Purchasing training for China management adds competitive advantage for leading global industrial solution company
This project was for a global company dedicated to developing innovative sustainable industrial solutions (compressors, vacuum solutions, air treatment systems, construction and mining equipment, power tools and assembly systems) that create value for their customers in more than 180 countries. In their business, they outsourced and purchased many of the components and products. Thus, it was critical for them to keep a low cost to establish their competitive advantage.
With a significant part of the sourcing activities taking place in China, it was essential for them to have a team of highly proficient and effective purchasing and supply management executives to manage the processes.
For this project, ARC Consulting was asked to prepare a complete training course for their purchasing and supply management staff to improve their skill set and their performance to deliver the desired results.
With a large proportion of components outsourced and purchased, our client is dependent on an efficient and effective purchasing and supply strategy to keep costs low and improve its competitiveness and bottom line. For instance, when the share of material costs in a product is over 60%, it is proven that reducing material cost has greater impact on profit than increasing sales revenue.
A tactic to implement this strategy is to continuously provide opportunities for its staff to hone their knowledge and abilities in this field. Internally, it was very important for the different departments to “speak the same language” to coordinate better the efforts. And externally, it was also important to understand better the suppliers’ perspective on business transactions to optimize the negotiation position.
To support the client on these efforts, ARC Consulting team created a program customized to the client’s business conditions to train their staff and relevant functions. The program was divided into two sections: 1. The Role of the Purchasing Function, 2. Competency Development in 3 Key Tasks: Negotiation Skill, Inventory Management and Supply Logistics, and Risk Management and Legal Aspects.
The program format consisted of theory, class discussion and case studies to enhance the learning experience.
The main topics covered:
The Role of Purchasing Function
- Fundamentals of Purchasing (purchasing strategy evolution, price/profit relationship, product life cycle, etc…)
- Challenges of Global Sourcing (total cost reduction, Risk and Opportunities, sourcing regions)
- Organization models (purchasing functional excellence, decision support model)
- Purchasing and Supply Strategy (market analysis, the 5 forces shaping market competition, segmentation of procurement, the strategic supply wheel, etc…)
- Supplier Selection Process (Search for new suppliers, evaluation criteria)
- Supplier Management (Spending Cube concept, supply performance measurement system, analyzing the relationship, supplier development process, etc…)
- Quality Management (total quality management, six-sigma quality)
- Total Cost Management and Supplier Pricing (understanding pricing, cost analysis process, process and supply chain efficiency, TCO (total cost of ownership), price discipline)
Negotiation Skills in Purchasing and Sourcing
- Introduction to Negotiations
- Key Definitions (interests, ZOPA, BATNA, etc…)
- Fundamentals of Negotiation (planning, techniques, role-play practice)
- Negotiation in 7 Steps
- Outlining objectives
- Assessing balance of power
- Mutual interest and risk
- Negotiation strategy
- Negotiation tactics
- The negotiation process
Inventory Management and Supply Logistics
- Introduction to Inventory Management
- Enterprise Resource Planning
- Dilemma of Inventory Size (rationale for inventory, balancing costs and benefits, EOQ, demand planning, simulation game etc…)
- Concept of Safety Stock
- Measuring Inventory Management Performance (key indicators, cash to cash process, DOS (days of supply))
- Key Factors in Inventory Management (procurement and planning, warehousing and logistics, financial and company-wide targets, purchasing and global supply chain impacts, etc…)
Risk Management and Legal Aspects
- Risk Analysis Methodology
- Law and legal terms and definitions
- Types of Written Contracts
- GTP (General Terms of Purchase)
- GTS (General Terms of Sale)
- Intellectual Property
- Warranties and Liabilities
- Force Majeure
- Insurance and Guarantees
- Contract Performance
- Termination of Contracts
The management at our customer understood clearly the importance of effective and efficient purchasing and supply management as a tool to improve its competitive advantage and boost its market leadership position.
This very comprehensive and detailed program was prepared especially for our customer to raise the level of expertise of its procurement staff and internal organization to elevate their performance to the next level.
The key deliverables are as follows:
- A program customized to the client’s business conditions to train their staff and relevant functions.
- The two sections of the program are: 1. The Role of the Purchasing Function, 2. Competency Development in 3 Key Tasks: Negotiation Skill, Inventory Management and Supply Logistics, and Risk Management and Legal Aspects.
- Savings from purchasing and supply management are foreseeable and the performance of the company’s internal staff and organization is increased.