Developing a 5 year Supply Chain Strategy: IITA AS A CASE STUDY
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Transcript of Developing a 5 year Supply Chain Strategy: IITA AS A CASE STUDY
George CooperNovember 2009
3 KEY WORDS
In Developing a 5 year Supply Chain Strategy
REVIEW
DEVELOPMENT
CONTROL
coles
In Developing a 5 year Supply Chain Strategy
There is a need to:
• Understand where money is spent
• Evaluate strengths and weaknesses within current organisation and its existing strategy
• Plan short, mid and long term
• Develop strategy based upon evidence and data
• Develop KPIs to ensure strategy is on course
• Develop systems and staff to maintain the course
The Vision and Strategy
Need for vision and strategy must balance:
• Financial guidelines and limits
• Scientific and organisational objectives and desires / needs
• Growth and learning of internal personnel and beneficiaries
• Requirements of all stakeholders internal and external
IITA Annual Report
• Total Funding $US 51.09 million
• 94.2% from CGIAR
• Expenditure $US 50.747 million
• 83.3% for program expense
• $US 16.7 million for management and general expense
IITA Annual Report
CGIAR priorities:
• 33.5% Sustainable management of resources
• 31.1% Generic improvement
• 15.0% Improving policies
• 11.1% Agricultural diversification
• 9.4% Sustaining biodiversity
IITA
Likely Financial priorities:
• Maintain and improve KPIs and efficiencies to generate continued and increased support and funding.
• Help to maximise communication of work and benefits.
• Maximise use of funding for scientific resources by optimum efficiency in supply chain
IITA
Likely Stakeholder priorities:
• Effective and efficient use of funds
• Productive meaningful output from funds
• Real cohesive food improvement research
• Maximise productivity and communication of results
• Viable farming and food production research
Opportunities• Scientific Research fully supported• Maximise funds available for research• Minimise waste• Minimise Cost• Improve Efficiency• Improve Bottom Line / Cash availability • Alliances with manufacturers rather than agents• Alliances with Importers• Minimise expenditure on stock and develop fluid
supply chain.• Items where needed and on Time• People being fed
Threats• Ineffective utilisation of funds resulting in less
research and loss of funding confidence• Possibility of extended supply chains leading to
delays, shortages and wasted time.• Exposure to excess stock and subsequent
obsolescence• More effective use of funds by other organisations
leading to greater confidence in their research / operations
• Supply / continuity / availability• Items logistically unavailable and late• People starving
IITA
Weaknesses, opportunities and threats may include:
• Price / cost• Quality of goods and services • Reliability of supply (Availability on time)• Service levels• Communication• Impact of loss of funds both to program and
future funding
The First Steps Towards Solution
• Identify Problems
• Identify Causes
• Effect Solutions
• Measure
The Process of 5 Year Improvement is therefore to:
• Understand causes of problems• Understand research, operations and funding• Agree goals and direction• Devise strategy• Effect solutions and KPIs• Involve, motivate and train staff• Introduce controls• Develop strategy and innovative solutions• Involve suppliers and move forward
Developing the Purchasing / Supply Strategy and Team for 5
year plan
Requires clear understanding of the role
Role of Purchasing and Supply:
To help and advise on:
• Minimising cost and improving bottom line / research funding
• Satisfying customers re service (internal and external)
• Increasing efficiency• Mirroring supply to demand• Developing sourcing and supply chain strategies
Apply Best Practice Purchasing and Develop Effective 5 Year Supply Chain:
• Researching and understanding the internal and external problems and market thoroughly
• Developing the best overall supply solution re price, quality and supply reliability
• Consolidating spend (maximising opportunity)
Apply Best Practice Purchasing and Develop Effective 5 Year Supply Chain:
• Rationalisation of suppliers with regard to price, quality of service and reliability
• Apply: – Negotiation– Cost reduction– Value Analysis– Vendor Rating
Apply Best Practice Purchasing and Develop Effective 5 Year Supply Chain:
• Supplier development / relationship building• Determining the total cost of acquisition• Rigid control of pricing, freight and services• Buying team becoming professional enough to
warrant being fully involved in long and short term strategic decision making and direction
• The value of purchasing to the bottom line being recognised at all levels throughout the entire organisation
Likely Timescale
• 0 – 3 Months
Review current situation including systems, controls, staff, problems, suppliers
• 3 – 12 Months
Change and modify problem areas and create competitive market atmosphere supplier review. (Consider supplier days, conference, e auctions etc). Introduce system and administrative controls etc
• 12 – 20 Months
Continue process of change and introduction of new suppliers, staff reviews, training
Likely Timescale
• 20 - 24 Months
Review, analyse and modify. Introduce 360 degree feedback
• 24 – 48 Months
Conduct further improvements taking account of market changes
• 48 – 60 Months
Further review and hone ALL
Food for Thought
“The Future Viability and Funding of IITA may Depend upon Purchasing and the
Supply Chain”
The Purchasing Pie
Materials
55%
Labour
24%
Overheads
15%
Profit
6%
The average purchasing department spends over 50% of what the organisation receives as
income
Purchasing and the Bottom Line
Apportionment of Sales Revenue
A 5% reduction in bought out costs can increase
Bottom line Cash by 25%
100%
50%
Profit
Bought Out Materials &
Services
Overheads
Labour
Lean Thinking Supply
Includes minimising waste in any form including:
• Minimal stock solutions• Demand driven supply• Direct to customer supply• Simplified operations • Change• Challenging current practices and suppliers
Implementing Lean Thinking in the Supply Chain
• Is about accepting the need for change
• Planning change
• Implementing change
• Managing change
• Making it work
Improving the Productivity of Capital
Purchasing Efficiency
Supply Chain Efficiency
Sales Revenue
Costs
Inventory
Cash
Fixed Assets
Receivables
PROFIT
Capital
Employed
Return onInvestment
Purchases & Stocks – How they affect Funds and Bottom Line
Current Assets
Year 1 £5,100.0
Year 2 £3,800.0
Current Liabilities
Year 1 £300.0
Year 2 £1,200.0
Other Costs
Year 1 £16,700.0
Year 2 £15,400.0
Purchases
Year 1 £18,800.0 (50.7%)
Year 2 £16,300.0 (45.2%)
Fixed Assets
Year 1 £5,000.0
Year 2 £5,500.0
Working Capital
Year 1 £4,800.0
Year 2 £2,600.0
Total Costs
Year 1 £35,100.0
Year 2 £31,700.0
Sales Turnover
Year 1 £37,100.0
Year 2 £36,100.0
Total Capital Employed
Year 1 £9,800.0
Year 2 £8,100.0
Profit
Year 1 £1,600.0 (4.3%)
Year 2 £4,400.0 (12.3%)
Return on Investment
Year 1 16.3%
Year 2 54.1%
BALANCE SHEET
PROFIT & LOSS ACCOUNT
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