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CONTROLLING MATERIAL COSTS FOR DDC LAND INC., PROFITABILITY : CONTROLLING MATERIAL COSTS FOR DDC LAND INC., PROFITABILITY Engineering Marketing Documentation Accounting Personnel Purchasing Others Maximum Material Costs Minimum Material Costs Purchasing manager, purchasing supervisor and staff are the life support system of our supply chain : Purchasing manager, purchasing supervisor and staff are the life support system of our supply chain Supply Chain Replenishment Visibility Procurement Maximum Material Costs Minimum Material Costs Talent/People Management : Talent/People Management I often use the phrase of Sir Martin Sutter: “You’re only as good as the people you surround yourself with.” : I often use the phrase of Sir Martin Sutter: “You’re only as good as the people you surround yourself with.” That phrase also applies to each and everyone of us and to one of the most critical functions in DDC Land Inc., the Purchasing Manager What Made our Purchasing Culture Successful? Allow me to answer the following questions: : What Made our Purchasing Culture Successful? Allow me to answer the following questions: 1. How was the Purchasing Manager selected? 2. What criteria were used in the selection process? 3. What kind of qualifications beyond seniority was brought to the table? 4. What kind of training did the Purchasing Manager receive after being promoted? To Update Myself, Your Purchasing Manager joined online learning studies on the following topics : To Update Myself, Your Purchasing Manager joined online learning studies on the following topics Leadership Skill Development Mentoring & Coaching Skills Sales Effectiveness Understanding Purchasing Certifications Organizational Skills Scenario Planning Strategic Thinking Skills Time Management Operational Analytical Skills I am still evaluating the MBA online programs of U.P., Ateneo and DLSU Characteristics of Purchasing Personnel : Characteristics of Purchasing Personnel Highly Self Motivated • Optimistic • Excellent Leadership Skills • Skilled at Coaching & Mentoring • Calculated Risk Taker • Listens Well --- 80% of the Time • Plans Well Moreover Your Purchasing Manager Will Continue to Exhibit : Moreover Your Purchasing Manager Will Continue to Exhibit Ability to Think Outside the Box Because I Know What Goes on Inside the Box • Strive to be an Excellent Communicator • Inspires Excellence in Others • Shows Strong Social and Interpersonal Skills • Commands a Presence • Value Honesty • Demonstrate Integrity in the Workplace • Embraces Accountability for Self and Purchasing Personnel So what does being the life support systems to supply chain management mean? It means purchasing is the center of the universe, the equator, the fulcrum when it comes to meeting company demands. : So what does being the life support systems to supply chain management mean? It means purchasing is the center of the universe, the equator, the fulcrum when it comes to meeting company demands. Engineering Marketing Documentation Human Resources Customer Relations PURCHASING Top Level Management However, the more important, often overlooked, misunderstood and underutilized concept is that Purchasing Manager, supervisor and staff in our company are really the “Tendons and Muscles” that enhance profitability within the supply chain itself. NOTE, the purchasing department has only 4 personnel, including the manager, to respond to your needs. : However, the more important, often overlooked, misunderstood and underutilized concept is that Purchasing Manager, supervisor and staff in our company are really the “Tendons and Muscles” that enhance profitability within the supply chain itself. NOTE, the purchasing department has only 4 personnel, including the manager, to respond to your needs. Accountabilities/OwnershipKey Performance Indicators : Accountabilities/OwnershipKey Performance Indicators Consider The Following : Consider The Following The major drivers of material costs can be managed well, for material costs near the minimum or interior of the doughnut-shaped area of possible costs, or poorly for high costs near the outside. Maximum material costs Minimum material costs Engineering Procurement Supply Chain Visibility Replenishment Data Shows That : Data Shows That Effective sourcing can improve margins dramatically. Last year, a 5% decrease in purchased material costs results in a 50% increase in profits. The same profit gain would require a 50% sales increase or a 20% drop in overhead for most departments. In The Year 2007 : In The Year 2007 purchasing tends to compensate for the constant changes in housing engineering design by increasing quantities or ordering on an expedited basis. Despite our best efforts, parts and supply shortages still sometimes occur. This leads to continued ordering of higher quantities than the plan requires. Sharing production forecasts with suppliers early and often helps avoid these problems; with visibility, they know how to best plan for and accommodate changing demand patterns. There Is A Need For Supply Chain Visibility to Minimize Costs : There Is A Need For Supply Chain Visibility to Minimize Costs The greatest problem of our department is lack of visibility to what is happening up and downstream of a given operation or function. This is due to critical documents being shared on paper rather than electronically. There is a need for systems to be used to generate sales and purchase orders, forecasts, plans, schedules, exceptions, expedites, transfers, receiving and shipment documents, so that they travel on integrated systems. Strategic Sourcing : Strategic Sourcing The more engineering consolidates its use of component parts, the easier it is for purchasing to establish long term relationships with suppliers. These mutually beneficial relationships with suppliers are strategic and can considerably reduce costs. Sharing information over the Internet with suppliers can greatly enhance their ability to deliver as needed, even as conditions change. Supplier partners can also support engineering in designing products with more cost-effective materials. Working more closely, suppliers are informed about demand projections and more willing to commit to Proactive Planning : Proactive Planning Collaborative Planning : Collaborative Planning Visibility to demand forecasts gives suppliers greater insight to plan their own production requirements. The opportunity to collaborate on the forecast gives suppliers more of a voice in creating a plan that’s feasible, resulting in mutual agreement on how to meet demand. This early exchange of information helps eliminate the high cost of excess inventories that by both parties build to hedge against the unknowns in demand and in supply. Incidentally… : Incidentally… The Purchasing Manager is also at the same time Office Manager, Executive Assistant, Asst. Board Secretary. But whether you’re rich or poor, everyone has 24 hours in a day. It’s what you do with your 24 hours that counts. In the end it all boils down to this: the secret of our success is by working hard and focus on whatever it is that we need to succeed. At present, I am finalizing the Incentives Program for the department as requested by TLM. System : System A range of systems are now available that support real-time visibility and collaboration between trading partners and internal departments. These systems provide a secure environment where each supplier sees only the relevant information to their materials at the appropriate moment. Material Cost Control is Strategic : Material Cost Control is Strategic In both economic downturns and recovery, material cost controls play a crucial role in profitability and competitiveness. Pricing of materials goes up in market recoveries as demand escalates, while severe cost cutting is required to stay solvent when markets decline. For example, Holcim planned to increase prices twice this year, since they are now getting their supply from Mindanao. Once we buy materials prior to the increase we save money, and it is in this regard that the incentives will be based. Other aspects will also be considered. Major Cost Driver Areas : Major Cost Driver Areas Consolidate materials at the design engineering stage and collaborate with suppliers and other departments throughout the process to ensure agility to manage engineering advances and ongoing changes. Improve purchasing policies. Promote longer-term contracts with suppliers. Streamline replenishment Deliver visibility across the enterprise, supply chain and product lifecycle. We Can Safely Say That… : We Can Safely Say That… These areas are the foundation for visibility and synchronization that will yield lower material costs and help DDC Land Inc., weather economic highs and lows profitably. Of course, we need two (2) more staff to act as agent and buyers or even doing secretarial and clerical tasks. As I end this presentation, I hope you learn something : As I end this presentation, I hope you learn something about the real value Purchasing Management have brought to the company. about leverage, profit opportunities, merchandising and product creativity. about, cost effectiveness, relationship equities and most importantly, about the individual requirements necessary to maximize success. Our Commitment : Our Commitment Purchasing Management will continue to focus on maximizing profitable growth. We all look at sales first when it comes to growth and profitability. Don’t overlook the ability and responsibility to contribute to the primary reason we are all in the construction business. Remember, the Purchasing Management is determined to become the muscles and the tendons that maximize profitable growth of DDC Land Inc. Our Challenge Our Mission I Can Say that DDC Land,Inc. Purchasing Department Succeeded In Focusing on maximizing profitable growth : I Can Say that DDC Land,Inc. Purchasing Department Succeeded In Focusing on maximizing profitable growth At DDC Land Inc., Effort Is Its Own Reward : At DDC Land Inc., Effort Is Its Own Reward We are here to do, And through doing to learn; And through learning to know; And through knowing to experience wonder; And through wonder to attain wisdom; And through wisdom to find simplicity; And through simplicity to give attention; And through attention to see what needs to be done and say: “What matters to you matters to me.” The End : The End Maraming Salamat At Ako Man Din Ay Natuto Sa Inyo! Copyright 2008 by Fe O. Cabural and DDC Land, Inc. You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.