119155693-case-questions-supply-chain.pdf

7/27/2019 119155693-case-questions-supply-chain.pdf

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Case Questions

1. Compare and contrast Purchasing set-ups in

Optics & Precision vs Automobile Industry.

a.


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2. Identify the potential gaps and problems inPurchasing at Schott Zeiss.

Potential gaps and problems

Since the operating units do not deliver long term production

plans, there was no possibility for long term purchasing planning.

Buyers were limited to selecting suitable sources of supply

The wide range of highly specialized products leads to a huge

number of specialized needs in high quality and small volumes

which led to a limited purchasing power.

Role of purchasing was to find sources of supply with the highest

quality rather than the lowest cost

There was no clear separation between operational and strategic

purchasing tasks. The purchase function is seen as a middleman

rather than being accepted as an important management

function.


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No concepts like purchasing partnerships with

suppliers

Suppliers who were dropped from a preferred

list due to poor performance at one location,

received new orders from another plant


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3. Discuss the key issues in Schott Zeiss whichthreaten the consolidation (for Purchasing) making

it less favorable .

The company always was highly research and engineering driven.

A standard material classification that could be used to identifysynergies could not be materialized.

The computer-systems of the sites were incompatible, and could

not communicate with each other. The organization of Schott did not provide a framework for working

together in cross-functional teams, leading to problems of allocatingcost and time budgets.

There were no consolidation synergies because demand is too

heterogeneous, or consolidation effort was way above what themanagers were willing to invest into the project.

Conflicts between business unit managers, who had complete profitresponsibility, and central purchasing arose.


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4. How will you assess and derive priorities for

various material groups?

Exploit purchasing power

Strategic Items

Form partnerships

Non-Critical Items

Ensure efficient processing

Bottleneck Items

Assure supply


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5. Distinguish between centralized and decentralized

purchasing functions?

Centralized purchasing is where a singlepurchasing department, usually located at thefirm's corporate office, makes all thepurchasing decisions, including order quantity,

pricing policy, contracting, negotiations, andsupplier selection and evaluation.

Decentralized purchasing is where individual,

local purchasing departments, such as at theplant or field-office level, make their ownpurchasing decisions.


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Advantages of Centralization

1. Concentrated volume

2. Avoid duplication

3. Specialization4. Lower transportation costs

5.No competition within units

While centralized purchasing may result in lower costs and better negotiating

power, the centralized system may also be too rigid and even infeasible for large,

multiunit organizations consisting of several unrelated business operations.

For these reasons, a hybrid purchasing organization may be preferred.

Organizations may use a decentralized-centralized purchasing structure todecentralize purchasing at the corporate level, but centralize the procurement

function at the business unit level. Conversely, a firm may utilize a centralized-

decentralized purchasing structure.

Advantages of Decentralization

1. Closer knowledge of

requirements:

2. Local sourcing:3. Less bureaucracy:

Decentralization allows quicker

response.


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6. Suggest Alternate purchasing set-ups Discuss the

possible organizational settings, and an evaluation

of the alternatives for quick hits.

The alternate approach would be to let somebody else do theconsolidation and joint negotiations, these purchasing solution

providers offer their customers a complete supplier network of

capable, supra-regional suppliers. The savings they promise to the

client would stem from three sources:

1) Reduced material costs due to an increased purchasing powerresulting from high purchasing volume created by theconsolidation process,

2) Reduced inventories costs due to reliable lead times and directsupply,

3) Reduced process costs.These purchasing service providers act as commercial agents on

behalf of their clients. They negotiate basic agreements with the

suppliers Delivery of the goods takes place directly between the

supplier and the customer on behalf and on account of the client.


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Encourage suppliers to implement lean manufacturing andset-up reduction projects.

Make the buying companys technical support and know-

how available to the suppliers. Expand the range of product groups under consideration,

and also plan to implement a central departmentresponsible for the coordination of the groups purchasingactivities

Strategic (very long range) and tactical (day-to-day)activities should separated within the organization.

Understand the internal application of goods and servicespurchased.

Promote standardization and simplification of componentsand products.

Conduct or take part in make-versus-buy studies.

Evaluate consolidation of shipments

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119155693-case-questions-supply-chain.pdf