Communiqué Newsletter of NAPM-Indianapolis, Inc. Established in 1917

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1 An Affiliate of Communiqué Newsletter of NAPM-Indianapolis, Inc. Established in Years Old and still counting! Volume 20, Issue 11+ June 2012 Inside This Issue: Introduction of new BOD Letter From the Board 1 2 Congratulations to your Board of Directors. President - Megan Mills Vice President - Stacie Neuhaus The 6 Core Purchasing Strategies Sole/Single Source Procurement Midwest Regional Leadership Workshop New Member 9 NAPM- Indianapolis Calendar of Events 9 Secretary - David Mumper Treasurer - Erica Voetsch Past President - Lea Anne Fuchs Directors: Communications - Dan Levine Excellence - Angela Davis ISM Term of the Month NAPM- Indianapolis Networking Upcoming ISM Conferences/ Events & Seminars Education - John Hill Membership - Ron Wright Programs - Patrick Carroll

2 Page 2 President Megan Mills President@napmindianapolis.org Vice-President Stacie Neuhaus, C.P.M. VP@napmindianapolis.org Treasurer Erica Voetsch Treasurer@napmindianapolis.org Director of Programs Patrick Carroll Programs@napmindianapolis.org Director of Education John Hill, CPIM, C.P.M. Education@napmindianapolis.org Director of Communications Dan Levine Communications@napmindianapolis.org Director of Membership Ron Wright Membership@napmindianapolis.org Director of Excellence Angela Davis Excellence@napmindianapolis.org Secretary David Mumper Secretary@napmindianapolis.org Past President Lea Anne Fuchs, C.P.M., CFSP PastPresident@napmindianapolis.org Office Manager Wendy Bayley CustomerService@napmindianapolis.org LETTER FROM THE PRESIDENT First of all, I want to thank everyone for a great program year as we look forward to the exciting changes taking place within the organization throughout the upcoming year. I also want to welcome our new board members: Angela Davis - Director of Excellence, Patrick Carroll - Director of Programs, and Ronald Wright - Director of Membership. As we completed our very first board meeting for the year just last week, many activities are underway. We are all very busy during the next few months reviewing our bylaws, strategic plan, and key initiatives. Our stategic vision is to provide opportunities, resources, and leadership for professional development, certification, and networking for our membership, and to advance the purchasing and supply management profession within our affiliate area. Considering this, we are intensely focusing on membership, specifically growth and development, as these are areas which we see room fo. Finally, I hope everyone has a wonderful summer and gets some time to relax before we return together again for our August PDM! Should you have any questions or comments, please feel free to reach out to me. My is president@napmindianapolis.org. See everyone soon, Megan

3 Page 3 The 6 Core Purchasing Strategies Companies implement Purchasing strategies in order to make cost effective purchasing decisions from a group of efficient vendors who will deliver quality goods on time and at mutually agreeable terms. These purchasing strategies may include such choices as making procurement savings by using centralized purchasing which is concentrating the entire procurement activities within one principal location. Other companies may decide to undertake a single source procurement strategy that involves obtaining excellent dedicated service from a single vendor. These strategies are predominant when sourcing for IT or indirect purchasing such as office supplies and cleaning. Other companies may use a procurement strategy of using a core purchasing cycle. This is where they order from a group of regular vendors and use outsourcing procurement for their larger and ad hoc purchases. Still others, particularly when they are seeking labor for short-term projects will use procurement auctions in order to obtain the best pricing levels. Regardless of the size of the company, there is a core group of purchasing strategies that most of them implement. These are: Supplier Optimization The company chooses an optimum mix of vendors who can provide the best prices and terms. This process usually means that the less able suppliers who cannot provide a quality service at the terms and prices required are discarded. This is by far the most common of the various purchasing strategies.

4 Page 4 TQM Total Quality Methods, requires the vendors to provide an ever increasing quality service with zero errors. The supplier ensures purchasing best practices using a number of tools such as six sigma. Risk Management As more companies obtain their supplies from countries such as China and India, they are more concerned with the risk management of this supply chain. Whilst these countries can supply products at very advantageous prices, these advantages can be soon negated by a natural or human disaster. Global Sourcing Large multinational companies see the world as one large market and source from many vendors, regardless of their country of origin. Vendor Development Some companies believe that they are working hand-in-hand with their vendors. They therefore spend some time in developing processes that assist these vendors. There may also be the situation where a company is dependent upon just one supplier for their products. If this supplier is unable to perform to the required standards, the purchaser may assist the vendor in improving their service or implement processes to improve their procurement cycle. Green Purchasing This is one of the more common purchasing strategies for governments and local governments. This strategy champions the need for recycling and purchasing products that have a negative impact on the environment. A company will choose purchasing strategies that promote their procurement best practices of minimizing costs, maximizing quality and ensuring that quality products are delivered on time.

5 Page 5 Sole/Single Source Procurement: Problems, Challenges & Potential Solutions Before anything else, understand that despite the similarities, sole & single source procurement are 2 different terms. We define both terms below. Single Source Procurement Definition Single source purchasing refers to purchases from one selected supplier, even though there are other suppliers that provide similar products. If your company decides to buy only Dell computers then that is single source purchasing. However unlike sole source purchasing you and your company have a choice to switch suppliers, but for strategic and possibly cost reasons the company decides to use only a specific supplier. Sole Source Procurement Definition Sole source procurement however refers to those purchases where there's only one supplier that provides the product. Usually these are unique products that you cannot find anywhere but only thru one supplier/manufacturer. So before you do anything else when dealing and negotiating with a sole or single source supplier is to understand exactly that i.e. whether you're dealing with a sole source or single source. Sole & Single Source Procurement Main Difference Both sole & single source purchasing require buying from only one vendor. This is a very precarious position for any company to be in, as they are so dependent upon the services of a single vendor. The vendor is also in a difficult position as they may have only one customer. If vendor relationships become difficult, or either company experiences financial pressures, then both companies will have problems continuing to trade. However, if you're dealing with a sole source options are much more limited since it is very difficult to change suppliers unless your radically change

6 Page 6 your requirements. But if you are dealing with single source procurement, your options are much less restricted, since it is less difficult to change suppliers. Possible Solutions to Sole & Single Source Procurement 1. Avoid Sole & Single Source Procurement The top solution is not to enter into a sole or single source procurement situation in the first place. For example, in some cases, particularly with government contracts, great care has to be taken to ensure that no charge of corruption can be levied at either party. It is for this very reason that many governments insist on competitive tendering and the removal of any monopolistic tendencies. Many countries rigorously review their purchasing strategies to ensure that this does not happen. Defense contracts in particular are continually awarded to more than one company to remove the possibility of corruption and ensure that a country is not reliant on just one company for its nation s defenses. Many governments publish quite stringent regulations that must be adhered to before a single source procurement can be authorized. 2. Buying Out the Vendor Many large purchasers solve the problem of sole & single source procurement by buying out the vendor. This was the case with Sky when they bought out Amstrad who were the suppliers of the set top boxes. 3. Be Ready with an Alternative Source This is much easier with single source procurement (but not sole source), since other similar suppliers should be able to supply similar products with more or less that same quality as the previous suppliers.

7 Page 7 The suppliers would know this as well, and they would be more flexible when negotiating and more accommodating to terms. One word of caution: Ensure your contracts are tightly drafted to avoid any situation where you cannot change the single source supplier/ vendor. Single Source Contracts for Small Companies With small companies, single source procurement is quite common and is an inherent weakness of running a small business. It is rarely cost effective to purchase the same small set of product requirements from more than one vendor. Combined with the fact that small orders are not particularly important to a large vendor, this puts the small company at a disadvantage in any purchaser/vendor relationship. In this situation, it is imperative that the small company has an excellent supplier relationship and takes on more vendors as soon as the company has expanded enough to make this a viable proposition. Anyway you look at it however, being dependent upon one vendor for a core part of your business can never be a good idea. So, work to ensure you are not into such a position in the first place. If you are talk to your top management (and top management only, since no one else can change the single source), to actively and seriously look to remove sole & single source procurement situation

8 Page 8 Fourth Annual Midwest Regional LEADERSHIP TRAINING WORKSHOP PLANNING, COLLABORATING AND LEADING FOR TODAY AND BEYOND SPONSORED BY SAVE THE DATE!! WHEN: Friday, July 27 & Saturday, July 28, 2012 LOCATION: ISM-Milwaukee Office W. Silver Spring Dr., Ste 200 Milwaukee, WI WHO SHOULD ATTEND: ISM/NAPM Board Members, Chairs and Vice Chairs of Committees, as well as anyone wishing to get more involved in their local ISM affiliate ISM and NAPM Affiliates in the Midwest are also encouraged to attend.

9 NAPM-Indian apolis MEM BERSHIP Septemb er, Building a Powerful Profession: One Member at a Ti me Volume 20, Issue 11+ Page 9 Social Media in the Supply Chain ISM Membership Number of CPSM s Number of CPSD s NAPM-Indianapolis 34,551 4, Membership 280 New Members of our Affiliate Please welcome the following new members of NAPM-Indianapolis, Inc. Name Maria S Correll Angela D Erton Steven J Hobbs Gregory L Mendenhall Janet R Mitchell Michelle Moore Company Marathon Petroleum Company LLC Marathon Petroleum Company LLC Marathon Petroleum Company LLC Marathon Petroleum Company LLC Marathon Petroleum Company LLC Raytheon Technical Services Co The Board of NAPM-Indianapolis would like to express a warm welcome to each of our new members. Please let us know how we can better serve you by answering any questions you may have. ISM Term of the Month: Cycle Time Reduction: The process of minimizing the total time required for a designated process; for example, the time required for production and delivery. Efforts to shorten cycle time often focus on reducing wait time and/or eliminating unnecessary steps. Customs Bond: A guarantee from a surety company to the government that the importer will faithfully abide by all laws and regulations governing the importation of merchandise into that country.

10 Page 10 NAPM-Indianapolis Monthly Calendar DATE DAY TIME EVENT Summer Break until September Join us on Linked-In and NETWORK, NETWORK, NETWORK with your colleagues. about=&gid= &report% 2Esuccess=r3Tayp0nRRro3Er8iWS8vOu_mFd11ndGIOEdAI27ES3KgpplepkOcIgotS3mJWzXqb2u21w qjdjwm