Preliminary & Tentative – for discussion purposes only
Strictly Condential
RAW MATERIAL PROCUREMENT PROCESS Policy/Guiding principles
1. Vendors Vendors should should be identified identified at the sample development development stage itself itself functionall team should guide product selection. selection. (this could be a policy for 2. A cross functiona design department also…) 3. Relianc Reliance e on any one vendor especially especially for large and/ or recurring recurring orders should should be avoided. For recurring orders, at least three reliable sources and for other orders at least two sources should be developed. . Financial Financial targets targets should be based on prices that that competitors competitors !especially !especially vertically vertically integrated mills" are able to manufacture/ source at. #. Firm orders orders should be placed placed only after confirmat confirmation ion of sample by the buyer buyer. $. %ervice %ervice level agreements agreements should should be entered with with vendors especially especially for large large and/ or recurring orders. &. 'nno 'nnov vativ ative e sche scheme mes s to redu reduce ce proc procur urem emen entt cost cost shou should ld be iden identi tifi fied ed and and implemented. (.g. financing the supplier by leveraging the company)s availability to raise low cost finance, utilising supplier e*pertise in p roduct development. +. rder rder approv approval al proce procedu dure re shou should ld be base based d on the the valu value e of order order !to !to ensu ensure re management by e*ception".
9. A time action plan for monitoring timely receipt of material of re-uired -uality should be prepared and automated . 1. urchase order cycle cycle times for smaller orders should should be 0ept to to a minimum.
11 11 Proc Proces ess s O!"ec#i$es
o ensure, raw material availability 12. of re-uire re-uired d -uality -uality,, 13. in a timel timely y manner manner 1. at competitiv competitive e prices prices for sample development and order fulfilment !both ma0e to order and direct sales model" .
CS%&s
'PI&s Lin(ed #o CS%&s
A. o ordination ordination with %ales, %ales, design and / or buyer representatives for clear understanding of raw material re-uirements in terms of -uality, time plan
Process
4A to 56 1#. %treamlining of procurement process i.e. elimination of non value value added activities
Financial
16. argeted argeted Vs. Actual ost reduction [C]
Preliminary & Tentative – for discussion purposes only
and pricing limits.
7. Raw material order monitoring and control . Vendor management process 5. (limination of non 8 value added activities from vendor interaction process. (. 7ac0 up plan for delays in procurement
Ris(s W)ic) T)re*#en O!"ec#i$es F. ;ismatch between buyers re-uirements and ordered R; specifications.
Strictly Condential
1&. 9uantum of procurement from intermediaries vis a vis direct sourcing 18. 'nstances of delays in sourcing vis a vis timelines committed in contract review [B, D]. 1:. 'nstances of not updating factory and logistics of changes in R; delivery schedule 47<. 2. =o. of instances of return of fabric to suppliers [B] 21. =on moving inventory !attributable to procurement problems" [A,B] 22. Re>ections/ ?astage on account of fabric defects [A,B, C, D] 2!. %toc0 outs [A,B, C, D] 2". @oss of production time/ overtime !attributable to procurement problems" [A,B, C, D] Customer
2#. otential orders lost on account of high raw material prices !to be ascertained based on customer feedbac0 and benchmar0ing of conversion cost with mar0et rates" [A] 26. 5elay in shipments and instances of airfreight !attributable to procurement problems" [A, B, D] 2$. 5elays and other problems in sample development !attributable to procurement problems" [A,C]
M*n*ge+en# Responses Lin(ed #o Ris(s
(by managing structure,
policy/ process, people and technology front)
C. %ourcing at higher prices
Policy/ Process 28. %ourcing policy/ guidelines !e.g. %@As with suppliers, information e*change programmes" [A, B, C, D, ] 29. 5etailed roduct specification sheet [A] !. ontract review mechanism [A] !1. %ample approval by buyers [A] !2. Alternate vendors for each significant order [B] !!. Vendor management process !mar0et intelligence studies etc," [A, B, C, D] !". %trong internal control system and internal audits !e.g. >ob rotation" [C,!]
'. (rror of >udgement on price forecasts
People !#. A dedicated sourcing team [A, B, C, D, ].
D. 9uality problems
Tec)nology
B. 5elays in procurement on account of unforeseen problems at vendor)s end.
Preliminary & Tentative – for discussion purposes only
E. (*cessive centralisation of power/ control in sourcing department
Strictly Condential
!6. Automation of contract review mechanism [A" !$. Automated time action charts and other e*ception reports #B,C] !8. Validation and other systemic controls [A, B"
