What Is Centralized Procurement?

Picking the appropriate system of control is always difficult for an organization. And when it comes to procurement, the decision becomes crucial for the supply chain management. Centralized procurement is the purchasing system wherein all branches of the agency, spread over vast geographic expanses, fulfill their procurement requisites through one common purchasing organization.

Usually, it is one specific department that purchases all goods and services as per the needs of all the company branches. A purchasing manager leads it. This structured process gives balance to the organization and reduces costs. It is especially beneficial in finding local vendors in proximity to the company branches.

What Are The Steps In The Annual Planning Cycle?

Different b2b supply chains and manufacturing organizations follow specific steps in the annual planning cycle. Widely, these five steps make up this cycle.

• Strategy Alignment- In an article in Harvard Business Review in 2016 raised two questions. How well can a business strategy support the realization of the company’s purpose? How well can the organization support the achievement of its business strategy? Strategy alignment is a system that ensures that a b2b or any organization’s structure, utilization of its resources, and work culture support its strategy. Wider work environment, awareness, technological upgrade helps in this. It helps in the efficient utilization of resources. It is beneficial in large businesses spread over vast geographical firms or regions having complementary goals.

Moreover, it is often thought that the alignment of business strategy and HR strategy impacts performance. Coalignment of business strategy, business structure, IT strategy, and IT structure contributes to performance. Alignment also generates a positive work climate, staff engagement, a solid commitment to core values, and fewer in-fighting.

• Operational Forecasting- Manufacturing, new product generation, and logistics, come under operational processes. Purchase managers and procurement professionals are in charge of the same. However, organizations implement forecasting methods such as time series analysis, projection, and causal models to predict business outcomes. The resultant estimates from these forecasts help managers to develop and implement production strategies accordingly. Operations managers contribute to the entire process to deliver the final product to the end-user. These forecasts enable budget formulation, sales, and demand planning.
• Financial Forecasting- Financial forecasting involves collecting requisite data, processing, estimating, and predicting the possible future performance of a business. This estimate is crucial in getting a fair understanding of how the business might look financially in the near future. Like all forecasting, historical performance data enables visibility into the future. These help predict future trends so that the business can prepare accordingly.
• Capital Facilities Planning- Capital planning proposes specific work or projects and estimated costs for the future. It allows businesses to better understand the future of their assets and plan in accordance. Effective capital planning has numerous merits. It facilitates the organization’s strategic objectives and priorities, long term goals, ensures understanding and coordination among key decision-makers, and provides a viable platform for communicating the same to shareholders about the financial needs and priorities of the business.
• Facilities Planning- Facilities planning is the formulation of a long-term and progressive strategy for managing a single facility or an organization’s complete space area that supports its operation for present and future scenarios.
• Annual Operating Plan- The last stage of this cycle is developing an annual operating plan, which is a document that defines the financial, physical, and human resources required to achieve the short-term goals of the business. In other words, it is a roadmap for operations within an organization for a given time, usually a year.

What Is The Importance of Last-Mile Logistics?

One of the most prevalent problems of b2b and retailers is of the last mile. While it is the key ingredient to customer satisfaction, it is also the most costly and time-consuming. The popularity of e-commerce with the ever-increasing number of parcels each day increases customer expectation of fast and free delivery. In keeping up with competitors, retailers are forced to provide the option of free delivery to customers leaving the transportation and logistics intermediaries to shoulder these costs. Last-mile delivery costs make up a substantial portion of the overall cost of shipping — comprising 53% overall.

Other than costs, businesses need to be prepared for the time consumed to deliver the product to the end-user. Tracking the same is costly, and once the product is ‘out for delivery’ it seems to take ages. This process is severely inefficient and includes multiple stops with low drop sizes. In rural areas delivery stops on some routes may be extremely far apart, with only a couple or more parcels to be delivered which takes all day. While urban regions don’t have that issue, delays due to traffic congestion are rampant there.

What is the Use of Ethical Procurement?

Ethical procurement is a blend of source-chain dealing skills and satisfying legalities. Various societies have diverse views on the value of their profit.

Ethical procurement requires alertness of a company’s social and lawful tasks. It also needs a planned tactic to remove immoral behaviours from its procurement actions. A bribery outrage, for example, might result in huge penalties. However, long-term damage to a firm’s status might bring it to the doldrums if it loses its consumers’ trust. As a result, ethical procurement must be pursued.

What are the most significant aspects of direct procurement?

• Long-term relationships – Direct procurement teams tend to cultivate long-term, collaborative relationships with their suppliers to boost quality and improve efficiencies over time. Delivery schedules and consistency directly influence production. The quality of raw materials impacts the final product’s quality and, consequently, the organization’s reputation and credibility. In this process, partnerships with suppliers are typically long-term and collaborative. As a result, companies can spend more time developing and managing supplier relationships.

• Planning – Direct procurement manages the core supplies that the business requires to run its day-to-day operations. As a result, it requires special attention to ensure resilience. Hence, the companies must carefully plan the budget to avoid supply chain disruptions.

• Inventory – Raw materials should be frequently retained in the capital when using direct procurement to enable continuous and defer-free production. It will ensure that the inventory is never empty and that the business grows unhindered.

• Centrally automated – Direct procurement is based on a centralized system in which the category managers devote their time and talent to directly purchase specific goods and services. It enables quick acquisition of products without undergoing any hassle.

• Saving costs – Direct procurement is carried out by a method in which the actual costs incurred for the offering of direct materials are calculated and compared to the price set during negotiations. This ensures complete transaction transparency.

• Deep knowledge – Setting up and orchestrating a global supply network of numerous partners, who collaborate in complex processes, necessitates extensive knowledge and abilities. Because the stakes are high, direct supply chain execution systems must establish connections and visibility between manufacturers, BPO firms, logistics providers, raw material suppliers, banking partners, etc.

• Boundaries – Because most businesses are geographically dispersed, the world is a tiny place for direct procurement. A direct procurement system usually operates worldwide and locally (local in terms of language, currency, user connectivity methods, etc.).

• Supply chain environment – Direct procurement typically has a considerably larger supplier base, and the procedure sometimes requires longer lead times since more valuable items are at stake. As a result, errors in the case of direct procurement have far more weight, and process inefficiencies can cause significant disruptions in corporate operations and result in revenue losses. Hence, direct procurement management is influenced by supply chain mobility and supplier base health.

• Technology – Direct procurement enables businesses to technologically manage their direct product order lifecycles, from funding the supply chain to final delivery. These services connect purchasing organizations with suppliers and provide anticipated billable sales ahead of schedule. They provide more precise and thorough lead-time estimates by offering visibility into the company’s activity and progress. Multiple-level ordering functionality and coordination tools enable enterprises to manage multi-tiered supply chains, making it easier to ship internationally, combine shipments, and keep track of shipping operations.

What Are the Skills Required to Be a CPO?

From numerous surveys conducted, it has been observed that certain common skills are found and required in CPOs.

• Excellent leadership skills are required to oversee the entire production process. Managing and mobilizing cross-functional teams has to be undertaken by a CPO.

• CPOs are in charge of developing new products following the company’s vision and objectives. They have to answer for every new product formulated and manufactured. Thus they need to have a strategic vision for products.

• A CPO must have good communication skills as they have to interact and coordinate with stakeholders, manufacturers, and customers. They need to be keenly empathetic to customer demands, grievances, and possible redressal. Due diligence is a make-or-break moment for a developing business.

• A CPO has to deal with a lot of data regularly. They might be overseeing revenue and profits, churn rate and retention, product engagement, etc. Making data-driven and objective decisions is not always easy but such has to be the expertise of a CPO

Beginning of Advanced Quality Planning

The beginning of AQP dates back to the 1980s when it was developed in the automotive industry. Initially, Ford, Chrysler, and General Motors published it jointly.

It was also included in the QS-9000 Quality Systems Requirement Manual. The intention was to develop universal quality planning principles to provide a common understanding to all their suppliers. The AQP guidelines establish principles and standards to ascertain that customer quality requirements are met.

Phases of Advanced Quality Planning:

1. Planning

2. Product Design and Development

3. Process Design and Development

4. Product and Process Validation

5. Feedback, Assessment, and Corrective Action