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1 Sourcing. 2 Outline  cross-functional sourcing team  examples of sourcing.

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Presentation on theme: "1 Sourcing. 2 Outline  cross-functional sourcing team  examples of sourcing."— Presentation transcript:

1 1 Sourcing

2 2 Outline  cross-functional sourcing team  examples of sourcing

3 3 Cross Functional Sourcing Teams

4 4 Cross-Functional Sourcing Team  firms surveyed in 1993  rising trend of cross-functional teams  70% planned to have such teams by 1997  expected impact from such teams  107 cross-functional sourcing teams at 18 US-based corporations, with more than 700 individual participants  industries: communication, automotive, computing devices, electrical, pulp and paper, electronics, electrical devices, photographic, auto components, industrial engines, farm equipment, transportation equipment, consumer products Robert J. Trent and Robert M. Monczka (1994) Effective Cross-Functional Sourcing Teams: Critical Success Factors, Journal of Supply Chain Management, 30(4), 2  11.

5 5

6 6 Factors Important for Success  key organizational resources  participation & involvement of suppliers  level of decision makers  team leadership  effort spent in team assignment

7 7 Example of Sourcing  Material for Flea Market

8 8 Material for Flea Market  keys  cheap supply  variety in supply  scrapped goods, over stock, closing of firms, moving, etc. 肥跳蚤 年收百萬的秘密 商業周刊 2009-4.

9 9 Material for Flea Market  seraching and receiving infomration  searching: industrial parks  information  from bitter nut shops for factories around  from cleaners, management and security office of building complexes, recyclers, moving companies, possibly with payment  from infomration of failing shops to large wholesalers to exchange for the option of small batches from these large whoesalers 肥跳蚤 年收百萬的秘密 商業周刊 2009-4.

10 10 Example of Sourcing  Recycler

11 11 Recyclers  15 legions in 「第一資源合作社」 with more than 2800 persons  450,000 metric ton waste paper  NT$ 6b  profit margin 10% 街頭傳奇魏進益 商業周刊 2008-4.

12 12 Recyclers  buying, not picking, paper  balancing interest among legions  two-part bonus system, one on revenue the other on location of material  maintaining sense of belonging  training, with examination to establish the co-op culture  holding discipline, on family value and on loyality to co-op

13 13 Example of Sourcing Apparel on Web: Small Scale  Apparel on Web: Small Scale

14 14 Apparel on Web: Small Scale Apparel on Web: Small Scale  人氣衣著館 ! 網拍開店完全攻略 人氣衣著館 ! 網拍開店完全攻略  a web company by a sophomore in 2000  starting with less than NT$15K to sell apparel  initially supply from 「五分埔」  photos of models to sell apparels  later self-design clothes from subcontractors  talking care of the whole process: design, sample, material sourcing, manufacturer  selecting subcontractors by site visits in Taiwan and mainland  small orders to test quality and reliability of subcontractors 大陸工廠當靠山 商業周刊 2006

15 15 Apparel on Web: Small Scale  small-size orders for customer reactions and large-szie orders for winners  most effort on marketing and logistics management  before 2004 monthly revenue NT$500k  2004 monthly revenue NT$1mill  2005 annual renvenue NT10 m, profit NT$200k  2005annual renvenue NT12 m 大陸工廠當靠山 商業周刊 2006

16 16 Example of Sourcing Apparel on Web: Large Scale  Apparel on Web: Large Scale

17 Apparel on WebApparel on Web: Large Scale Large Scale Apparel on WebLarge Scale  lativ: set up in 2007 lativ  polo shirt 600K pcs in a year  Disneyland T-shirt 200K pcs in a year 2011 2010 2009 2008 2007 Rev. (NT$) Year > 4 billion 1.5 billion 370 million 100 million 10 million

18 18 Selling on Web  three issues: quick, cheap, good quality  abilities: marketing in web, establishing brand name, and supply chain management  hurdles  by revenue, 10 million, 100 million, 1 billion

19 19 lativ  Founder: electronics by training and web designer in early career  self learning the whole process; design, material, cutting, tailoring, sewing, laundry, ironingapparel  self learning the whole process; design, material, cutting, tailoring, sewing, laundry, ironing apparel  simple clothes

20 20 lativ  stress on quality  strict requirement  e.g., industrial laundry for cotton material to clean, shrink, and remove defect  destroy defective items  send technicians to factory to guarantee quality

21 21 lativ  2011: annual output 14 million items, only one possible supplier in the world  to align with the supplier  3 months to meet various levels to establish relationship  6 months to 1 year teething period  on-site technicians

22 22 Home Depot Home Depot

23 23 History  found in 1978  first opened in 1979  went public on NASDAQ in 1981  on New York Stock Exchange in 1984  2012  revenue US74.754B  operating income US$ 7.901 billion  net income US$ 4.535 billion (2012)

24 24 Business Model  large discount retailer specialized tools and material for home improvement and home decoration  by passing wholesalers, the then standard channel, and dealing directly with manufacturers to save the 15% to 20%  regarded as an infeasible business model  stores too big  hard to turn goods into cash  insufficient cash flow  hard to get bargains from suppliers with 2 to 4 stores

25 25 Early Day Sourcing of Home Depot  convinced suppliers by projecting the vision and the blooming prospect of Home Depot in retailing for home improvement  networking and socializing with manufacturers   at least 3 dinners/weeks in high-end restaurants with suppliers  promising large amount, often regarded as impossible by suppliers  strength of Home Depot: expertise in sales  long, repetitive but varying sale talks to make suppliers yield  spent long time, e.g., four years, or even longer, to get a desirable supplier  often several levels, convincing sales, then financial controller, and then CEO of suppliers

26 26 Early Day Sourcing of Home Depot  understanding the psychology of suppliers  greed, passion on ideology, fame of their products  asking for discount, e.g.,  additional 2% discount if sales reaching US$100K  another 3% discount if adding sale US$150K  another 5% if total sales reaches US$400K  asking for long delay payment, one month common, but two to three months possible, and even 5 months for some cases  sourcing and purchasing personnel in Home Depot constantly on business trips, in US and overseas

27 27 Selection of Goods  goods of high demand  goods associated with Home Depot by customers, keeping even if not profitable  omitting goods not matching image of Home Depot, e.g., leaving kids’ plastic swimming pools for ToyRus;  goods related to home improvement and decoration

28 28 Sourcing After Getting Large  requiring suppliers growing with Hong Depot  production capacity, distribution network, goods display, cooperation in sales, expenses in advertisement  providing expansion plans of 4 to 5 years time frame to suppliers  requiring the lowest price from supplier with absolutely no shortage, however powerful the supplier  loyal to suppliers to some extent, but swapping to cheaper suppliers of better quality if no change after warning  brands  brand contractor, including development, for others  creating brands of Home Depot  having personnel from suppliers in Home Depot and Home Depot persons in suppliers


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