戰略管理碩士dissertation節選
02-03, 2016
Chapter 2 Strategic Sourcing第二章戰略采購
2.1 Chapter Introduction介紹
下面的章節將討論戰略采購過程中的商業模式植物。采購是整個商業模式的一部分，與制造業和運輸業一起。探索戰略采購的過程，有助于完成整個業務流程，為研究提供理論基礎。辦公桌研究過程中實施的探索行業背景信息，以澄清公司的大畫面。由于花卉產業的特殊情況和花的制造工藝，采購過程和需求將是不同的。在以下內容中闡述了采購策略、供應商管理流程、談判階段細節和合同管理。所有的Visio流程圖將顯示每個進程的詳細信息。成本/效益分析將被包括在過去，以進一步解釋經濟狀況的業務。所有的分析和策略，將在第五章中得出結論。The following chapter will discuss the strategic sourcing process of Floras in the business model. Sourcing is a part of the entire business model, along with manufacturing and transportation. Exploring detail process of strategic sourcing would help to accomplish the whole business process.A literature review is used to provide theoretical foundation to the research. Desk research process is implemented to explore the industry background information in order to clarify the big picture of the company. Due to the special condition of flower industry and flower manufacturing process, the sourcing process and requirements will be various. The procurement strategies, supplier management process, negotiation stage details and contract management will be elaborated in the following content. All the visio flow diagrams will be included to indicate the detail information of each process. Cost/Benefit analysis will be included at last to further explain the economic condition of the business. All the analysis and strategies will be concluded in chapter conclusion.
2.2 Literature Review文獻
The literature review will provide theoretical foundation to the entire research project. The relevant academic articles, journals or books will be reviewed and analyzed to get deeper understanding about the flower industry and strategic sourcing process. Four most relevant theories will be reviewed in the following paragraphs. Each of the theories will be analyzed with motivation to the research.
2.2.1 Theory 1 Supplier Relationship Management
Supply chain management (SCM) has emerged as a powerful tool in the business process management arsenal. Application of the the methodology has transformed the way in which suppliers, manufacturers, distributors and retailers operate.
Strategic relationships
Strategic relationships lie in the middle of a spectrum of business relationships. At one end of the spectrumis the traditional supplier relationship-“Buy on the Market”. However, more possibilities by levels of integration of planning, workflow, and sharing information is more and more popular nowadays. There are ongoing relationship, Partnership, Collaboration/strategic alliance, and Merger/Acquisition
In developing a Supplier Relationship Management strategy, companies must decide which type of relationship fits for them. APICS indicated there are five variables to measure and decide the relationship strategy:
- Proximity (How long is the relationship? How narrowly defined is it?)
- Visibility (How much information sharing is occurring? What type of information is being shared?)#p#分頁標題#e#
- Communication (Is this just a casual “Hookup”? are we dating? Courting?Engaged? Married?)
- Culture (Is there any attempt to share cultures or influence the culture of the other?)
A supplier relationship governance framework would be a good reference to managing the supplier relationships. In the framework, some key points will need to be focused.
- Clear Mutual understanding has to be made. Both parties have to know each other’s ceiling and ground-floor.
- A system or mechanism could be built and managed to deal with the minor change or deviation of the delivered service.
- Meeting schedule would be planned for both parties to investigate the possibilities of continuous improvements.
Motivation
The supplier relationship management is an important part in strategic sourcing. A better supplier relationship would help to improve the operational efficiency and lower the procurement costs. The theory provides various perspectives in managing supplier relationships. They could be used to evaluate the condition of Floras in order to develop more collaborative long-term buyer-supplier relationship. The supplier relationship governance framework provides very specific and applicable ideas for the company to come up with supplier development program.
2.2.2 Theory 2Procurement Strategies
Quality in procurement is one of the core concepts. The issue of quality in procurement often represents a delicate balancing act for the involved organization. That is, if an organization buys an input inferior quality, it runs the risk of lowering the quality of the final product. In short, in the buy-sell relationship, both parties must understand issues of quality and strive to match the quality levels of buyers and sellers in the supply chain.
Moreover, procurement department should pay enough attention on supplier selection and evaluation. The selection and evaluation of suppliers is a process that involves stating an organization’s needs and then determining how various potential suppliers can fulfill these needs.
Global sourcing means to buying components and inputs anywhere in the world continues to grow in scope. Because of the tremendous distances that can be involved in global sourcing, managers must understand the trade-offs between transportation and holding costs. In addition, electronic procurement is having a profound impact on organizational purchasing, and two such impacts, online reverse auctions and procurement cards, were discussed. Investment recovery was discussed, with a particular emphasis on managing excess, obsolete, scrap, and waste materials#p#分頁標題#e#
Motivation:
The general overview of procurement strategies emphasize the points that need to be focused in global sourcing process. The quality of procurement product, supplier selection and global sourcing tips were introduced to give deeper insight about procurement in all levels. It is helpful to develop procurement strategies from every possible aspects.
2.2.3Theory 3 Service Performance Management& Outsourcing implementation
Performance management and measures are important parts which help to translating the organization’ overall strategies.Improving the performance offered by service provider would help the organizations achieve higher efficiency.
- Set up outsourcing objectives
Lack of clear outsourcing objective would cause lots of difficulties in entire procurement and business strategies implementation. The chosen objectives reflect the potential needs and intentions. Identify the most crucial objectives would offer explicit and straightforward direction for future business.
- Determine requirements
What is expected from service providers have to be involved. The requirements need to be determined from the most basic level, in other words, to be very detail-oriented and specific. The interdependency among outsourced services, internal resource, process and other internal functions have to be clarified in this stage to avoid possible conflicts. The more outsourced service, the more complicated the performance management will be.
- Build performance measures and standards.
It is necessary to identify which outsourced service will be prioritized to be measured. The most prioritized service will be the service which cost most and have larger number of dilemma. Performance standards need to be set up as a reference, in other words, to be typical criteria for future operations. It could show a clear picture to indicate what kind of outsourced service is acceptable and qualified. In the standards, a range of tolerance should be involved.
Motivation:
Service outsourcing may interact with many internal and external issues during the business. How to measure the outsourced service would directly influence the improvement of the business level. The relationship between outsourced service and internal functions is the key focusing point. For Floras, the prioritized outsourced service will be the transportation and logistics service. The movement of goods and customs clearance will be included in the service. The quality of the performance will greatly influence the quality of the rose, since rose is very sensitive in time and handling conditions. Therefore establishing a complete evaluation system for measuring the service provider performance would help to avoid any damage or delay of during the international delivery. #p#分頁標題#e#
2.3 Desk Research書面研究
Desk research will be elaborated to provide industry background and relevant market information. It would be a part of the market analysis. The desk research will be done outside the organizational boundaries, including online desk research, official data gathering and other reliable public sourcing.It will help the company to get a deeper insight of the industry and be better prepared for the future competitions. The following desk research will focus on industry background, competition analysis, supplier information analysis to further explore the position and circumstance of the company.
2.3.1 Industry Background
The purpose of industry analysis is to get a better understanding about the current situation of flower industry and its future trend worldwide, in the export and import countries.
Flower industry worldwide
In recent years, the world flower consumption increases by 10% every year on average. At present the world flower consumption is 40 billion euro, the fresh cut flowers takes 30 billion euro, potted flowers and packaged plants take 10 billion euro. Flower consumption areas are mainly divided into three parts: America, Europe and the Asia-pacific region. Among them the European market is the largest market for cut flowers. Global wholesale trade of flower is 10 billion euro, the export volume reaches 5 billion euro.
Flower industry in Ecuador
The flower export volume of Ecuador has reached 331 million US dollars up till May 2011. It has increased by 9.39% compared with the number of the same period in last year. Ecuador is currently one of the major flower export countries in the world. The largest market for Ecuadorian flower is the United States. The second largest markets are Germany and the Netherlands. Ecuador has become the third largest rose exporter in the world.
Flower industry in Netherlands
In Netherlands, flower consumption has very substantially increased in recent years. The Netherlands is not only one of the world's leading growers and exporters of cut flowers and plants. It is also one of the most important flower trading countries.
Rose consumption has an increasing amount in recent years in many auction markets in Netherlands.Because the increase in production process, energy consumption and the economic problems which were caused by the varity of rose products, lots of Dutch growers begin to reduce the production of roses. For now,the rose planting areas has reduced by 10% , and it still has the reduce trend. However rose consumption keeps increasing in many auction markets in Netherlands. The major rose suppliers are from Ethiopia, Kenya, Tanzania and Ecuador. Among them, For Ecuador, The Netherlands is becoming their second biggest market except the United States. The import volume of roses in Netherlands is predicted to increase in the future. The Netherlands remains the center of flower trading for the European floral market, as well as one of the flower distribution centers around the world. The flower auction at Aalsmeer is the largest flower market in the world. 80% of the flower in the market comes from Flower Auction Aalsmeer. The daily volume of flower trading in Dutch flower market ranks No.1 in the world. Therefore entering the Dutch flower market is an important access to global market. Our flower could be sold to not only the Dutch customers but also customers around the world as the Netherlands has the best distribution resource and marketing channels.#p#分頁標題#e#
2.3.2 Competition Analysis
The purpose of this analysis is to develop a greater understanding of what competitors exist in place in terms of resources and capabilities. By acknowledging our competitors,it may be able to make competitive strategies. It is done by starting to identify the competitors.
Identification of the competition – NPB Groothandel
“NPB Groothandel” from the Netherlands is a specialist wholesaler for flowers has gained significant market share. NPB´s distribution area is located in the center of the Netherlands.
Their current strategies and prediction of their future strategy
NPB´s current strategy can be described as “down to earth”. For a company with comparable size it is remarkable that NPB has specialized on a specific target area in the Netherlands only. Although they have their own transport fleet and intermediate storage available, the area of operation is relatively small.
Their strengths and weaknesses
NPB´s undoubted strength is their market experience. Since 1988 the company had time to settle in the domestic flower market. Their greatest strength is the specialization in the local market. However, it can be a chance for us. With a more international approach we can compete for market share by means of expanding business to other sub purchasers located outside the operating area of NPB. In a later stage we must try to gain international market share as well since the opportunity is promising and the competitor is not yet fully involved in such an expansion.
Identification of the competition –Ecuatorian Flower
EcuatorianFloawer is one of the leading rose producer and exporter in Ecuador. It also has obtained remarkable market share over time. It is a specialized producer in cut-flowers. Their target market consists of exporters, wholesalers and bouquet producers. Its product range covers cut flowers and pre-assembled bouquets. In addition, they offer customized cut flowers.
Their current strategies and prediction of their future strategy
Ecuatorian Flower emphasize on products varieties, service and optimal communication with the customer. They have more than 110 varieties of rose. They have their own transportation fleet and intermediate storage available, the area of operation is relatively small.
Their strengths and weaknesses
Ecuatorian Flower’s strength is their market experience. Since 1994 the company had time to settle in the domestic flower market. They are also “different” by offering customized cut flowers. They distinguish themselves from the competition by doing it.
Competition from African flower traders
Although the Netherlands dominates the international flower industry, African power has been a powerful player in Dutch flower market. Although the Netherlands itself is a major producer of cut flower, the cut flower, especially the rose, is very different from the African ones. Therefore many African cut flower producers are exporting the cut flower from Africa to the Dutch flower market. They mainly achieve their goals by delivering their products to the Dutch flower auctions. The following graph shows the turnover amount of various cut flower exporters in Dutch market.
Figure 1 Turnover amount of various cut flower exporter in Dutch market
As it shows in the graph, Kenya and Zimbabwe are the leading flower exporters in Africa. Uganda and other countries such as South Africa, Tanzania and Zambia are also less major exporters. But their export volume is much smaller.
In current stages, most of the African cut flower producers are selling their product through the Netherlands flower auctions. However, the more-developed cut flower traders appear in Kenya. They begin to set up their own approaches to directly sell their flowers to Dutch customers. For less-developed African flower operators, however, such as operators in Uganda, where most of the growers are in small scale. 90% of them can only market flowers in Dutch flower auctions.
In the flower types, there are a few flower types take the majority when African cut flower traders are doing export. Among all the types of flower, the export amount of rose has increased from 70% to 95% in recent years. For the less developed flower export countries, the export amount of rose may be even higher than the average level. There are some top flowers exporters, such as are Bergflora, Safier Export, SAPPEX
2.3.3 Supplier Information Analysis
The supplier information analysis includes both the reason of choosing Ecuador as place of origin and the potential possible suppliers for all the necessity.
The reason of choosing Ecuador as place of origin
Ecuador is famous for its cut flower and rose industry. Cut flower has been a major boom time in the past decade for Ecuadorian flower growers and exporters. Meanwhile the rose has been the main leader. Export plantings are currently over 2,000 hectares, namely, 5,000 acres. Due to its natural elements and human factors, the roses in Ecuador are of high quality.
Natural elements
Ecuador is located in the northwestern part of South America. It is at the equator. On its 26 million square kilometers land, there are Galapagos Islands in Pacific Ocean. There is western coast is plain.From north to the south, there are the Andes mountains. Amazon primeval forest is in the east. As in Ecuadorthe most intensive group of volcanoes and geothermal hot springs can be found, the volcanic ash accumulated. It makes the soil rich and fertile. The soil is full of phosphorus, nitrogen and potassium etc. This is very suitable for growth of the flowers.The temperature is very high in the daytime. However, it is really cold during the night. So there is alarge temperature difference between day and night. This kind of weather is suitable for the flowers to have bright colors. Ecuador is a rainy country. It has abundant water. Besides, there is a lot of melted ice in that area. The water is clean and its quality is very high. The altitude of Ecuador is about 2500 meters. It is sunny and warm most of the daytime.#p#分頁標題#e#
Human factors
For human factors, an important factor is advanced planting and management technology. Its government focuses mainly on technologies in flower planting and exporting. They want to maintain their dominant position in the international flower market. The government has specialized funds which is used in introducing beneficial fungus in order to deal with pests. Additionally, they encourage thedevelopment of biological control method againstspiders.The Ecuadorian government has set strict standards to the use of chemical fertilizers.Ecuador develops advanced irrigation systems in important flower industry areas. People who plant roses and other flowersuse drip irrigation methods to solve the increasingly desperate shortage of water. In almost all of the enterprises,there are the cellars, greenhouses, heating system. They emphasize on using advanced technology to ensure efficient, adequate ventilation and lighting. Their flower growers value great importance to staff training and effective use of resources. They also pay much attention to environmental protection. These guarantee the uniqueness of their roses.
2.4 Strategic Sourcing Analysis& Strategies戰略采購分析與策略
Analysis and strategies exploration will be done to cover aspects supplier management, service procurement, negotiation policy and contract management.
2.4.1Supply Strategy
The supply strategy design of the company is focusing on establishing integrated supply strategies. Due to the business scale and the enterprise scale, in the beginning of the business, the main efforts will be done in building a process-focused organization with cross functional team. In our business, the supply strategy design will follow certain steps to maximize the economic and operational benefits.
? Step 1 Team Building
The team which works for the strategic sourcing will consist of the general manager and members from all relevant departments. Due to the scale of our business, all the members within the company will join in the strategic sourcing. The aim of the team is to develop appropriatesuppliers for the material of the business, coordinate among different functional departments to achieve strategic sourcing, purchasing and procurement. To establish collaborative and close buyer-supplier relationship, there is a need to clarify the demands of all the stakeholder’s expectations from strategic sourcing. The following diagram lists all the relevant internal and external stakeholders of the business with their expectations and needs from strategic sourcing. It would help the company to maximize stakeholder benefits, get them more involved in the business and expand the business of the Floras.
? Step 2 Market Research
Market research will be done by interviewing, online research, observation, experiment and other means to collect relevant data. Data include pricing, trends, political environment, technical requirements and other relevant data will be gathered with detail information.For Floras, the necessary information required for the business has been discovered by doing preliminarymarket researches.
- Purchasing Items: include all the commodities that should be purchased for the business.
- Purchasing price trend
Office rental in the Netherlands is keeping rising in recent years. However, the price of warehouse rental and office rental in Ecuador has been in very low level which does not show sharp rising. The price of international compound fertilizer has decrease by 8 $ per ton from November, 2012.
- Key environmental issues
The environmental impact of fertilizer, herbicide and pesticide would the greatest concern. The impact of chemical ingredients on human health, natural environment and pollution will be the key focus. Local communities and government will be greatly involved in environmental monitoring.
- Technical requirement
Technical requirement is the main issue of transportation and warehousing service. The vehicles and warehouse has to be equipped with material or thermotanks. The temperature of keeping the rose has to be controlled at 1℃. The bags/boxes used during the transportation need to be ventilated and equipped with nutrient to keep the rose in best statement.
? Step 3 Strategy Development
Commodity portfolio will be made according to the actual condition of the business. Key suppliers will be chosen to be assessed.Suppliers will be evaluations with certain tools. The collaborative, close buyer-supplier relationship can be built with chosen suppliers. The further information will be given in the ‘Supplier Selection’ chapter.
? Step 4 Contract & Negotiation
Negotiation will be conducted with various suppliers to establish reliable relationships. The ultimate goal of the negotiation is to achieve win-win situation for the company and its suppliers. A contract template will be given as a reference to use in real negotiation and contracting stage. The detail information regarding contracting and negotiation will be in the following chapters.
? Step 5 Supplier Relationship Management &Continuous Improvement
The maintenance of buyer-supplier relationship, communication plan and continuous improvement measures will be elaborated according to the actual situation of Floras. The detail information will be shown in the following chapters.
2.4.2 Supplier Selection
Supplier selection stage focuses on evaluating the suppliers of very critical commodities. As there are very different commodities, the quality standards categories will be very different. The supplier selection process will help to determine which suppliers should be cooperated in future long term period.
The most critical commodities which will be prioritized to be selected are farmland, rose seeds, fertilizer/herbicide and transportation/logistics service. Due to the particularity of flower industry, the selection standards will be very different from traditional light industry and manufacturing industry. The quality standards categories for each of the critical commodities will be based on its special feature.
? Farmland
Farmland is the most important raw material for cut flower planting. It is the basic component of all the subsequent processes. The owners of farmland in Ecuador are mainly local government. A few areas of farmland are owned by local private land owners. There is a large amount of farmland owned by foreign.The supplier selection process is shown in the next visio diagram in order to indicate how the selection process will go for choosing a suitable area for planting.
After researching and investigations, there are 3 pieces of farmland chosen to be evaluated.
Farmland 1: Apiece of 6 hectare farmland in the north of Ecuador, Otavalo
Farmland 2: Apiece of 9 hectare farmland in the suburban areas of its capita, Quito
Farmland 3: Apiece of 12 hectare farmland in the south of Ecuador, Cotopaxi
The evaluation will be focused on the soil characteristics, land costs, location, auxiliary facility, transportation feasibility and labor feasibility.
The Quality Standards& Selection Criteria:
- Soil characteristics:the soil has to be soft, mist and well-drained with rich humus. The ideal pH value for rose planting is around 7.0.
-#p#分頁標題#e# Land cost: the land cost has to be controlled in certain range. It can no longer exceed 30% of the total costs.
- Location: The distance between the farmland and the city area is important. Since farmland is mostly located in rural areas, the moving of labor from farmland towards living area is an important issue. Besides, the distance from the farmland to the transportation center is the key point of controlling the total costs. The time spent travelling from farmland to the airport of Quito should be as shorter as better in order to keeping the flower fresh.
- Transportation convenience: along with the distance issues, the convenience of transportation is crucial for the business as well. The roses have to be kept in fresh-keeping condition. This requires a very quick and convenient mode of transportation. The quicker it can reach available warehouse, the fresher the flower can be. The surrounding infrastructure of the transportation would directly impact the quality of the flowers.
- Labor feasibility: flower industry is a typical labor-intensive industry which requires high productivity of the labor. The special skills of the labor in planting and maintaining are also important considerations.
The three pieces of farmland are compared according to previous quality standards and selection criteria. The weighted-criteria evaluation system will be used to evaluate and select an appropriate piece of farmland. The evaluation scorecards of each pieces of farmland are shown as follow.
Conclusion: By using the weight-criteria evaluation system, according to the total score, farmland 2 which is located in the suburban area of Quito is chosen as the planting base. It is easy to get to the transportation center. In the suburban area of Quito, there are plenty of available warehouse that can be rent. It is also very easy for workers to move between the planting base and the living area. Although the land cost is the highest among all the alternatives, the price of the land is still in acceptable range.
? Rose seeds suppliers
Rose seeds directly determine the quality and the feature of the rose. The seeds can be obtained from various seeds suppliers, including local professional seeds company and local farmers. During the selection of the seeds, the inspection condition has to be taken into consideration. It means the hygiene condition such as the level plant virus or bacteria has to reach the quality standards of countries. The selection process is shown in the following visio diagram.
The Quality standards & Selection Criteria for the rose seeds include the following items.
- Qualifications & Specifications: the seeds would be described clearly with breeds, color, etc.
- Price: The purchasing price of the bulk seeds has to be controlled. According to the amount and market trends, the price of per package of rose bulk seeds is rising rapidly. The lower the purchasing price is, the better the cost-saving effects.
- Applicability: The seeds need to be qualified with high level of applicability. The high level of applicability would improve the survival rate of the final product.
- Growth Time:the shorter growth time would help to reduce the planting costs.
- Flowering phase:the flowering days of the rose have to be more than 10 days.
- Germination Rate: the germination rate of rose is usually lower than other types of flower. The higher germination rate of the bulk seeds is very crucial during the entire planting. It directly influences the final amount of the output.
- Virology Standards:The quality and the hygiene condition have to cope with the local regulations and the GENERAL SEED REGULATION. There are two types of virus need to be specially focused, the rose mosaic ilarvirus and HippeastrummosalcVjrus. The above two type of virus origin from the rose bulk seed. They influence germination rate a lot.
According to the investigations and selections, there are three suppliers stand out to be further evaluated. The three suppliers include: UNWINS, CRAWFORDSVILLE Seed. Co., and local farmers. Supplier scorecards for rose seeds will be used to assess the performance of each supplier.
Figure 12 Supplier Scorecard For local farmers
Conclusion: the seeds from local farmers have lower price than the other two professional companies. However, due to the lack of standardized operations, the hygiene and virus controlling cannot be very reliable. According to the comprehensive evaluation, the most appropriate supplier for the queen rose bulk seed is Crawfordsville Seed Co.
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? International transportation/logistics service providers
The international transportation/logistics service provider is the key service that needs to be purchased during the business. The most crucial service is the transportation from Ecuador to the Netherlands. It is the longest route that is going to cost most of logistical costs. Selection process is indicated in the following flow chart.
The Quality standards & Selection criteria include:
- Remote air freight capability: From Ecuador to the Netherlands takes 9.5 hours. Due to the specialty of the flower industry, it has to be aircraft to move the roses from Ecuador to the Netherlands. The capabilities of the logistics service provide have to be sufficient. The 3PL partner has to have air freighters which can be equipped with preservation technology material for keeping the rose fresh.
- Auxiliary facility: if the company has lots of experience in perishable commodity logistics, it can provide thermal boxes designed for perishable goods transportation.
- Capacity: due to the size of the queen rose, the flowers have to be handled in small bunches. The space among each of the rose has to be wider than that of other flowers. So the capacity or the storage space of the vehicle needs to be wide enough to handle large amount of queen rose.
- Price:the costs spent in international transportation will be the biggest item of the entire logistics costs. Therefore, the lower price could greatly benefit the cost control.
- Preservation technology: technology is the key issue during flower handling. The service provider has to be equipped with advanced technology which can help the flower to be kept fresh during the journey.
- Skilled personnel: the handling persons need to be well-qualified and with rich experience. The handling procedures need to be monitored carefully as roses are easy to be broken.
Based on research and investigations, there are three 3PL logistics company stand out and wait for selections, Kuehne + Nagel airfreight logistics, Perishable Logistics Alliance (PLA) and Sadleirs Global Logistics. Scorecards are used to evaluate and assess the possibility of the three service providers.
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Figure 16 3PL partner selection scorecard for Sadleirs Global Logistics
Conclusion: Since the difference in capacity, capability and price are not very apparent, technology is the most distinguished factor.Based on previous comparison and analysis, Kuehne + Nagel airfreight logistics is the best choice for its high performance on average.
? Fertilizer/Herbicide
Fertilizer and herbicide are the most importan auxiliary components in rose planting and processing. Its quality direcly impacts the quality of the final product. Many fertilizer and herbicide brands have its own unique ingredients.The selection process of fertilier/herbicide is shown as follows.
The quality standards & selection criteria include:
- Ingredients quality & safety: the ingredients of the fertilizer and herbicide have to be qualified with National Standards for Chemicals, ISO standards for Fertilizer to ensure the safety of the ingredients
- Effectiveness:the effectiveness rate needs to reach 90%
- Price: within budget
- Environmental impact: the environmental impact of the fertilizer and herbicide need to comply with the National Environmental Protection Standards with less negative impact on human health and nature environment.
Based on research and investigation ,three brands of fertilizer and herbicide have been chosen to do the further comparison. Fertilizer brands: Soluciones ambientales sostenibles Ltda, nature’s touch and Bonide. Herbicide brands: Syngenta, Aeria and Harness Xtra. The selection scorecards are used for the final evaluation.
Conclusion: According to comparison and evaluation, the most suitable fertilizer coms from the South American brand Soluciones ambientales sonstenible. The effectiveness and the environmental footprints are better among all the products.
Conclusion: the unique ingredients of Harness Xtra make its effectiveness very outstanding. Along with the fairly balanced performance in other measurements, Harness Xtra is chosen as the Herbicide.
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2.4.3 Supplier Management Program
Supplier management program is designed to managing the entire supply process. It helps to control the quality of supplier and develop better long-term buyer-supplier relationship. For Floras, the supplier management program will cover main three aspects, Supplier performance measurement, Supplier development and Supply base risk assessment.
? Supplier Performance Measurement System
The supplier performance measurement program measures how the suppliers perform during the business. The relevant data, information,figures will be assessed to explore how well the suppliers are doing. The following content will include a complete structure of supplier performance measurement system. The detail figures and real performance can only be obtained after real business starts. The key commodities or service suppliers which will be speciallyfocused on arethose who provide seeds supplier, fertilizer, herbicide, irrigation water and international transportation/logistics service. The reason for choosing the above commodities or service is mainly because these necessary components have to be continuously supplied. The level of quality is under a changing risk. Any minor change of the quality will impact the entire planting and distribution processes.
- The measurement items: seeds supplier, fertilizer supplier, herbicide supplier, irrigation water supplier.
- According to different commodities, the measurement standards will be various.
The following diagrams indicate the specific measurement process of different commodities suppliers. Description of data, performance categories, categories weight and reporting frequency will be followed after each of the diagrams.
- A weighted-point system is used for evaluating the performance of seeds supplier. Figures and data can be effectively recorded and compared.
- The performance report of seeds supplier will be generated quarterly. It is determined according to the feature of planting industry.
- The performance will be compared and recorded in order to feedback to the suppliers to develop its performance. It is an important way to keep options open. The germination rate and quick response ability are the most important factor. In flower industry, time is very influential in product quality and sales. The supplier of seeds needs to keep pace with the season and be able to resolve defective seeds in time to prevent reduction of output.#p#分頁標題#e#
- A weighted-point system is used for evaluating the performance of fertilier and herbicide supplier.
- The performance report of seeds supplier will be generated monthly. Since fertilizer and herbicide have to be used in daily operation with large amount, the reporting has to be done in higher frequency.
- The performance data will be compared and recorded in order to feedback to the suppliers to develop its performance. The product innovation is very key to the plant, the ability of production innovation is also a key point in evaluting supplier’s performance.
- A weighted-point system is used for evaluating the performance of water supplier.
- The performance report of water supplier will be generated weekly. Since water is one of the most neccessary component in rose planting and keeping, it needs to be used in daily operation with large amount, the reporting has to be done in higher frequency. Therefore any minor change in the quality of water, the change of its composition will be realized in time to avoid acidenetial loss caused by risky irrigation water.
- The performance data will be compared and recorded in order to feedback to the supplier to develop its performance. The ability of resolving accidents or shutdown problems is very important in order to keep continuous irrigation water supply.
- A weighted-Point system is used to measure the performance of transportation service provider.
- Weekly meetings will be scheduled for Floras and the 3PL partners to exchange and discuss recent performance.
- The rose is very sensitive in temperature, delivery duration and other physical conditions. Therefore the technical capability of keeping the rose in best statement is one of the most important focusing points. The product handling has to be done technically and carefully to avoid any damages to the flowers.
? Supplier Development
Supplier development program is designed to improve the performance of suppliers. By improving the supplier’s performance, buyers can better achieve its goals. The long-term buyer-supplier relationship can be well established. According to the situation of Floras, a supplier development process map is shown to indicate the steps of developing suppliers’ capabilities.
Step 1 Identify the critical commodities for development
For the business, the critical commodities for development are rose seeds, fertilizer and herbicide. Seeds are the basic raw material and can be improved by innovation. Fertilizer and herbicide are necessities that have to be used in daily routine. The quality and effectiveness are completely artificially controlled. The continuous improvements in seeds, fertilizer and herbicide can greatly improve the quality of final products. It is very economic and efficient that a minor change can lead to greater benefit.
Step 2 Identify critical suppliers
The critical suppliers are the chosen suppliers in previous selection phase. Since their products will be used in actual planting and manufacturing, the feedback and tracking on their products would be more helpful.
Step 3 Form cross-functional development team
A cross-functional team can be formed both with internal personnel and external people, such as expertise or consultants. For Floras, the cross-functional team would consist of general manager, operational manager, worker representative and expertise or specialties who are invited from external organization in the relevant fields.
Step 4 Meet with senior management team of selected brands
Having meetings with top management team of the suppliers provide a direct and effective way to exchange the feedback information or any suggestions. The cross-functional development team would have meetings with brands selected previous stage to discuss the further improvement plan.
Step 5 Identify the possibilities or chances for improvement
The team should investigate the actual planting and manufacturing situation along with the management team members from suppliers. Inviting the representatives of suppliers to visit Floras and discuss the dilemmas would be a good chance to develop the potential of both Floras and suppliers. The rose seeds can be optimized by biological measures. The improvement emphasis of fertilizer and herbicide could be focused on reducing the environmental footprints and increasing the effectiveness.
Step 6 Setting rule or regulations for joint project team
Common code of conduct, regulations in finance, resource and operation would be established before the formal development program starts. The cost sharing method is the key issue in the stage. The cost sharing percentage should be determined according to the willingness of companies and the emphasis of the development strategies.
Step 7 Form agreements, keep monitoring and continuous improvement
After a series of preparations and discussion, formal agreements of the development program could be established. The project should be monitored under the management team of both Floras and the suppliers. It also needs to be continuously improved.
? Supply base Risk Assessment
Supply base risks include risks about supplier, finance, sourcing, market, society and politics. Various risks exist in the supply and procurement stages. The risks need to be analyzed and prepared before everything starts. In the following paragraphs, risks will be categorized and approached with certain manners.
Risks from suppliers
Risks from suppliers includedelay delivery, product quality issues, unqualified after sales service risk, communication problems. Each type of the risks would lead to a series of sequential results. Communication is the key preventive action of the supplier risks. Communicating with supplier more frequently would help to increase the mutual trust and understanding. Before cooperation starts all the rules, regulations, deadline, specifications and other detail information need to be written completely. The possible results of any breaching behaviors should be clarified previously as well. Sometimes, natural factors may also cause supply risks. For queen rose, the bad weather or natural disaster would result in delivery delay or supplier failure. Signing insurance contract for accidental natural risks would help to avoid these risks.
Financial risks
Financial risks include the risks of capital turnover, foreign currency risks, excessive costs, waste and embezzling budget etc. Setting clear financial structure, standards would be the first steps. Monitoring mechanism is the key solution to make sure the budget and costs will be used in the right ways.
Market risks
Market trends are always changing. The customer’ consumption pattern, purchasing power, raw material price change and other trends changes in other related components would be potential risk for the business. The price of rose seed is very changeableand easy to be influenced by all kinds of natural, human factors. Its market trend has to be focused all the time.#p#分頁標題#e#
Political risks
The political state of Ecuador, local, national policies regarding flower industry, export regulations, import regulation of the Netherland and European Union would be the primary consideration in defining the potential political risks. The business has to be operated by obeying the rules and laws. However, legal risk averse would be an option.
Social risks
Social risks include language barriers, traditions or customs conflicts etc. Suppliers, intermediaries or operational partners may come from various countries. South America and Europe are very different from working style, traditions and language used. Dutch, Spanish, English translation is necessary.There must be an investigation on the cultural background information in the plan.
2.4.4 Services Procurement Strategies
Service procurement strategies define the strategies used for purchasing the necessary service during the business. For Floras, the most important necessary service that needs to be purchased is the transportation/logistics service. It includes moving the roses from Ecuador to the Netherland, warehouse renting and the custom clearance. The service procurement process is briefly indicated in the following visio diagram. The explanation and elaboration will be in the next paragraphs.
Step 1 Identify objectives and scope
The goal of the procurement is to find service provider to move queen roses from Ecuador to the Netherlands, to be specific, from Quito to Amsterdam. The service provider needs to arrange the entire procedure of export and customs. It has to be equipped with technical pieces and facilities, such as fresh-keeping technology and thermotanks. The warehouse in Ecuador needs to be located between the Quito airport and the planting base in suburban area. Therefore the transportation costs and convenience will be suitable for keeping the flower very fresh. The indirect spending item has to be standardized by using electronic requisitioning. The spending requirement can only be implemented till it is approved by senior management team. By doing this, the service procurement process can start with a fair, public and transparent beginning.
Step 2 Primarily select service providers
The primary selection of the service providers was done among 3PL companies which based in North and South America. The most experienced perishable logistics service providers were chosen since queen flower is a typical perishable product. The selection of warehouse was focusing on suburban area of Quito.#p#分頁標題#e#
Step 3 Examine the crucial data and information of the providers
By doing researches and investigations, the critical data information has been found to get deeper understanding about the potential providers.
Step 4 Establish selection standards
The selection standards for the international 3PL transportation can be found in chapter 2.4.2
The selection standards for the suburban warehouse include:
- Location requirements: near to the planting base and Quito Airport
- Auxiliary facility: a well-equipped warehouse which is especially designed for perishable products.
- Rental price: the price has to be kept within the budget.
Step 5 Selection & Anticipation
The selection methods and process of the 3PL partner can be found in chapter 2.4.2. The suburban warehouse in Quito should be equipped with certain facilities or technique that can help to keep flowers fresh. The selection range should be limited in perishable warehouses in suburban areas of Quito.
Anticipation is done by predicting the performance of the possible service providers. According to the key information and their former performance with other companies, there would be a general forecast. Anticipation would help Floras to prepare possible risks. Scenario planning will be used. The possible delay, damage to the queen roses or other scenario caused by possible service provider would be pre-planned with alternatives.
Step 6 Develop closer relationships with fewer providers
There are plenty of warehouse there since the Muros area is a suburban warehouse district. The rental fee may be lower than other warehouses in Quito. By considering the various location conditions, a perishable warehouse which is located in the Muros area of Quito is chosen as the local warehouse.
Step 7 Form standardized contract
Request for quotation will be sent by Floras to the service provider. The international transportation service provider will submit the proposal. As the proposal has been approved, the company and the 3PL partner will begin to negotiate and conclude formal contracts.
Step 8 Actual purchase phase
Electronic transfer will be made.The actual performance of the service providers with the expectations from Floras will be evaluated and compared at the end to find out whether their performance has reached our goals. Continuous monitoring the results would help to make improvements in future service purchasing stages.
2.4.5Negotiation Policy
Negotiation will be involved in the business circle. The processes and policies of negotiation would impact on the success of sourcing results. The following visio diagram shows the negotiation framework. The description about which functions need to be included, the focusing points with key suppliers and attentions will be followed after the visio diagram.
Step 1 Identify sourcing requirements
The items and commodities which need to be purchased will be listed. The key commodities and service that need to be negotiated include rose seeds, fertilizer/herbicide and international transportation/logistics service.
Step 2 Plan for negotiations
Negotiations will be planned and prepared in all levels. What needs to be negotiated and the negotiation details will be the main points during the planning stages.
Step 3 Determine what needs to be negotiated
Functions have to be included and focused in the negotiation are:
- Rose seeds: expected product, allowable costs, delivery schedules, contract volume, biological technical assistance, liability for loss and damage, payment terms, warranties and replacement.
- Fertilizer/Herbicide: expected product, ingredients specification, allowable costs, delivery schedule, contract volume, chemical technicalassistance, environmental monitoring assistance, liability for loss and damage, payment terms, warranties and replacement.
- 3PL service:expected service, service price, service delivery schedule, liability for loss and damage, payment terms, technical assistance, transportation mode, carrier selection, freight claims, capacity commitments, penalty clause (dealing with tax authorities or customs authorities)
Step 4 Detail issues for negotiation: time/expenditure/methods
Detail information regarding how to conduct the negotiation is also an important issue during the planning stage.#p#分頁標題#e#
- Time:as soon as all the information is gathered, the negotiation can start. The duration of the negotiation process would be no longer than one month, since the required material or service is not quite complicated.
- Location: since most of the suppliers are located in Ecuador, the location of negotiation could be easy to be determined by both parties.
- Expenditure: business traveling costs, document preparation costs, communication costs and other cost would be taken into consideration.
- Methods: face-to-face conversation, telephone, fax and internet communication
Step 5 Conduct negotiations
Several phases will be divided with different focuses during the negotiation.
- Phase 1:Information gathering and confirming
- Phase 2:New information assessment, strengths and weakness analysis, set up progress schedule and negotiation agenda.
- Phase 3:Meet face-to-face is preferred as the location is very convenient. Electronically meeting is the second choice. Identify and narrow the differences. Be clear with each other’s obligations and rights.
- Phase 4:Form agreements on specific activities, detail issues, generate formal contracts and close negotiations.
Step 6 Execute contracts
Formal contracts will be generated and signed by both parties. The execution of the contracts will begin as planned.
Attentions: tactics of negotiation would be stressed during the whole process. The key points of different commodities would be separately focused on. The customs clearance service which will be provided by 3PL partner would be special as it deals with relationships with customs authorities in both Ecuador and the Netherlands. Therefore the obligations and rights of the service need to be specially emphasized.
2.4.6Contract Management
Contracts need to be formalized at the end of the strategic sourcing stage. Contract templates are given to show what has to be included in the contracts. The procurement contract templates established based on key commodities - rose seeds, fertilizer/herbicide and international transportation/logistics service. Sufficient information must be exchange. In order to avoid possible disputes, both negotiation parties have to put warnings of unacceptable behaviors beforehand. The clause and articles would be changed according to the changing of real world situations.
[ProcurementContract Agreement]
- THIS AGREEMENT is made the ________ day of _______, _____,
- BETWEEN: name of contractor, address of contractor, legal description, tax ID
NOW IT IS HEREBY AGREED as follows:
Article 1ContractDocuments
1.1 Contract Documents
The following documents shall constitute the Contract betweenthe Contractors, and each shall be read andconstrued as an integral part of the Contract:
(a) This Contract Agreement and the Appendices
(b) Personal Information and Privacy
(c) Particular Conditions
(d) General Conditions
(e) Specification
(f) Drawings
(g) Warranty
(h) Owner issue
(j) Inspection & Certificate document
(k) Any other documents shall be added here
1.2 Acceptance and Delivery
The terms of delivery shall be added here. The insurance,date, place of the delivery shall be described here. Any activity prior to the delivery, such as inspections, testing and other activities shall be described here.
1.3 Definitions
Capitalized words and professional phrases shall be explained here.
Article 2Contract Priceand Terms ofPayment
2.1 Contract Price
(a)Deposit: amount of deposit shall be received by contractor party.
(b) Purchase price: the purchase price of the contracting goods, the unit price of the goods and the sum of purchase price.
(c)Invoice
(d) Others
All details have to be determined in accordance with the termsand conditions of the Contract.
2.2 Terms of Payment
The terms and procedures of payment shall be described here.
(a) Payment amount
(b) Payment period: within _____ days from the date of this contract, the buyer shall establish an irrevocable L/C with ____ bank under the terms and conditions.#p#分頁標題#e#
(c) Currency issue: All the payment shall be made in ____ currency.
(d) Bank account information
(e)Accompany document: documents that need to be accompanies with the payment shall be added here.
(f)Receive/Confirmation of the payment: the receiving and confirmation requirement detail of the payment shall be added here.
All details have to be determined in accordance with the terms and conditions of the Contract.
Article 3Time of Essence
3.1 Date of Essence
The date regarding the effectiveness of the contract shall be notified here.
(a)Contract effective date: the effective date of this contract
(b)Contract termination date: the closing date of this contract
(c)Government any delay of work: the delay of all the parties shall be described here.
(d)Government any change of the date: any expirations or change on the dates shall be notified here.
3.2 Requirements
If the conditions listed in 3.1 are not fulfilled within _______ from the date of this Contract notification because ofreasons not ascribable to the Contractor, the Parties shalldiscuss and agree on an equitable adjustment to the ContractPrice and the Time for Completion and/or other relevantconditions of the Contract.
Article 4 Default by Contractor
Any risk and loss caused by defaulted activities by all parties shall be notified here.
Article 5 Termination Procedure
The procedures of the contract termination shall be added here.
Article 6Communications
4.1 The address of the Contractor 1for notice purposes is _______
4.2 The address of the Contractor 2 for notice purposesis _______
Article 7Appendices
7.1 The other documents or instructions regarding the contracting shall be added here as appendix.
7.2 Any reference in the Contract shall be added here
Signed by, for and on behalf of ______
#p#分頁標題#e#
[Signature] _______
[Title]in the presence of_______
[Date]__________
Signed by, for and on behalf of ______
[Signature] _______
[Title]in the presence of_______
2.5 Overview of Procurement Process采購流程概要
2.5 Overview of Procurement Process采購流程概要
The following paragraphs will provide an overview of the procurement process. Not only the key commodities or service but also the other required commodities and non-critical commodities will be elaborated.
[Date]__________
Figure 32 Procurement Process Overview Diagram
2.6 Cost/Benefit Analysis成本/效益分析
Procurement Process Overview
The following visio diagram describes the general procurement process. The following processes will be followed in the procurement of every commodity and service. The specific change on the procurement process will be made according todifferent categories of the items.
? Office rooms in Ecuador and Amsterdam
Two office rooms in Amsterdam and Quito will be rent. Their locations are convenient for transportation and the cost can be controlled within budget. The office renting period will be one year. After one year, the decision will be made to decide if the renting will be continued or not.
? Office supplies: stationary, IT equipment,furniture, cups, food &beverage
The office supplies will be purchased from local market. These items are relatively small and less-critical. They would by purchased by E-procurement or in the local market stores. The purchasing requisition has to be approved before any purchasing happen.
? Planting Base:farmland, rose seeds, planting/maintenance tools & equipment, construction material, heating & cooling system, fertilizer &herbicide, irrigation system, electric cable, truck
Raw material, facilities and equipment used in planting base would be purchased through strict procurement process indicated in the next flow chart as they are the most critical commodities in the business.
? Service: transportation/logistics service
The criteria, procedure and results of the service procurement selection can be found in chapter 2.4.2 and 2.4.4
Figure 32 Procurement Process Overview Diagram
2.6 Cost/Benefit Analysis成本/效益分析
Cost/Benefit analysis is a tool used to determine whether the strategic sourcing will end with positive results. The following diagram shows the cost/benefit situation of the sourcing program of Floras queen rose project.
2.7 Conclusion總結
The strategic sourcing chapter provides strategies with detail information regarding the strategic sourcing process of Floras in the business model. The purchasing of necessary commodities and service has to be in accordance with transportation and manufacturing strategies.Relevant literature is reviewed to provide theoreticalframework for the research and investigations. The desk research helps to discover the industry background information to clarify the general situation that Floras is facing. The supplier management process, supplier selection procedures, supplier development program, negotiation policies and contract templatesare elaborated based on researches. All the visio flow diagrams in the chapters are designed to visualize each of the processes. Cost/Benefit analysis at the end aims to assess the financial feasibility of the strategic sourcing strategies. The strategic sourcing is part of the foundation of the entire business. Based on the sourcing results, the manufacturing planning and control process in the next chapter can be planned to complete the business.
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