The Strategic Procurement Practice Guide (eBook)

Ulrich Weigel is Vice Chief Operating Officer and Head of Purchasing at Leica Camera AG. Over two decades he gained global management experience of strategic- and operational purchasing organizations up to complete supply chains in the automotive-, the consumer goods-, aircraft- and optical industry. Furthermore he also has many years of international experience in project management, strategy developments and lead buyer functions - at Johnson Controls Automotive, Joachim Loh Group at Hailo, the Sell GmbH and since 2009 at Leica Camera AG. Mr. Weigel has extensive global sourcing experience in South East Europe, but especially in Asia (China, Japan and Korea). His passion is modern and sleek purchasing management with continuous and sustainable cost reduction and transparent procurement controlling. Since 2010 Ulrich Weigel acts also as coach and lecturer for purchasing management and global sourcing at various European universities.Marco Ruecker is strategic procurement manager at Leica Camera AG where he leads the efforts of the indirect procurement team and the Leica transfer group. He has advanced knowledge in strategic purchasing management disciplines and proven expertise in cost optimization, supplier management and risk management solutions. Additionally he has strong experience in process engineering and strategy planning and implementation. Mr. Ruecker holds a Master degree in process management and a Bachelors degree in engineering economics.

CoreTrust Europe 6
Preface 7
Science Meets Reality: A Guide for the Modern Buyer 7
Preface for the First German Edition (Translated from German Original Text) 9
Science Meets Reality: A Guide for the Modern Buyer 9
Contents 11
1: Principles of Modern Purchasing 13
1.1 Introduction 13
1.2 Purposes and Aims of Purchasing 14
1.2.1 Operational Purchasing 15
1.2.2 Strategic Purchasing 15
1.2.3 Project Purchasing 15
1.3 The Growing Importance of Purchasing Within the Company 17
1.4 Future Challenges to Purchasing 19
2: The Strategy of Purchasing 21
2.1 Strategic Principles 21
2.2 Principles of the Purchasing Strategy 22
2.3 The Process of Developing a Strategy 23
2.3.1 Strategic Analysis 24
2.3.1.1 Analysis of the Internal Requirements 24
2.3.1.2 Analysis of the External Environment 26
2.3.1.3 SWOT Analysis 27
2.3.2 Target Setting 27
2.3.3 Strategy Development 29
2.3.3.1 Commodity Group Strategy 29
2.3.3.2 Supplier Strategy 32
2.3.4 Tactical Implementation 35
2.3.5 Commercial 35
References 38
3: The Purchasing Organisation 39
3.1 Introduction to the Organisation 39
3.2 Structural Organisation 40
3.2.1 Centralised Purchasing 41
3.2.2 Decentralised Purchasing 42
3.2.3 The Lead Buyer Concept 43
3.2.4 Outsourcing of Purchasing Activities 45
3.3 Operative Organisation 46
3.3.1 The Purchasing Process 46
3.3.1.1 Assessment of Demand 47
3.3.1.2 Enquiry 48
3.3.1.3 Evaluation of Tenders 48
3.3.1.4 Award 49
3.3.1.5 Purchase Order 49
3.3.1.6 Order Confirmation 50
3.3.1.7 Supervision and Control of Deadlines 50
3.3.2 Roles in the Decision-Making Process 51
3.3.3 Process Optimisation 52
3.3.3.1 Quantity Contracts 52
3.3.3.2 Consignment Stores 52
3.3.3.3 Special Price Agreements 53
3.3.3.4 General Terms and Conditions of Purchase 54
3.3.4 Project Purchasing 54
Reference 56
4: Supplier Management 57
4.1 Introduction to the Supplier Management 57
4.2 Supplier Strategy 58
4.3 Supplier Selection 60
4.3.1 Supplier Identification 60
4.3.2 Supplier Analysis 61
4.3.3 Supplier Selection 62
4.4 Supplier Evaluation 64
4.5 Supplier Development 67
4.6 Supplier Controlling 71
4.7 Conclusion 72
Reference 73
5: Global Sourcing 74
5.1 Principles of Global Purchasing 74
5.1.1 Aims of Global Sourcing 75
5.1.2 Strategies and Manifestations 76
5.1.3 New Risks at the International Level 78
5.2 China as an Example of Global Sourcing 80
5.2.1 Incentives and Problems with Regard to Sourcing in China 81
5.2.2 Sourcing in China: Development Stages 83
5.2.3 Implementation 85
5.2.3.1 Identification of Suitable Products 85
5.2.3.2 Feasibility Studies and Market Tests 85
5.2.3.3 Supplier Evaluation 87
5.2.3.4 Supplier Development 88
5.2.4 In-house Resistance 89
5.3 Compliance 90
5.4 Protection of Know-How 92
5.5 Cultural Peculiarities 93
5.6 Future Prospects 95
Reference 96
6: Risk Management with Regard to Purchasing 97
6.1 Principles of the Risk Management 97
6.1.1 Definition of the Risk Concept 98
6.1.2 Legal and Financial Framework Conditions 99
6.1.3 The Economic Importance of Risks 100
6.1.4 Risk Management in Purchasing 100
6.2 The Risk Management Process 101
6.2.1 Identifying Purchasing Risks 102
6.2.2 Evaluation of the Purchasing Risks 103
6.2.3 Controlling the Purchasing Risks 105
6.2.4 Risk Control 106
6.3 Special Safeguarding Against Supplier Risks 107
6.3.1 Analysis of the Supplier Portfolio 108
6.3.2 Reactive Risk Management 109
6.3.3 Active Risk Management 110
6.3.4 Pre-emptive Risk Management 112
6.3.5 Long-Term Measures 117
References 117
7: Methods and Tools for Everyday Purchasing 118
7.1 Procurement Market Research 118
7.1.1 Types of Procurement Market Research 118
7.1.2 Procedure 119
7.1.3 Sources of Information 120
7.1.4 Areas of Application 121
7.2 Value Analysis 121
7.3 ABC Analysis 129
7.4 Portfolio Technique 131
7.4.1 Commodity Groups Portfolio 132
7.4.2 Supplier Portfolio 133
7.5 Price Structure Analysis 134
References 136
8: The Purchasing Negotiation 137
8.1 The Principles of a Purchasing Negotiation 137
8.1.1 Motives for Purchasing Negotiations 138
8.1.2 Negotiating Strategies 141
8.2 Preparation 142
8.2.1 Organisational Preparation 142
8.2.2 Supplier Negotiation Form 143
8.2.3 Negotiation Targets 146
8.3 Communication and Body Language 150
8.3.1 The Communication Square 150
8.3.2 Nonverbal Communication 152
8.4 Negotiating Stages 153
8.5 Negotiating Methods 156
8.5.1 Competitive Negotiating 157
8.5.1.1 Basic Pattern of Competitive Negotiating 158
8.5.1.2 The Power Factor 160
8.5.1.3 The Time Factor 161
8.5.1.4 The Information Factor 161
8.5.1.5 The Complexity Factor 162
8.5.1.6 ``Dirty Tricks´´ 162
8.5.2 The Harvard Concept 164
8.6 Peculiarities in International Negotiations 165
8.6.1 The Ritual of Exchanging Business Cards 166
8.6.2 The Beginning of the Talks 167
8.6.3 Laughing: An Asiatic Means of Managing Conflicts 168
8.6.4 Lose One´s Face 169
8.6.5 Other Peculiarities 169
8.6.6 Conclusion 170
8.7 Evaluating the Success of Negotiations 171
References 173
9: Personnel Development in Purchasing 174
9.1 The Principles of Personnel Development 174
9.2 Requirements for the Modern Buyer 176
9.2.1 Identifying Potential with the Transactional Analysis 179
9.3 Purchasing as a Managerial Function 180
9.4 A Career in Purchasing 182
Reference 184
10: e-Procurement 185
10.1 Basics of e-Procurement 185
10.1.1 Conceptual Definition 186
10.1.2 Basic Types of e-Sourcing Models 187
10.1.2.1 e-Tender 188
10.1.2.2 e-Auction 188
10.1.2.3 e-Collaboration 189
10.1.3 Basic Types of e-Ordering Models 190
10.1.3.1 Sell-Side Models 190
10.1.3.2 Buy-Side Models 191
10.1.3.3 e-Marketplace Models 193
10.1.4 Aims of e-Procurement 193
10.1.4.1 Financial Objectives 193
10.1.4.2 Process Objectives 194
10.1.4.3 Information Goals 195
10.1.4.4 Market Objectives 195
10.2 Practical Application of e-Auctions 195
10.2.1 Preparing for the e-Auction 196
10.2.2 Supplier Acquisition 197
10.2.3 Creating an Electronic Invitation to Tender 198
10.2.4 Executing an Auction Event 200
10.2.5 Verification of Auction Results 200
10.2.6 Long-Term Implementation of e-Auctions 201
10.3 Determining the Potential of e-Ordering 202
10.3.1 Requirements and Supplier Analysis 203
10.3.2 Consideration of Representative Market Solutions 205
10.3.2.1 Marketplace Solution: Mercateo 206
10.3.2.2 Simple-System Procurement Platform 206
10.3.2.3 Pool4Tool System Solution 207
10.3.3 Cost-Benefit Analysis 208
10.3.3.1 Cost Analysis 208
10.3.3.2 Potential Benefits in the Procurement Process 208
10.3.3.3 Further Potential 210
10.3.4 Critical Success Factors 212
10.3.4.1 Utilising Technological Potential 213
10.3.4.2 Learning and Adjustment Effects 213
10.3.4.3 Considering the Consequences of Delegation 213
10.3.4.4 Using the Compound Effect and Network Effects 214
10.3.4.5 Further Recommendations 214
References 215