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Lesson 6 - SCM Sourcing 101- Learn sourcing of materials in procurement, purchasing management - YouTube
Channel: Americo e-Learning
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One of the most important activities of the
purchasing process is the sourcing.
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What is sourcing?
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What are the alternatives?
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How to select suppliers professionally?
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My name is Americo Cunha, in this lesson,
we will be studying the sourcing process and
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its alternatives.
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Welcome, let's start learning.
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Sourcing is the process of identifying, selecting,
and developing suppliers.
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In this video, you have to answer four questions.
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What are the materials required?
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How can the company obtain these materials?
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In the case of purchasing, who and where are
the suppliers?
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The what question lead us to the requirements.
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The how, if the company will be producing
or purchasing the material.
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Alternatives for location, type, size, quantity
are the answers to the questions who and where.
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The purchasing professional should evaluate
alternatives and determine which one meets
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the company requirements and strategy.
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One of the first decision to be made is if
the company will produce internally or buy
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the resource required.
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If decides for producing internally,
the production area should take care of the
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request.
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In the case of purchasing, the company has
some basic alternatives.
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The basic sourcing alternatives are:
(1) Single vs. multiple suppliers
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(2) Local, regional, global suppliers
(3) Retailers, distributors, manufacturers
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(4) Large and small suppliers
We will be working on them with more details
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next.
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Supplier location is important and very frequent
analysis.
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The company can choose suppliers between
who are closer to its facilities or in other
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locations.
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Each alternative has pros and cons
depending on the situation, item to be bought,
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company鈥檚 strategy.
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As we can see, it is clear that companies
usually have fewer suppliers near the facility.
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It can lead to some limitations.
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If the company expands the sourcing radius,
there will be more suppliers to be evaluated
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The benefits of local suppliers are that usually,
the lead time is shorter, the supply risk
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is lower,
and better supplier-buyer relationship,
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although the company can face some capacity
and variety limitations,
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also, the unit cost tends to be higher than
offshore suppliers
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Global suppliers may give more capacity and
lower unit cost
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But it comes with longer lead time, risk,
and transportation costs.
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How to choose among manufacturers, distributors,
and retailers?
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Some professionals, also call this the comparison
between indirect and direct suppliers
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The supply chain network here shows the 3
options.
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The company can decide to buy direct in bulk
from the manufacturer,
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Or some amount from a distributor,
or even units from a retailer.
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From the manufacturer, the company can get
better prices
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but has to buy large quantities with undesirable
consequences on transportation and inventory
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holding costs.
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From distributors, the company can get the
item for a reasonable price in smaller and
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cross-vendor lots.
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In this case, the company can save in transportation
and inventory costs.
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The retailer is a good alternative, for spot
purchasing,
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Through a quick item replenishment
but usually through a higher price.
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Another option is to purchase from a single
or multiple sources.
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Multiple suppliers can reduce the unit cost,
supply risk,
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And have access larger capacity.
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Single source has the benefit of having
the supply process under better control
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regarding quality and intellectual property
protection
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These are the two last sourcing alternatives
we are evaluating in this lesson.
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A larger supplier can provide more capacity,
variety, and locations,
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but the buyer usually should agree
to standard products
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and contract terms.
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In the other hand, smaller suppliers tend
to be more flexible and
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is a good option when the company needs to
customize materials, services, and supply
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conditions.
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Remember, the purchasing professional
should start with 4 basic sourcing questions.
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What?
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How?
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Where from?
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And Who?
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The evaluation factors discussed in this lesson
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may change, depending on
the individual characteristics of the company,
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its strategy, and purchasing situation
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Thanks for watching, see you in the next lesson
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