Evolution and Growth of Supply chain.pdf

GutaMengesha 77 views 98 slides Jun 07, 2024
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About This Presentation

Definition of Procurement
Procurement process
Different functional names of procurement
Total cost of ownership (TCO)
Impact of procurement on cost and revenue
Procurement as a profession
. Supplier relationship management
.Strategic sourcing
.Category Management
...


Slide Content

Evolution and Growth of Supply chain
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
By Guta Mengesha(MBA, MA)
Ethiopia
Email: [email protected]
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Slide outline
Definition of Procurement
Procurement process
Different functional names of procurement
Total cost of ownership (TCO)
Impact of procurement on cost and revenue
Procurement as a profession
. Supplier relationship management
.Strategic sourcing
.Category Management
. Contract Management
. Negotiation
Key procurement trends
Custom Clearance and relevant documents
Spend Analyzes
Supply segmentation form buyer and seller prospect
KPIs in procurement
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement:
It is act or action involved in obtaining of good and/or service for the lowest Total cost of ownership (TCO). Source:
Chartered institute of procurement and supply
Procurement” means acquisition by way of purchase, lease, license or otherwise, either using public funds or any other sourceof
funds (e.g. grant, loans, gifts, private investment etc.) of goods, works or services or any combination thereof. Source NTEP
guidance and training material.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement Process
•Need Assessment
•Market analysis: collection and analysis of supply market data from manufacturing process, published data, trade
fairs, supplier annual report, Gov and industry statics for the aim of insight to investment to be made, Risk involved
and capability of potential suppliers
•Supplier selection: Tool :Gozzian curve
•Portfolio Analysis: classify items Tool: KralijicMatrix
•Risk management: up to this is called sourcing activities before signing a contract.
•Order fulfilling
•Receive and payment
•Supplier Performance: Supplier relationship analysis( how they perceive buyer) and Supplier development(
alternative when supplier incapable of meeting your needs like re-source, outsource, produce internally, improve
supplier performance
•Quality management
•Cotinus improvement: activities after contract is called operational procurement
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PROCUREMENT PRINCIPLES
•Competition. It must guard against collusion, and be conducted based on clear and appropriate regulations that
are consistently applied to all potential suppliers.
•Value for money: includes both whole life costing and quality. Is selecting best offers that present optimum
combination of factors like quality. Life cycle cost, and other parameter that include socioenvironmental
strategies objectives. It simply mean best return on investment.
•Sustainability: this issues can be considered where appropriate and when relevant. This must be balanced
against cost and affordability. Sustainability issues should be addressed in the planning stages. In some
instances, particularly where environmental issues are relevant, sustainable procurement can reduce whole life
costs and improve quality through recycling or reducing disposal costs
•Fair, open and transparent :All contracting authorities should be seen to be acting in a fair manner. Records
are open to inspection by auditors, unsuccessful bidders can be briefed on their strength and weakness of their
offers. A transparent system with clear rules and mechanisms like unbiased specification, objective evolution
criteria, standard solicitation document, equal information for all parties, confidentiality of offer and the like.
•Requirements definition and procurement strategy: Your strategy should set out the key objectives and
justification for the purchase. You should also have a clear sourcing strategy and have considered the options for
leveraging existing contracts and collaboration opportunities.
•Market Assessment/Market creation :There may potentially be limited response to a requirement because of
its nature or the state of the market. In these cases, the organization should stimulate the market.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PROCUREMENT PRINCIPLES
Producing the requirement: Requirements need to be clear and unambiguous. An inadequately thought through
requirement is a common reason for procurement not providing the right goods or services, or. Requirements
should be defined in as much detail as possible, though there may be cases where you can only develop a full
requirement during the procurement process. From the onset, broad parameters should be set that establish what the
organization can or will tolerate from its purchase.
Supplier selection: Start the supplier selection and evaluation process early. This can begin with pre-qualification. Clearly
define, plan and document your approach from the start, ensuring a fair and transparent process can be demonstrated.
Supplier selection and evaluation should be a continuous process, each passing through a number of stage gates
Proposal evaluation:Evaluation is a stage gate hurdle; it passes every supplier that, at the particular stage, meets all the criteria
required of them. It picks no favorites and does not prejudge the outcome of the overall process. Follow your pre-defined
evaluation model and criteria. For additional information on developing evaluation criteria
Contract preparation:Match the contracting process with the nature of the purchase. Take into account complexity, size, and
value.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PROCUREMNNT PRINCIPLES……
Bid evaluation:Evaluate the financial and qualitative elements separately, then review the results together to reach the trade-off
(if one has to be made) that represents best value for money. For additional information on bid evaluation
Award :Unsuccessful suppliers may require more attention than successful ones. You need to retain their interest and goodwill
for the future, convey lessons that will enable them to submit stronger bids, build relationships and networks and maintain
transparency. Your chosen supplier may fail and at this moment there is no more qualified alternative than the supplier that came
second in the selection process.
Procurement project closure :Close each purchase in a controlled way. Capture the lessons you have learnt. Analysis should
capture how well the organization and process have performed against aims and projections, especially planned costs, schedule,
tolerances and business case.
Implementation and transition:There should be a clear transition process from the procurement stage to contract management
—it is important to ensure the organization understands and fulfils its obligations so as not to delay or derail implementation.
Economy and effectiveness: Providing appropriate solution to need of organization with regard to quality, quantity, and
timeliness at the right price.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Exception to a competitive bidding
It depends on the policy but major are the following.
➢Lack of completion
➢Proprietary reasons (sole manufacturer or sole importer)
➢Minor value
➢Security (Critical items)
➢Research and development
➢Extension of works
➢Standardization with previously purchased goods or services
➢Exigency
➢Government organization
➢From nongovernmental organization if appropriate by law
(source: UN procurement manual)
By Guta Mengesha,Ethiopia

Evolution and Growth of procurement
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Growth of procurement
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Different functional names of procurement
Strategic Sourcing
Supply Chain Department
Supplier Relationship management
Negotiation
Category Management
Contract Management
Value management
By Guta Mengesha,Ethiopia,kk

Evolution and Growth of Supply chain
SUPPLIER RELATIONSHIP MANAGEMENT
WHAT IS SUPPLIER MANAGEMENT?
It is important that the company engages properly with its suppliers, establishes a proper relationship, manages the
requirements, and communicates effectively about them to the vendors.
A comprehensive supplier management policy is essential.
This process of supplier management recognizes the value of the contractor’s contribution.
It then builds and manages a relationship with the contractor to sustain that contribution and improve suppliers
performanceand supplier relationships.
Supplier Management Dashboard and Reports by SimfoniAnalytics evaluates if the suppliers are performing as per the
organizational requirements and help identify areas of improvement while engaging with suppliers throughout their
lifecycle. The report enables companies to evaluate and select suppliers, negotiate future contracts, and evaluate supplier
performance. The Supplier Management Dashboard provides a detailed report on each supplier by spend category, spend
trends, spend transactions by Business units, and payment terms.
The advance filters can help deep dive by PO, Non-PO, contracted or non-contracted,supplier diversity, and so on.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
What is Supplier Relationship Management (SRM) actually mean………….
Supplier Relationship Management(SRM) is the systematic approach of assessing suppliers’ contributions and
influence on success, determining tactics to maximize suppliers’ performance, and developing the strategic
approach for executing these decisions. As part of vendor managementsupplier relationship management is
where companies segment their suppliers and determine important supply categories, in order to devise strategies
capable of managing their suppliers and supplies more effectively.
Supplier relationship management is comprised of three main steps as follows:
1.Supplier Segmentation :is differentiating suppliers as a means of identifying risks and opportunities.
2. Supplier strategy development:Devising an optimal way to interact with suppliers based on business goals and
needs.
3.Supplier strategy execution: Executing the designed strategy, at the previous step, in an effective way to obtain
desired results in line with the company's goals.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
What is Supplier Relationship Management (SRM) actually mean
Takeaway
Supplier relationship managementis important because a long-term relationship between your organization and its
suppliers allows for the free flow of feedback and ideas. Over time, this will create a more streamlined, effective
supply chain that will have a positive impact on costs and customer service.
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
The supplier management process is used to centrally review and manage the relationship with
each contractor which is owned by an individual.
•It provides value for money to all the parties involved and benefits the entire supply chain
•It ensures that the targets in all the contractor agreements and contracts are resource aligned with the
needs of the business and within the service level agreements.
•It ensures the seamless delivery of quality services which are aligned to the expectation of the
business.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
The Purpose of Supplier Management?
The main purpose of supplier managementis to get adequate returns for the money spent on the vendors and provide
seamless quality of service to the business.
The main objectives for this are:
•To ensure that maximum value for money spent is obtained from all the vendors and contracts.
•To make sure that the underpinning contracts (UCs) and agreements with the suppliers are in line with the business
needs and agreed on targets of the organization.
•To manage the supply chain and relationships with the various vendors and monitor theirperformanceby keeping
accurate records.
•To negotiate with the suppliers, finalize contracts, and manage them throughout their lifecycle.
•To establish and maintain a policy regarding suppliers and also to maintain a supporting SupplierContract
ManagementInformationSystem.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Supplier Management
Is key element in procurement and it involves:
A.Registration or Pre-qualification of suppliers
B.Supplier Relationship management
C.Performance management
.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Supplier Evaluation
Carter’s 10 C of supplier evaluation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
STRATEGIC SOURCING VS CATEGORY MANAGEMENT
Strategic Management in procurement
➢It is the a procurement process aimed at selecting the right suppliers and negotiating the best
price to meet business objectives.
➢It is component of supply chain management focused on spend optimization.
➢Its primary goal is cost reduction
➢Help deeper supplier audit that determine which supplier best the company’s needs and allow
to stay aware of latest supplier developments and new supplier coming to market.
➢Strengthen supplier relationship as more attention is placed on strategic selection
➢It allow for regular contract analysis
➢The RFP process is revised to ensure contract in place have competitive and lowest price
➢With out it a contract the automatically renew have an ”Out-of-sight, out-of-mind effect” that
leads to missing of opportunities for innovation.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
STRATEGIC SOURCING VS CATEGORY MANAGEMENT
Benefit of strategic sourcing cont…
➢Maximizing value for the organization
➢Overall procurement cost reduction
➢Improvement of the quality of products or services
➢Optimization of an organization’s inventory
➢Convenience and improvement of lead time
Customized steps to implement strategic sourcing
1.Evaluating sourcing needs
2.Analyzing current spend
3.Performing market research to identify potential suppliers
4.RFP process and supplier selection
5.Contract negotiation
6.Evaluation and optimization
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Strategic procurement should be implemented in three broad steps:
• Value chain positioning (VCP) –the process by which the organisationpositions itself in the
market to reflect a margin cost analysis of all the supply and value relationships within their
market.
• Market positioning analysis –this is where the organisationcomes to understand the value
creation and costs aspects of its own supply chains and how this compares to competitors.
• Extended relational competence approach –This is where the organisationcreates supplier
and customer relationships that are underpinned with a solid idea of how value is created, what
contracts should look like, how to install efficient boundaries and how best to exploit core
competencies.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Elements of strategic sourcing
I.Supplier Management
II.Demand Management
III.Total cost of ownership
IV.Sustainability
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
CATEGORY MANAGEMENT
•The most popular topics in the Procurement world which is said to be ‘Category Management’.
•Category Management is a strategic approach to procurement where businesses segment their spend into areas that
contain similar or relatedproductsenabling focus opportunities for consolidation and efficiency.
•‘’Category Management is the strategy of cost management andstrategic supplierrelationship management within an
organization.’’ by Shanon
•Itis a strategic approach toprocurement where businesses segment their spend into areas that contain similar or
relatedproductsenabling focus opportunities for consolidation and efficiency. CPIS
•Isused for efficient spend management and cost savings.
•It involves the categorization of various goods and services and managing them as business units (BU) with the purpose
of effectively and efficiently improving business outcomes.
•It employs a structured and measurable project management approach to achieve these improved outcomes.
•a general rule of thumb applies that products or services with similar characteristics are placed in one group. A few of
these categories include: Information technology, Security, Medical, Office management, Industrial products/services
•Once the categories have been identified, the organization can create a tailored strategy to meet their objectives. An
analysis of current spend, pricing, and supplier performance will determine the best way to optimize the category.
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
Benefit of category Management
o Centralizing Spend Data: Category management enables easy tracking, logging, and reporting due to
consolidated and centralized spend. It also allows for the outsourcing of spend analysis.
o Cost Savings: By leveraging the expertise of strategic managers, knowledge of categories and
subcategories not only adds value but also minimizes cost.
o Better Vendor Risk Management: Since category management allows the organization to gain
comprehensive knowledge of their suppliers, they can use one supplier’s operational risk to benchmark
others, thereby maintaining a better risk management strategy.
o Purchase to Pay Process: By perfecting its operational processes with one supplier, the organization can
duplicate these processes for others in the same category without creating entirely new ones.
o Streamlined Business Strategy: It also plays a key function in the strategic management of businesses.
It can aid the expansion of a particular business operation if the need arises.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Category Management……….
Advantages of category management
•Allows procurement professionals to focus on their time to conduct market analysis to fully leverage their negotiations
•Helps to correctly manage suppliers to align with corporate objectives
•Enhanced supplier relationships
•Gain an in depth understanding of how each category contributes to risk management through market analysis
•Enhances the customer experience as organization's will be able to focus on one category and look at promotions and
product availability.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Category Management………
Disadvantages of category management
It relies on the good communication and collaboration with suppliers, which can sometimes be difficult..
The seven steps within category management include:
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Category Management process
Theprocess is highly fluid and often simplified to expedite results, but generally follow this framework:
✓Analyze current spend to identify categories
✓Define goals,KPIs, and objectives for each category
✓Develop a master strategy to achieve each category’s goals
✓Break the strategy down into specific tactics and phases
✓Launch and implement strategy
✓Evaluate and optimize.
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
Category Management process
7 skills every Category Manager should have in 2024
1. Analytical skills
Analytical skills enable Category Managers to dissect market trends and data which is crucial for identifying opportunities
and navigating challenges, making it a cornerstone of effective category management.
2. Strategic sourcing skills
This skill involves identifying and engaging with the best suppliers which is vital for optimizing value and ensuring supply
chain resilience, directly impacting the organization's ability to meet its strategic goals.
3. Stakeholder engagement skills
Effective communication and collaboration with stakeholders ensure that procurement strategies are aligned with
broader organizational objectives.
4. Financial intelligence skills
Understanding budgets, cost management, and financial analysis is essential for driving cost savings.
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
Category Management process
7 skills every Category Manager should have….
5. Risk management skills
Identifying and mitigating potential risks protects the organization and ensures supply continuity which is essential
for maintaining operational stability and safeguarding against unforeseen challenges.
6. Negotiation Skills
Negotiation is critical for securing favorable terms and building strong supplier relationships, and effective
negotiation strategies impact the bottom line and support long-term strategic partnerships.
7. Project Management
Efficient project management from inception to completion ensures procurement projects align with strategic
objectives, are delivered on time, and achieve desired outcomes, marking it as a crucial skill for Category
Managers.
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
Enablers of Category Management
By Guta Mengesha, Ethiopia

Evolution and Growth of Supply chain
Difference between strategic sourcing and Category managenent
By Guta Mengesha, Ethiopia
Variables Strategic sourcing Category Management
Nature Process Strategy
Focus Spending less within supply
channels
Value and goal based objective like
buying lesser or smarter
End result Leads to an overall spend
optimization
Leads to an overall supplier optimization
Competency Functional Strategic
Horizon Short Term/one time event Long term/end-to-end process
Approach Event/process based Context
Program No supplier development, no
typical demand management
Supplier development, demand
management
Commodity Single category Portfolio category
Executive support Passive Proactive

Evolution and Growth of Supply chain
Category Management power house
Take always………………
Category Management isn't just about managing spend, ❎
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�When Category Management is embedded into the core business strategy, it enhances cross-functional
collaboration, ensuring that procurement decisions support the company's long-term objectives.
This alignment helps in identifying cost-saving opportunities while also focusing on value creation,
sustainability and innovation. ??????
By developing comprehensive category strategies and leveraging advanced market intelligence, we can
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Let's shift the focus from mere cost-saving to holistic value creation and witness the synergy it creates. ??????
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By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION
In a Florida State University study titledA Skills-Based Analysis of the World-Class Purchaser, Larry C.
Giunpiero, Ph.D., found that negotiation skills were crucial in achieving an organization’s goals of
improved quality, price delivery, and service.
Negotiation:
Itis a conversation to reach an agreement. Procurement negotiation is a process by which professionals
engage with each other tocreate agreeable terms for a contract.
Negotiation is ‘coming to an agreement’. It is necessary as ‘the process by which agreements are
reached, by parties with different and potentially divergent interests, is a complex one” (Chartered
Institute of Purchasing & Supply, 2012) 2 .
“In a procurement context, negotiation is a process of arriving at an agreement on the conditions of a
contract, through discussions between buyer and seller:
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION……..
Negotiation is a fact of life’. Everyone negotiates something every day. “In particular those involved with
the procurement function. skills in negotiation are highly valued in the pursuit of commercial ‘value for
money’ outcomes.(Chartered Institute of Purchasing & Supply, 2018)
Both parties typically discuss pricing, payment, delivery date, and timeline. Ideally, the negotiations should
consider the best options for both parties tobuild strong relationshipsthat lead to long-term business.
Ultimately, this creates a win-win result for both parties.
In reality, procurement negotiations don’t always work out so easily or successfully. Those who enter into
the negotiation often might not think about what’s best for everybody. Instead, they may be thinking about
what’sbest for themselves.
With that in mind, it’s important to learn all you can about who you’re negotiating with and their true
objectives. A good way to do that is to understand the different styles of negotiation that people use. That
way, you're ready for whatever comes your way.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION……….
FIVESTYLES OF NEGOTIATION
1.COMPETITION: Negotiators who use a competition style value the negotiation outcome more
than the relationship between the two parties. Negotiators who use this style are looking to win the
negotiation and want the other party to lose. Usually, negotiators who favor this style will do
anything to get the win.
2.COLLABORATION: Collaborators value outcome and relationship equally because they believe
both are important. They want a win-win outcome and a long-term relationship. And they'll work
hard to achieve both.
3.COMPROMISE: While compromisers value outcome and relationship, they are willing to sacrifice a
little of each to reach an agreement. They believe in winning some of what they want while losing
a little bit of it.
4.ACCOMMODATION : Accommodators value the relationship more than the outcome and are
willing to lose the negotiation. The result is a “you win, and I lose” style. This is the opposite of the
competitive style.
5.AVOIDANCE: With this style, the negotiator doesn't value the outcome or the relationship. It can
simply be considered a “lose-lose” model with the party withdrawing from the negotiation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION………….
5 Styles of Negotiation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION………….
5 Styles of Negotiation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION…..
Seven Stages of Procurement Negotiation
1.Preparation: Thoroughpreparation is extremely important. This is when you acknowledge your
negotiation style first. Then, you decide on the relationship and outcome you expect to achieve with
the other party. You should also research the other party and, if possible, learn what negotiation style
they typically use.
2.Opening: During the opening, the parties state the goals of the negotiation. This is when you can
discover if the relationship and outcome expectations match.
3.Testing: As the name implies, both parties are “testing” each other to understand each party's
values. Good communication and listening skills are key to this step. Paying attention during this
stage can help you find opportunities.
4.Proposing: Both parties propose what they expect to achieve at this stage. It’s also a time when you
and your team may want to think about modifications to your strategy based on the proposal from the
other party.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION…..
Seven Stages of Procurement Negotiation……
5. Bargaining**: Based on what has been said, both parties should offer compromises if needed. Ideally,
any compromises should be equal and agreeable to both parties. For example, look for opportunities tocut
procurement costson both sides. This way, everyone's paying the optimal price for the good or service.
6.Agreement: Once compromises are reached, the parties can make an agreement. When both parties
accept the agreement and sign, the procurement contract becomes a legally binding document.
7.Closure: Both parties receive documentation and contracts from the previous stages for their records.
After this stage, the negotiation is complete.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION
Reasons for negotiation
➢It ensure potential supplier understand requirements
➢It avoid the possibility of litigation
➢It exert the control over the manner in which the contract
is performing
➢It reduce risks
➢It improve benefits like better quality, performance delivery
➢It helps to overcome problems and challenges that might
arise during course of contract
➢It help to achieve value for money
➢Foster sound continuing relationship
➢Eliminate unnecessary cost
➢Create better understanding and relationship with suppliers
➢Gain knowledge of supplier products, capabilities,capacities
and process.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
NEGOTIATION summary
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Contract Management
Contract management is the means of managing contract creation, execution, and analysis to maximize operational
and financial performance at an organization, all while reducing financial risk.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Contract Management
Allocate expert and dedicated contract management for the term of the contract. You need to have robust procedures, with
people to manage the contract. The management provisions should be built into the contract. The level of contract
management you need will depends on the type of contract. Inadequate planning for, and carrying out of, contract
management is a crucial reason for user dissatisfaction and not realizing value for money. It is important to have continuityin
the relationship and for the contract managers from both the procuring organization and the supplier to have been appointed
early in the process.
Match the contracting process with the nature of the purchase. Take into account complexity, size, and value. You should be
able to answer 'yes' to the following questions.
• Does the contract accurately represent the requirement?
• Have stakeholder requirements and views been taken into account?
• Do potential providers have realistic solutions to meeting the requirement?
• Does the organization have the necessary skills and resources to meet its obligations under the contract and for managing
the contract?
• Have you had appropriate, expert legal advice? • Has the future contract manager been involved in the process?
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
TOTAL COST OF OWNERSHIP(TCO)
To fully understand what you are paying for equipment, you need to evaluate theTotal Cost of Ownership (TCO),
which is an estimation of all the collective expenses associated with purchasing and operating a piece of equipment.
The TCO will provide a way to compare pieces of equipment “apples to apples.”
The price tag can cause much confusion because it reflects one small part of the big picture. Some sources say that
the amount on the price tag represents less than 10 percent of the total cost spent on a piece of equipment over its
lifetime.
In fact, energy costs, maintenance, and repair fees are predicted to have at least five times more relevance than the
upfront cost. But, few consider these factors as part of the price during their selection process.
TOC Formula
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Total cost of ownership(TCO)……
I = Initial cost: The initial cost is the number that appears on the price tag.
O = Operation: Operation is the cost to install the asset, test the asset, train employees to run the asset, and
the cost of energy to operate the asset.
M = Maintenance: Maintenance includes the cost of regular repairs such as cleaning, inspecting, lubricating,
and adjusting the asset to make sure it is in optimal condition. This also includes reactive maintenance when
the equipment breaks down unexpectedly.
D = Downtime: While you could include downtime along with the cost of maintenance, it is often so large that it
warrants its own category. Downtime involves the labor costs of employees whose work is delayed, indirect
labor costs from supervisors who address the issue, lost production, and lost customers from inability to meet
time expectations.
P = Production: Two different assets will likely have different levels of output, produce different qualities, and
have different environmental implications.
R = Remaining value: The remaining value has to do with the asset’s longevity. How much will the asset be
worth in 5 or 10 years? It can be a big difference.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Total cost of ownership(TCO)
This formula can sound a little overwhelming, but let’s start simple.
I + M –R = TCO
For this example, we will start with three variables to compare two hypothetical of assets: Asset A and
Asset B. The variables chosen are initial cost (I), maintenance costs over 5 years (M), and the remaining
value after 5 years of depreciation (R).
•Asset A has an initial cost (I) of $10,000.
•Asset B has an initial cost (I) of $20,000, twice the upfront cost as Asset A.
By Guta Mengesha,Ethiopia
Asset A Asset B
Initial cost $10,000 $20,000
+ Maintenance $5,000 $2,000
-Remaining value$2,000 $10,000
= TCO $13,000 $12,000

Evolution and Growth of Supply chain
Total cost of ownership(TCO)
Based oninitial cost (I) alone, Asset A would be the clear choice. However, the TCO can tell us a lot more
about which option is best.
The TCO of Asset B is less than Asset A even though its initial cost was twice as much.
We will go with a conservative estimate and of $50,000 per hour, even though downtime will likely be a lot
more.
Since$163,000 –$62,000 = $101,000, Asset B costs $101,000 less than Asset A. The price gap
becomes wider with every variable that you add, giving you a clear choice for cost value.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Total cost of ownership(TCO)
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We need strategic procurement that prioritizes both financial savings and creating value for our organizations. ??????
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competitive advantage.
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Collaboration with suppliers can unlock hidden cost savings and generate new value streams.
By asking these questions that can help maintain the balance, organizations can develop a comprehensive category
management strategy that achieves both cost reduction and value creation. ??????
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
KPIs (key performance indicators), also called metrics, are designed to measure the performance and
effectiveness of procurement management. Procurement may affect product quality, costing, timely
delivery, and customer satisfaction. So it is important for organizations to monitor and improve,
performance and health of procurement. Procurement KPI metrics help organizations to track and
report performance and effectiveness of procurement in meeting business objectives.
Are broadly classified in to four KPI
1.Quality KPI: measure quality of good, work, service you procure
2.Inventory KPI: measure the efficiency of your inventory management
3.Delivery KPI: measure the timeliness and reliability of deliveries
4,Cost saving KPI-the money saved
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix -image
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
Is a measurable value that tracks all relevant aspect of obtaining or purchasing goods and services. It helps procurement
department to control and optimize the quantity, quality , cost timing and sourcing of purchasing process. (By
Rakotomola)
1.QUALITY KPI’S
A. COMPLIANCE RATE (C.R) :
❑Is a measure of how well supplier adhere to term of their contract with buyers.
❑To ensure legal security, businesses need to be in contractual and policy compliance.
❑To improve the compliance rate, businesses can turn to a foolproof purchasing contract that clearly outlines all
penalties in the event of a breach.
❑Are the ratio of disputed invoices to total invoices, as well as the total difference between the paid and quoted prices.
❑A high compliance rate means fewer disputes, delays and extra expending
❑A low compliance rate means more problems and inefficiencies
C.R= Number of supplier’s meeting the requirementX 100
Total number of supplier
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix…….
B. PURCHASE ORDER ACCURACY (P.O.A)
❑It measures how well supplier meet the buyer’s expectation
❑It allows if the orders are correct and timely
❑It is determined by comparing the actual deliveries with agreed terms
❑Higher P.O.A benefits the buyer with lower cost and improved efficiency.
❑A low purchase order accuracy will typically increase the company's operating costs.
❑This specific metric will help organizations keep an eye on whether their suppliers are delivering the right orders
and if these deliveries are on time.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix……………
C.SUPPLIER DEFECT RATE (S.D.R)
❑It measures the proportion of faulty or substandard products from a supplier
❑It helps to identify the type of defects and their root courses
❑By measuring the supplier defect rate based on defect types, procurement professionals will be
able to generate actionable insights regarding each supplier's overall trustworthiness.
❑The supplier defect rate is a representation of the total number of substandard products over the
total units tested.
❑It typically expressed as defects per million
❑S.D.R = Total number of substandard products x 100
Total number of unit received
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix…………
2.INVENTORY KPI’S
A.INVENTORY TURNOVER RATIO (I.T.R)
❖It shows how efficiency a company sells and replace its inventory in a given place.
❖Higher ration indicates improved inventory planning or inventory sold more quickly and
efficiently.
I.T.R= Cost of good sold
Average inventory level
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix……….
B. INVENTORY AGING
❖It indicate report tells us how many days an item is in inventory
❖Report represents a list of all the items on hand that are grouped based on the period of time spent in inventory.
❖It helps to spot slow moving inventory and associated storage cost
❖High inventory aging means capital tied-up in stock
❖A higher inventory aging reflects the blockage of certain working capital in the form of inventory.
Average age of inventory= Average cost of inventory at its present level X 365
Cost of good sold
C. INVENTORY CARRYING COST (I.C.C)
❖It refers to the expense of holding inventory over a certain period of time
❖This includes the cost of space such as rent, electricity, equipment, salaries, inventory shrinkage or losses, etc
❖The more products in stock, higher the inventory carrying cost. It is overhead cost
❖I.C.C = Inventory holding cost X 100
The total value of the inventory
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
3.Delivery K.P.I’s
A. SUPPLIER LEAD TIME (S.L.T)
➢It measures the time between order placement and shipment by supplier
➢This matrix refers to the efficiency of the purchasing process
➢Is typically measured in days and starts with the availability confirmation and order, and ends with the delivery.
➢Shorter lead times are preferred, as long as quality remains uncompromised.
➢For example, if you place a PO on January 1st and receive the goods or services on January
10th, your lead time would be 10 days.
S.L.T= Delivery time –Purchase order acceptance time
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix………..
B. PURCHASE ORDER CYCLE TIME ( P.O.C)
➢It measures the time it takes to fulfil an order from requisition to delivery
➢It is time between receipt of purchase requisition to releasing a purchase order to the vendors.
➢It measured from the moment a purchase requisition is submitted to the time when it's sent to a vendor
➢It also indicates supplier’s delivery speed and indicates the preparedness of the procurement team.
➢It is the time it takes to create the PO , approve it, send it to the supplier, and receive the goods or services.
➢It reflects how efficiently the procurement team is able to execute intermediate tasks such as sending
RFQs, receiving and comparing quotes, approvals, etc.
➢Shorter purchase order cycle time confirms an efficient procurement strategy.
➢The supplier with shorter cycle time are ideal for urgent orders
P.O.C= Po delivery date(time order received by customer)-order date(time order placed)
Total number of orders shipped
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
c. Vendor availability (V.A)
❖It measures a supplier ability to meet urgent needs and indicate their reliability.
❖It calculates the ratio of available items to total orders placed
❖A supplier availability of 90% or higher indicate a strong and efficient supply chain performance
V.A= Number of times items area available with vendor
Total number of orders placed with the vendor
D. Emergency purchase ratio (E.P.R)
❖This quantifies the frequency of urgent orders placed by the company
❖Is measured by comparing the emergency purchases to the total number of purchases made over a given period of time
❖Are unplanned orders that are made so as to avoid any product shortages
❖Lowe numbers signify improved planning and efficiency
E.P.R=the number of emergency purchase
Total number of purchase over fiscal period of time
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
4.COST SAVING K.P.I
A. PROCUREMENT ROI
•It measures the financial gain from the procurement activities relative to the
investment
•It calculates how efficiently procurement contribute to financial performance
•Is a ratio between the annual cost savings and the annual procurement cost.
P.ROI= Annual cost saving
Annual procurement cost OR
Procurement ROI = (Cost Reduction + Cost Avoidance)/Cost of Procurement Operation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix…..
B. COST REEDUCATION
•It measures a percentage of saving achieved through negotiation , finding alternative supplier, reduce
maverick spending and discounts on purchases
•Is a central procurement KPI
•It is utilized to plan the company’s budget and spending as part of long-term cost management strategy.
•It measures the tangible hard savings that were achieved over the years through cost management
techniques.
•You can measure this KPI by comparing the old costs with the new costs for the same good or service
•It is determined by comparing the previous and current price for identical items.
•It is also called hard savings.
•Cost Reduction = Actual Purchasing Price –Last Price Paid or (Procurement costs in the previous period –procurement
costs in the current period
•For example, if your procurement costs in the previous period were $100 million and your procurement costs in the
current period are $90 million, your procurement cost reduction would be $10 million
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix….
C. COST AVOIDANCE OR SOFT SAVING
✓Refers to how the procurement team prevent or mitigate potential future additional costs.
✓These are savings from the actions taken to reduce future task
✓Although not quantifiable , still contribute to cost saving as companies can track metrics such as the number of late deliveries,
quality defects, and supplier failures to identify areas where cost avoidance occurs
✓One effective way to avoided costs is to secure long term contracts that stabilize price and prevent fluctuations.
✓Is the amount of money a company saves on its procurement costs by avoiding potential problems, such as late deliveries, quality
issues, or supplier failures
✓These do not appear directly in the company's bottom line in any tangible or quantifiable way; nevertheless, these can
still have a positive impact, even if they don't directly impact the income statement.
✓It often targets strategic spend such as new technologies or investments that have no terms for comparison
✓Few examples are rate contracts or price protection, negotiation after initial quotes, asking for value-adds such as add-on services,
continuous improvements for saving, finding substitutes
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix………
D. SPEND UNDER MANAGEMENT (SUM)
✓It optimize expenses by ensuring negotiated prices are consistently applied.
✓It is the percentage of a company’s procurement spend managed through its approved supplier network.
✓The SUM represents the difference between the total approved spend such as direct, indirect, and service-related
costs, and the Maverick spend.
✓It covers strategically managed spend and negotiated rates with suppliers
✓Consolidated purchase and negotiating bulk discount can result in substantial saving.
SUM=Total procurement spend –maverick spend X100
Total procurement spend
Example if total procurement spend is $100 million and your maverick spend is $10 million SUM
is 90%
.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix…….
E. PRICE COMPETITIVENESS
✓Minimal vendor competition will oftentimes lead to a supplier monopoly.
✓Is the ability of a company to obtain goods and services at competitive prices
✓Over the long-term, this can lead to lower-quality services and fewer growth opportunities.
✓The focus is placed on shortlisting vendors that offer a competitive advantage.
✓This can be measured by comparing a company’s prices to those other companies pay for the same goods and
services.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
Other Relevant KPI
5. EMPLOYEE LEARNING AND GROWTH KPI
Number of employees with certification, training investment per
employee
6.SUPPLIER RATINGS
➢This KPI evaluates the performance of suppliers on various parameters. Few key parameters can be
response rate, on-time delivery of material, quality of material, invoice accuracy.
➢It helps in identifying strong and weak suppliers.
➢Companies can use supplier ratings to identify, reward and retain well-performing suppliers and to
identify, take corrective action regarding weak suppliers
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix
Other Relevant KPI……………..
7.Maverick spending
✓Is the unauthorized or unplanned spending on goods or services.
✓This can occur when employees purchase items outside the
company’s approved supplier network.
To measure Maverick spend, companies can track the following metrics:
•The amount of money spent on non-approved suppliers
•The number of purchase orders placed with non-approved suppliers
•The percentage of total procurement spend that is maverick spend
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Procurement KPI’s/Matrix……..
Takeaways
And while these list is not exhaustive, it is still comprehensive enough to cover all of
the critical metrics and KPIs that need to be taken into consideration.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Custom Clearance Process
Definition: is the process of passing goods through customs, so they can
enter or exit the country. It is very essential in the international trade in
ensuring goods meets all legal requirements.
Its role in the trade is to facilitate legal trade, help in in collecting tariff, and
Ensure imported goods are safe and legal.
Common terminology
oHarmonizes system (HS) code: international nomenclature for classification of products.
oDuty: a tax imposed on imports by the customs authority of a country.
oTariff: a tax or duty to be paid on a particular class of imports or exports.
oCustom bond: a contract used for guaranteeing that all duties, taxes, and fees owned by government is
will be paid.
oCustom declaration: a form submitted to customs authorities detailing the nature, quantity and the vlue
of good imported or exported.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Common challenges in custom clearance
1)Documentation error: in accurate or incomplete paperwork can lead to delays, fines, or seizer of goods.
2)Classification issue: inaccurately classifying goods in Harmonized system (HS) can result in wrong duty
assessments.
3)Regulatory Change: keeping up with changes in custom regulation and trade agreement can be challenging
4)Delayed clearance: delay in clearance process can disrupt supply chain and increase cost.
5)Unexpected duties and taxes: misunderstanding tariff codes and tax regulation can lead to unexpected
costs.
6)Compliance with local lows: each county has unique custom regulations, which can be difficult to
navigate.
7)Language and cultural barriers: it can complicate communication and understanding of procedures,
especially in international shipping.
8)Risk of good inspection and delays: random or targeted inspection can cause significant delays.
9)Technology integration: difficulties in integrating with advanced custom software system can hinder the
clearance process.
10)Security concerns: ensuring cargo security and meeting anti-terrorism regulation is critical and challenge.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
1.ImportLicenseorPermit/Donationcertificate:Import/ExportLicense:Itisrequiredforcontrolled
goods;servesaspermissiontoimport/export.Itisspecifictothetypeofgoodsandtheimporting/exporting
country.WhattoLookistcheckifyourgoodsrequirealicenseandapplyinadvancetoavoiddelays.
2.CommercialInvoice:itservesasabillofsalebetweenthebuyerandseller,detailingthedescription,
quantity,value,andtermsofthegoodsbeingimported.Itisessentialforcustomsclearanceandvaluation
purposes.Itgivesyourpotentialbuyeraquoteforashipmentofgoods.
3.PackingList:Thisdocumentprovidesadetailedlistofthecontents,dimensions,packagingtype,and
weightofeachpackagewithintheshipment.Itassistscustomsofficialsinverifyingthecontents(cargo)of
theshipmentandensuresaccuratehandlinganddelivery.
4.Transportationdocuments:(BillofLading(B/L)orAirWaybill(AWB)orcombined:Issuedbythe
carrierorfreightforwarder,thebillofladingservesasacontractofcarriageandareceiptforthegoods
beingtransported.Itcontainsessentialinformationsuchastheshipper,consignee,vesseldetails,quantity,
gooddescriptionandtermsofshipment.Itmustcorrespondwithcommercialinvoiceandpackinglistand
signedbycarrier.
5.CertificateofOrigin:usedtodeterminetheoriginofgoodsfortariffpurposes;likecustomsclearance,
tradeagreements,orpreferentialtarifftreatment.Itistypicallyissuedbytheexporteroradesignated
authorityordoners.Indicatesthecountrywherethegoodswereproducedormanufactured.Ensureit’s
correctlytitledandauthenticated,asitimpactsdutyrates.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
6.ImportDeclarationForm:Alsoknownasacustomsdeclarationorentryform,thisdocumentprovides
detailedinformationabouttheimportedgoods,includingtheirclassification,value,andorigin.Itis
submittedtocustomsauthoritiesforassessmentofdutiesandtaxes.
7.InsuranceCertificate:Provesthattheshipmentisinsured.ItdetailsthetypeandCoverageofthe
insurancepolicy.Ensurecoverageisadequateandmatchesthevalueandnatureofthegoods.
8.Performainvoice:Usedforcustomstoassessdutiesandtaxes.ItisSimilartoacommercialinvoice
butissuedbeforetheactualtransaction.Itensureitreflectsthetruevalueanddescriptionoftheintended
shipment.
9.Counsularinvoice:Ensureitreflectsthetruevalueanddescriptionoftheintendedshipment.Prepared
bytheexporterandcertifiedbytheconsulateofthedestinationcountry.Checkifthedestinationcountry
requiresitandensurepropercertification.
10.CustomsDeclaration:Declaresthenature,quantity,andvalueofgoodsforcustomsclearance.Itisa
mandatorydocumentforallinternationalshipments.Makesuretocompleteaccuracyandconsistencywith
otherdocumentstoavoidpenalties.
11.DangerousGoodsDeclaration:Requiredforshipmentscontaininghazardousmaterials.Itdetailsthe
natureofhazardousgoodsandhandlinginstructions.WhattoLookoutforis:Compliancewith
internationalandnationalregulationsonhazardousmaterials
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
12,ExportDeclaration:itisrequiredbytheexportingcountrytodeclarethenature.quantity,and
destinationoftheexportshipment.ItIncludesexporterdetails,descriptionoftheexportshipment.Whatto
LookoutforisEnsureit’saccuratelyfilledouttocomplywithexportregulationsandavoiddelays.
13.CargoControlDocument(CCD):isusedbycustomstotrackandcontrolthemovementofgoods.Is
issuedbythecarrier,itincludesshipmentdetailslikeorigin,destination,andtransitpoints.WhattoLook
outforistoverifyaccuracytoensuresmoothtransitandcustomsclearance.
14.TransitDocument:itisusedwhengoodsarepassingthroughoneormorecountriesinroutetotheir
finaldestination.Characterizedbydetailsthejourneyofthegoods,includingalltransitpoints.Whatto
LookoutistoEnsurealltransitpointsarecorrectlylistedandcomplywithtransitcountryregulations.
15.HealthandSafetyCertificates:itisrequiredforproductslikefood,pharmaceuticals,andchemicals.
Itcertifiesthatthegoodsmeethealthandsafetystandardsoftheimportingcountry.WhattoLookoutforif
tobtainfromrelevantauthoritiesandensuretheymeetthestandardsofthedestinationcountry.
16.QualityInspectionCertificates:itassuresthequalityofgoods,oftenrequiredforindustrialproducts.
Itisissuedbyanindependentqualityinspectionagency.WhattoLookoutforistoensurethecertificateis
fromarecognizedandcredibleagency.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
17.FumigationCertificates:Itisrequiredforshipmentsofwoodproductsandagriculturalcommodities
likegrains.Itcertifiesthatthecargohasbeenfumigated.WhattoLookoutforthenecessaryforcountries
withstrictbiosecuritymeasurestopreventpestinfestations.
18.ATACarnet:itfacilitatesthetemporaryimportationofgoodswithoutpaymentofduties.
Characterizedasknownasthe“MerchandisePassport,”it’susedforgoodsthatwillreturntothe
originatingcountry.WhattoLookoutforistoensureallitemslistedwillbere-exportedtoavoidpenalties.
19.CertificateofFreeSale:itisrequiredforcertainproductstoprovethattheyarelegallysoldinthe
openmarketandapprovedforexport.Itisoftenusedforcosmetics,medicaldevices,andfooditems.What
toLookoutistoobtainfromtheappropriateregulatoryauthorityintheexportingcountry.
20.PhytosanitaryCertificate:itisrequiredforPlantandplantproductstocertifytheyarefreefrompests
anddiseases.Itisissuedbytheagriculturaldepartmentorasimilarauthorityintheexportingcountry.
Whattolookoutforessentialforinternationaltradeinplantsandplantproductstopreventthespreadof
pestsanddiseases.
21.CertificateofConformity:itdemonstratesthatgoodscomplywiththestandardsandregulationsof
theimportingcountry.Itisoftenrequiredforelectronics,vehicles,andotherregulatedproducts.Whatto
Lookoutforistoobtaincertificationfromaccreditedbodiestoensureacceptedbycustoms.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
22.CountryofOriginLabel:itindicatesthecountrywherethegoodsweremanufacturedorproduced.Is
requiredforvariousproductstodeterminedtariffratesandforconsumerinformation.Itmustbeclearly
displayedandaccuratetocomplywithtradeagreementsandregulations.
23.TextileDeclaration:Specifictotextileproducts,detailingthematerialcomposition.Includes
informationaboutfibercontent,countryoforigin,andmanufacturer.Whatocheckisaccuracyiscrucialto
meetspecificimportregulationsfortextiles.
24.ToxicSubstanceControlAct(TSCA):Requiredforchemicalsbeingimportedintocertaincountries,
liketheUSA.Certifiescompliancewithenvironmentalsafetystandards.WhattoLookisverifynecessary
forchemicalimportstoensuretheydon’tposeenvironmentorhealthrisks.
25.CITESPermit:Requiredfortheimportorexportofwildlifeproductsregulatedundertheconvention
oninternationaltradeinEndangeredSpecies.Ensurestradedoesnotthreatenthesurvivalofendangered
species.WhattoLookoutfor:EssentialforproductsderivedfromfloraandfaunalistedunderCITES.
26.ElectronicExportInformation(EEI)Filing:Requiredforshipmentsaboveacertainvaluethreshold
fromsomecountries,liketheUSA.SubmittedthroughtheAutomatedExportSystem(AES)forstatistical
andexportcontrolpurposes.Ensuretimelyandaccuratefillingtoavoidpenaltiesandshipmentdelays.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
27.CommoditySpecificLicenses:Requiredforcertaincommoditieslikeoil,minerals,andagricultural
products.Characterizedbyspecifictothetypeofcommodityanditsexport/importregulations.Whatto
Checkifyourcommodityrequiresaspecificlicensesandcomplywiththerelevantregulations.
28.RadiationCertificate:Necessaryforproductsthatmayemitradiation,likecertainelectronics.It
certifiesthattheproductcomplieswithsafetystandardsregardingradiation.WhattoLookisifrequiredfor
internationaltradeinapplicableelectronicgoodstoEnsuresafety.
29.VeterinaryCertificate:Requiredfortheimportandexportofliveanimalsandanimalproducts.It
certifiesthehealthandvaccinationstatusofanimals.Essentialforensuringanimalhealthandcomplying
withbiosecuritymeasures.
30.FoodSafetyInspectionCertificate:Requiredforimportedfoodproductsinmanycountries.Certifies
thatthefoodproductsmeetshealthandsafetystandards.obtainfromrelevanthealthauthoritiestoensure
compliancewithfoodsafetyregulationsiscrucial.
31.IngredientList:Requiredforfoodproductsandcosmetics,detailingallcomponents.Characterizedby
Listingallingredientsusedintheproducts,ofteninorderofpredominance.Mustbeaccurateand
comprehensivetocomplywithhealthandsafetyregulations.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
32.MaterialSafetyDataSheet(MSDS):Necessaryforchemicalsandhazardousmaterials.Provides
detailedinformationontheproperties,handling,storage,anddisposalofthematerial.WhattoLookisto
ensureit’supto-dateandaccompanieshazardousmaterialsforsafetyandcompliance.
33.CertificateofAnalysis(COA):Commonforpharmaceuticals,chemicals,andfoodproducts.Itisa
documentthatconfirmsaproductmeetit’sproductspecificationsandqualitystandards.Shouldbe
obtainedfromatrustedandaccreditedlaboratory.
34.End-UserCertificate:Requiredfortheexportofcontrolledorsensitivegoods,likemilitaryordual-
useitems.Itidentifiesthefinalrecipientandassuresthatthegoodsarenotforunauthorizeduse.Necessary
forcompliancewithexportcontrollawsandregulations.
35.ExportPackingList:Moredetailedthanastandardpackinglist,specificallyforinternational
shipments.Includesdetailsonthepackagingmaterial,dimensions,weight,andpackagemarkings.Whatto
lookagainstistoensuresthatthepackagingmeetsinternationalshippingstandardsandregulations.
36.Non-preferentialCertificateofOrigin:Usedtocertifiedtheoriginofgoodsforcustomspurposes,but
notlinkedtoanytradeagreements.tindicatesthecountrywherethegoodsweremanufacturedor
introduced,basedontextileslikewherethetestsubstantialtransformationoccupied.Whattocheekisif
essentialfordeterminingtariffundergeneralWTOrulesandforcomplyingwithcertainimport
regulations.Ensureaccuracyintheorigintoavoidtoavoidpenaltiesanddelaysincustomsclearance.
Source:www.primeintercorp.com
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ListofDocumentsRequiredforImport:
InEthiopia,priortotransportingitemfromoriginlicensetobesecuredfromrelevantgovernmentbodyto
import.Forexampleformedicalandpharmaceuticalsuppliesimportpermitispriorlytobesecuredfrom
FoodandMedicineAuthority.SameforICTmaterialfromInformationsecurityagency.Then,aftergoods
arrivedtheinformationneedtobefilledonCustomofficesystem“Singlewindow”forfinalapprovaland
bypayingnecessarycustomfeesandstoragecostgoodcaneasilycleared.
Sometimes,itcouldpassontootherthirdpartiesbeforetheshipmentisgiventoatransportationprovider,
includinga:
•Warehouse
•Customs broker
•Freight forwarder
•Packaging company
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Exporting of Goods
ListofDocumentsRequiredforExportinadditiontoother
1.ExportLicenseorPermit:exportlicensesorpermitsmayberequiredforcertaingoodssubjectto
exportcontrolsorregulatoryrestrictions.Thisdocumentauthorizestheexportertoshipspecifiedgoodsout
ofthecountry.
2.ExportDeclarationForm:Thisdocumentprovidesdetailedinformationabouttheexportedgoods,
includingtheirdescription,quantity,value,destination,andintendeduse.Itissubmittedtocustoms
authoritiesforregulatorycomplianceandstatisticalpurposes
3.ExportPackingDeclaration:Thisdocumentcertifiesthatthegoodshavebeenproperlypacked,
labeled,andmarkedinaccordancewithregulatoryrequirementsandinternationalstandards.Itensures
compliancewithsafety,security,andtransportregulations.
4.ExportLicenseforControlledGoods:Forgoodssubjecttoexportcontrols,suchasmilitary
equipment,dual-useitems,orsensitivetechnologies,anexportlicensemaybenecessary.Thisdocument
ensurescompliancewithexportregulationsandpreventstheproliferationofrestrictedgoods.
Source:www.primeintercorp.com
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Exporting of Goods
Advice from
For a person who wishes to enter the import and export trade, I would give the following specific advice:
1. Learn relevant knowledge: understand international trade rules, customs procedures and trade contracts
and other basic knowledge;
2. Establish contacts: strive to participate in industry exhibitions and business activities to meet potential
partners;
3. Develop markets: look for products with good quality and reasonable prices and explore new import and
export markets.
She thought import and export trade will be more digitalized and intelligent, and more efficient trade processes
will be achieved through blockchain technology.
The biggest problem that needs to be solved for import and export trade is the rise of trade protectionism and
the uncertainty caused by trade wars.
For import and export trade, the most important skill is the ability to communicate, as it is necessary to
communicate effectively with partners in different countries to ensure that trade runs smoothly.
During her career in import and export trade, she has experienced a variety of changes such as market
fluctuations, policy changes and technological innovations.
Challenges facing the import and export trade in the future include the vulnerability of the global supply chain,
environmental sustainability and the increase in geopolitical risks. It is necessary for all parties in the industry
to work together to find solutions and promote trade development and progress.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
CRITERIA FOR GOOD INSPECTION
1.Random selection: randomly choosing goods for inspection as routine custom procedure.
2.Risk assessment: custom may target goods based on a risk assessment, considering factor like origin,
destination and shipping history
3.Document discrepancies: inconsistencies or errors in documentation can trigger an inspection.
4.Suspicious cargo: if cargo appear suspicious in any way, such as irregular packaging, or labeling, it
may be inspected.
5.History of non compliance: Either by importer, exporter or carrier can lead to increased scrutiny.
6.Types of goods: more regulated goods like foods, chemicals and electronics are more likely to be
inspected.
7.Country of origin and Destination: goods from or distained to countries high risk may be subjected to
more frequent inspections.
8.Information from other agencies: Tips or information from low enforcement or government agencies
can prompt an inspection.
9.Value of goods: High value shipment may undergo inspection to verify their content and value.
10.Random or targeted quota: custom authorities may have quota for random or targeted inspection
that needs to be neat.
Source: Still fresh UK
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Exporting of Goods
Forigntrade transaction PPG
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
I. KRALJIC PORTFOLIO ANAYIZIS
Matrix Kraljic’smatrix is a simple spend segmentation tool that identifies four broad classes of
organizational input. Kraljicessentially places the criticality of an item to the organization on one axis of a
four-box matrix, and the difficulty of operating in that item’s supply market on the other. The matrix is
also referred to as “portfolio matrix” or “positioning matrix”.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
I. KraljicPortfolio Analyzes.. Image exploration
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
A. STRATEGIC ITEMS
High supplier risk and high profit impact items cover strategic suppliers. Ensuring an effective and predictable
supplier relationship is key to the future of the buying company as there are only a handful of suppliers. Managing
such suppliers requires a diverse array of skills and can subsume a significant proportion of executive time in
sponsoring and directing the relationship. Unlike the non-critical items, each contract is unique and focuses upon the
shared gains that equal partners enjoy in a collaborative relationship.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
B. BOTTLENECK ITEMS
The risk is high, but profitability is low. Here, the strength is in the hands of the supplier. The market consists of few
suppliers that can behave oligopolistically to force prices upward. Procurement Leaders found that these suppliers
absorb more of buyers’ time compared to any other segment. The supplier relationship is demanding, even though they
have a limited impact upon company profitability. The market structure forces buyers to accept an unfavorable deal.
The main strategy rests upon damage limitation. Few opportunities will arise from this category and more creative
buyers will seek to alter the terms of trade. Innovative internal activities can redevelop product requirements such that
the material can be replaced with another and preferably sourced from a leverage supplier
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
C. LEVERAGE ITEMS:
Where items have a high profitability, but a low risk factor, buyers possess the balance of power in the
relationship and leverage this strength to obtain greater returns. Traditionally, procurement professionals
have exploited this status to lower prices, but increasingly more advanced companies are looking to
unlock the innovative potential of their suppliers. The market dynamics of this relationship rest upon an
abundance of highly commodified parts. Suppliers can be easily substituted as their offerings are much
the same. The only limitation for buyers is perhaps over-playing their hand and forcing a low-profit
margin vendor into insolvency.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
PORTFOLIO ANLAYSIS
D. ROUTINE/NON-CRITICAL ITEMS:
These items are low risk and have a low impact upon organizational profitability. The most commonly
used example in this segment is office stationery. Although important for employees to perform their
duties, pens and paper do not have a significant impact upon the business, nor does their absence
represent a serious threat. For buyers, stationery is a nuisance as it clogs up time with peripheral
concerns. As such, the sourcing strategies deployed here focus on efficiency and reducing
administrative burden. Techniques such as e-auctioning and catalogues are an excellent means to
redirect responsibilities either directly to suppliers or to internal customers that are requisitioning the
goods.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
ANALYSING SUPPLIER PERCEPTIONS
The supplier preferencing model is an analytical tool that can be used to analyze and understand the supplier’s
perspective, which is analyzed as depending on two factors: the inherent attractiveness of the customer and the value
of the customer’s business. This tool helps organizations analyze why suppliers view organizations as they do and to
assess strategies to change that preferencing. As buyer to see how your supplier view your company.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
SUPPLIER PERCEPTION: The supplier perception is the view of the supplier back the purchaser, you.
This is how the supplier feels about this relationship. It has different names. This matrix is often better
known as the supplier perception model or the supplier preference model.
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
THERE ARE FOUR SUPPLIER PREFERENCE QUADRANTS :
1.CORE QUADRANT
2.DEVELOP QUADRANT
3.NUISANCE QUADRANT
4.EXPLOITABLE QUADRANT
1.CORE QUADRANT
These are the huge companies with substantial buying power and strong core business –think companies like
Target, Lowes and the like.Suppliers consider core purchasers as key to continued success, and these
purchasers get lots of attention and time. The outcomes are strategic partnerships, long-term cooperation and
close strategic partnerships on both sides.
2.DEVELOP QUADRANT
Purchasers here have low purchase value but high attraction through long-term development possibilities or
other factors outside of payment capabilities.This means a supplier will give this particular buyer time and effort
to build a positive relationship because of the high potential of the buyer. Those purchasers who fall into this
quadrant may earn preferential treatment options (pricing, services, correspondence etc.)
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
supplier preference quadrants………..
3. NUISANCE QUADRANT
The buyer has both low value and attraction.The purchaser lacks sufficient capital to meet MOQ and little to no
development.Suppliers faced with these buyers take little interest in establishing any sort of relationship now or in the
future.There is no practical reason to invest any resources and energy beyond what is necessary. The buyer may not
pay high prices but will also not receive any add value in personalized services.If this is the case, it is absolutely
necessary for the buyer to reconsider their position and work to improve –quickly.
4.EXPLOITABLE QUADRANT
There may be excellent purchases but only for a few sales or a one-time deal. It is common for the supplier to quote
exceptional prices specifically to exploit the purchaser.The reasoning of the supplier is sound.“Why would I invest
my time, effort and resources into a one shot deal?I am going to make what I can out of this and return to my usual
customer base.” It is vital the purchaser choose wisely for risk management and being overly exploited.
It is very easy to be exploited when you are in a hurry to order products.There are certain methods for supplier
pricing, and it is a good idea to understand them if you need products quickly
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
By Guta Mengesha,Ethiopia
supplier preference quadrantsimage

Evolution and Growth of Supply chain
SPEND ANALYZE
oIs the process of collecting, cleansing, classifying and analyzing expenditure data with the
purpose of decreasing procurement costs, improving efficiency, and monitoring compliance.
It can also be leveraged in other areas of business such as inventory management, budgeting
and planning, and product development..
There are three core areas of spend analysis –visibility, analysis and process. By leveraging
all three, companies can generate answers to the crucial questions affecting their spending,
including:
1.What am I really spending?
2.With whom am I spending it?
3.Am I getting what’s been promised for that spend?
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
SPEND ANALYZE
Benefit of spend analysis
➢Identifysavingsopportunities
➢Fullvisibilityofexpense
➢Improvingnegotiationstrategies
➢Datadrivensourcing
➢Managerisks.
➢Improvingsupplierperformance
➢Streamlineoperation
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
SPEND ANALYZE
spend analysis can help you review past performance and make an assessment of future performance
and trends.
Here are the basic questions we ask when analyzing expenses:
•What do we buy?
•How much did we pay?
•How much did we buy?
•Who do we buy from?
•Who is the buyer?
•Under what conditions did we buy?
•How often do we buy?
•When did we buy it?
•Are the products or services consistent with our order?
•Where were the items delivered (geographic location)?
•How does the data compare to previous years?
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Supply Chain Straggles
Common are six but corporate social responsibility, Procurement training and supplier
management
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
REFERENCE
oA.T. Kearney's Seven Steps for Strategic Sourcing. (n.d.). Retrieved from Association of International Procurement Technology:
https://www.aipts.org/a-t-kearneys-seven-steps-for-strategic sourcing/
oInstitute, C. F. (n.d.). What is Industry Analysis. Retrieved from Corporate Finance Institution:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis methods/
oMassin, J.-P. (n.d.). The Strategic Sourcing Matrix quandrants' characteristics. Retrieved from Sourcing and Procurement:
http://sourcing-and-procurement.com/the-strategic-sourcing-matrix quadrants-characteristics/
oNetwork, T. T. (2020, April). Retrieved from Tech Target Network: https://searcherp.techtarget.com/definition/strategic-sourcing
oPhilippe-Massin, J. (n.d.). Sourcing and Procurement . Retrieved from Example of a SourcoingTree: http://sourcing-and-
procurement.com/example-of-a-sourcing-tree/
oStrategic Sourcing and Supply Management. (n.d.). Retrieved from AT Kearney : http://www.middle
east.atkearney.com/consumer-products-retail/retail-capability/ /asset publisher/Jn6LoViFv6ZJ/content/strategic-sourcing-and-
supply management/10192?inheritRedirect=false redirect=http3A2F%2Fwww.middle east.atkearney.com%2Fconsumer-prod
oSupply, T. C. (2016). Category Management in Procurement and Supply. ProfexPublishing Lim
By Guta Mengesha,Ethiopia

Evolution and Growth of Supply chain
Thank YOU
God is Good all the time!
By Guta Mengesha,Ethiopia