer is expertise in its own category and able to buy not only for one product but products from different application. Common Rail Fuel System Example here after:

Buyers such as:

NEED:

Forging Category Buyer Electronic Category Buyer Rubber Category Buyer Tubing Category Buyer Etc… Each buyer responsible of few Dozen millions of Euros

A brief description of my professional career 2010 – now:

Purchasing/transport Manager at STERIMED (Amélie les Bains) Experiences in various types of purchasing / Supply Chain / Team management

In terms of raw material and Packaging, I am currently in charge of 35 Millions Euros of Purchase. As a smaller size company and lower resources, we have to concentrate our expertise on High Value Categories.

Program

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a Key role? Internal interfaces Categories of Purchasing Suppliers relationship Purchasing Strategy: some fundamentals Competences needed for a buyer Purchasing and Procurement Process

Program PART II: Direct Purchasing : From RFQ* to Supplier Selection and the industrial follow-up

Overview From RFQ (Request For Quote) to Contract set-up… Preparation of the RFQ Analysis of the quotes and Supplier Selection Industrial Validation of the Supplier Contract Application Industrial Follow-up (Key Performance Indicators) Commercial Indicator Quality Indicator – Non-Compliance Management Procurement Indicators

Program PART III: Indirect Purchasing : The various Types of « sourcing » and its management Purchasing in Investment Purchasing in Maintenance Purchasing in Transport Purchasing in Energy Other types of Purchasing

PART IV: Conclusion – Questions / Answers

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? 1- Purchasing is a “Support” function for companies looking for continuous improvement in regards to the evolutions and the constraints of the market. 2- Purchasing Function needs to adapt its activities with the market changes: Suppliers Evaluation Strategic Suppliers Management

Simplification and Standardisation of the Purchasing Process

PURCHASING

Complete The Right Sourcing

Globalization of Products and Services Cost optimisation

Risk Definition and Management

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? 3- Purchasing is contributing to the financial results of the company with: -

A good understanding of the needs and a proper globalization A good harmonization of the internal processes (Manage the duration of the process) Reduction of the global cost

One of the main contributors for the company profit margin !

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? Example of Company Income Statement Report to show Purchasing share and importance: Current State

Purchasing 55%

NET COMPANY TURNOVER

76 914 k€

Manufacturing Fixed Cost Energy Purchase Raw Material (RM) Purchase Transport Expenses

- 24 090 k€ - 4 994 k€(6,5%) - 33 838 k€ (44%) - 3 462 k€(4,5%)

Other Costs (SG&A)

- 7 220 k€

EBITDA*

3 310 k€ (4,3%)

With 3% RM Saving

- 32 823 k€

4 325 k€ (5,6%)

* Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance without having to factor in financing decisions, accounting decisions or tax environments.

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? 4- Purchasing is securing the relationships “uphill” (Suppliers)of the company by: -

Referencing and continuous evaluation of the suppliers Contract Negotiation Implementation of the appropriate techniques (Co-design, Innovation,..) Follow-up of the financial and manufacturing relationships

Guarantee the stability of the suppliers relationships !

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? - Example of supplier relationship failure: Lack of product deliveries or Major Quality defect that would stop the manufacturing lines of your own company: With STERIMED: A day of “shutdown” may cost up to 100 k€ / day With my previous company DELPHI: A day of “shutdown” may cost few hundred thousand Euros …

PART I: Introduction : General Purchasing Overview in Industry Why Purchasing has a key role? 5- Selecting the right suppliers with fundamentals such as:

- The supplier support the Research and Development in order for your company to ensure the leadership in your products

- The supplier initiate Cost Improvement Projects in order for your company to remain competitive

- The supplier ensure their own positive operating income stability

PART I: Introduction : General Purchasing Overview in Industry Internal Interfaces

PART I: Introduction : General Purchasing Overview in Industry Why do we purchase? -

To consume (also called “Indirect purchasing”): -

-

-

Through investments General expenses Consulting, Interims,…

To integrate (also called “Direct Purchasing”) -

Through the manufacturing process of your company

-

Trade products

To resell

Three different orientations which correspond to three types of purchasing

PART I: Introduction : General Purchasing Overview in Industry Categories of Purchasing - Direct Purchasing Definition: Example:

Purchased products which are directly used for the manufacturing of the finished goods in your industry DELPHI Company as a manufacturer of steering columns

Direct Purchasing consist of purchased products such as the wheel, screws,… Products which are directly linked to the steering column assembled by DELPHI.

PART I: Introduction : General Purchasing Overview in Industry Categories of Purchasing - Indirect Purchasing Definition:

Sourcing of all goods and services for a business that enable its activity, such as: Travel Management, IT related services (hardware, software) HR related services (recruitment agencies, training) Facilities Management and office services (Telecoms, furniture, cleaning, catering, printers) Utilities (gas, electricity, water), Consumable (Grease, Oil etc.) Maintenance, Capital Goods (Plant & machinery) Transport

PART I: Introduction : General Purchasing Overview in Industry Categories of Purchasing - Trade Products Definition:

a movement whose goal is to help producers in developing countries to get a fair price for their products

Example:

Within STERIMED Sales Portfolio, we promote trade products such as Medical Plastic Films – This product is not manufactured by STERIMED but by a manufacturer of film not involved in medical application. Goal is to use STERIMED Sales Worlwide organization in order to better support the sales of trade products (which would not be feasible short term for a company not involved in Medical Sales )

PART I: Introduction : General Purchasing Overview in Industry Supplier Relationship - Frequently, a long term relationship is implemented for Direct Purchasing Selecting a supplier for a new business opportunity is very crucial If the sourcing decision was not good, you may spend more time and more money to Resource a new supplier In Automotive industry, new product life is 5 years in Series and at least Five years in Aftermarket. In Medical industry such as Sterimed, very often at least ten years … - For Indirect Purchasing, it varies … A capital investment such a manufacturing equipment will be more crucial than sourcing office furniture, car rental services, travel agency services …

PART I: Introduction : General Purchasing Overview in Industry Supplier Relationship - A long term relationship is also implemented for Trade Products

Marketing Organization of your company will promote trade products to Customers And it is then vital to make sure to carry out the best long term relationship possible with the Company which will manufacture your trade product!

PART I: Introduction : General Purchasing Overview in Industry Purchasing Strategy: some fundamentals Implement contracts: To establish a price agreement during the contract period To determine the payment terms and the incoterms (FCA, DAP, DDP,..) To establish a cost reduction program along the contract period To secure a manufacturing capability at Supplier Site by providing a yearly Volume Forecast (but never an engagement from the buyer) Manage a quality performance board and follow-up quality improvement plan through audits and action plans

PART I: Introduction : General Purchasing Overview in Industry Purchasing Strategy: some fundamentals Study alternative product/supplier in order to have in place a backup solution, anticipate new market demands, … Get the best understanding of the supplier cost breakdown in order to ensure a better budget preparation and to support in further negotiation Support in minimizing stock value by consignment stock implementation or Safety stock at supplier site

Right size the number of suppliers in order to have a better followup of the suppliers and to allow leverage negotiation when sourcing Avoid One Purchased Product = One supplier Look for several products at same supplier

PART I: Introduction : General Purchasing Overview in Industry Main Competences needed for a buyer - Good communication skills The buyer is the interface between the plant needs and the suppliers and vice-versa - Good work organization The buyer must be capable of gathering different source of data as he might be Involved in different types of purchasing - Be curious The buyer must investigate the market in order to learn any technology improvement, Cost improvement, etc… - Good negotiation skills

PART I: Introduction : General Purchasing Overview in Industry Purchasing and Procurement Process

A process is a system of activities utilizing resources in order to transform incoming elements to a result of services.

The process responds to the question: “What to do?” whereas a procedure responds to the question : “How to do?”

A process will be composed then of procedures

PART I: Introduction : General Purchasing Overview in Industry Purchasing and Procurement Process

PART I: Introduction : General Purchasing Overview in Industry Purchasing and Procurement Process

PART I: Introduction : General Purchasing Overview in Industry Purchasing and Procurement Process

PART I: Introduction : General Purchasing Overview in Industry Purchasing Strategy When defining a purchasing strategy, it involves to know the needs of your company, to handle the capacity of your suppliers in order to satisfy the customers demands

Company Needs

Customers

Suppliers

SATISFY Needs Kinds of Market

Sales Impact

Purchasing Strategy

Those elements represent the fundamentals needed for driving an efficient purchasing organization!

PART I: Introduction : General Purchasing Overview in Industry Purchasing Strategy Elaborating a Purchasing Strategy is composed of FOUR main phases:

The BUYER in charge of the portfolio will be The the responsible of those phases implementation Internal Company Needs

Portfolio Segmentation

Suppliers Market Analysis

Risk Evaluation (Financial, Technical)

Purchasing Strategy Definition (Objectives, Action Plan)

Implementation & Follow-up