Souring & Supply Management (whole course)

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    1. What is a supply chain (def) and its components (5)
    • System of all the organizations and processes which handle the flows of goods, services, information and capital.
    • 1.supplier 2.manufacturer 3. distributor 4. ratailer 5. customer
    1. Sourcing and supply management in Finland
    1. Globalized Supply Chain Landscape
    • Dependency on Global Suppliers
    • Currency Exchange Risks
    • Extended Lead Times
    1. Sustainability Imperatives
    • Environmental Regulations
    • Ethical Sourcing and Fair Labor Practices
    1. Digitalization and Technology Adoption
    • Industry 4.0 Integration
    • Cybersecurity Concerns
    1. Talent Shortages
    • Demand for Supply Chain Experts
    1. Geopolitical Factors
    • Russia Relations
    • EU Membership
    • Tariffs
    1. Geographical Factors
    • Remote Location
    • Transportation Networks
    1. Why is Sourcing and Supply Management Important? (4)
    • Cost structures of companies - the largest part of cost of goods sold is taken by purchased materials and services
    • Relative performance - a small reduction in the purchasing cost results in a considerable improvement of the company's return on investment
    • Suppliers contribute significantly to the company's value creation and / or risk
    • Globalization of trade, increased information availability and environmental and sustainability concerns
    1. Procurement Primary Tasks (4)
    • Secure timely and undisturbed availability of purchased goods and services
    • Control and reduction of all purchasing-related spend
    • Reduction of the company's risk exposure in relation to its supply markets
    • Contribution to product and process innovation
    1. Changing purchase agenda: Value improvement. (5)
    • Revenue growth through new products
    • Improving customer value propositions
    • Early supplier involvement in NPD
    • Faster new product introduction
    • Co-branding and advertising
    1. Changing purchase agenda: purchasing cost reduction (6)
    • Supply base reduction
    • Product standardization
    • Global sourcing
    • Outsourcing and ‘offshoring’
    • Electronic auctions
    • Contract management
    1. Changing purchase agenda: risk management (8)
    • Single vs. multiple sourcing
    • Performance based contracting
    • Corporate Social Responsibility
    • Sustainable purchasing
    • Supplier auditing
    • Supplier Quality Assurance
    • Supplier financial position
    • Intellectual Property (IP) protection
    1. Three types of purchasing situations (3) (2,3,2)
    New task situation
    • Completely new product from unknown suppliers
    • High uncertainty regarding outcome
    Modified Rebuy
    • New product from known supplier
    • Existing product, new supplier
    • Moderate uncertainty regarding outcome
    (E.g. - Buying the same office computers as before, but from a new supplier
    • Purchasing an existing type of packaging machine with modified specifications from a known supplier)
    Straight rebuy
    • Known product from known supplier
    • Low uncertainty regarding outcome
    1. Traditional purchasing process (6steps (2main))
    1. Determining specification
    2. Selecting supplier
    3. Contracting
    4. Ordering
    5. Expediting
    6. Follow-up and evaluation
    1-3=sourcing
    4-6=supply management
    1. Traditional purchasing
    • Traditional purchasing focuses on the relatively simple context of a large, powerful customer buying a simple product from smaller, supplier selected from many similar candidates. e.g.(BOLTS AND NUTS)
    • Today, purchasing without collaboration with other functions simply is not enough!
    1. Extended purchasing process for value-focused purchasing (2)
    • add 2. rfi and 3. detailed specification
    • change expediting to collaboration
    1. Purchasing process model and related terminology (kuva)
    Kuvavastaus
    1. SSM definition
    The management of the company's external resources in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company's primary and support activities is secured at the most favourable conditions.
    1. Sourcing spend - what is it? (7questions it answers and def)
    1. What are we buying?
    2. When did we buy it?
    3. Who are we purchasing it from?
    4. How often are we buying it?
    5. Who is buying it?
    6. Are we satisfied with what we had purchased?
    7. How does the product and price compare to previous or similar?
    • The process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance.
    1. Spend-analysis (3 + kuva)
    1. Tells what are the purchasing costs divided by the purchase objects
    2. Tells what are the opportunities for cost savings by centralizing purchasing and reducing the number of suppliers
    3. Serves as a control tool telling how purchasing plans are realized
    1. Category management (2)
    • Purchasing category management focuses on the organisation's purchasing spend of goods and services by segmenting it into groups of products and services
    –For large companies, categories represent a primary structural dimension for organising purchasing function, and can be defined as a group of similar items that are required for specific business activities of a firm
    1. Direct vs Indirect Materials
    • Direct procurement, or direct spend management, is the company process of purchasing or obtaining materials, resources, goods and services that are used in core operations of its business and eventually make up their product.
    • Indirect materials are those materials that are used in production but do not form a part of the finished goods. Indirect purchases, both goods and services, are needed to support day-to-day operations.
    1. Indirect Purchasing Category (4)
    • Typically, services represent a high share of all purchases in the indirect category
    • The indirect spend can count up to 50 percent of the total spend, one reason for this is the increasing level of outsourcing
    • Compared to the direct purchasing spend, the variety of purchase items, the frequency of buying and the number of suppliers is very high.
    • Hence the number of transactions in the purchasing process is very high
    1. kraljic matrix
    Leverage items:
    • High purchasing volume
    • several alternative suppliers
    • Constant search for new suppliers
    • Exploit purchasing power
    Strategic items
    • High purchasing volume or high importance for profitability
    • Only few suppliers available
    • build close relationships
    Non-critical items
    • Small volume
    • minor importance for own operations
    • Emphasize efficient processing and cost reduction
    Bottleneck items
    • Purchasing volume typically small but product is important for own operations
    • Few suppliers
    • search constantly for new alternatives
    1. Value focused vs cost focused purchasing approch (kuva)
    Kuvavastaus
    1. Purchasing process (with explanations)
    Kuvavastaus
    1. purchasing process: 1. specifications
    • Functional specification: describes what the product/service must achieve
    • Technical specification: describes how it should be technically implemented and its required characteristics
    • Functional specifications give suppliers more freedom to use their expertise and new technologies
    –Too detailed technical specifications can lead to over-specification and higher costs
    • Purchase order specification includes:
    •Quality requirements
    •Logistics requirements (quantity, delivery place/time, conditions)
    •Maintenance requirements
    •Legal and environmental requirements
    •Target budget
    1. purchasing process: 2. supplier selection (6 steps + 4 contract types)
    1. Decide the subcontracting method
    2. Prequalify suppliers and create a bidders' long list
    3. Send RFI (Request for Information) and assess supplier capabilities
    4. Reduce the long list to a short list, usually around 3-5 suppliers
    5. Send RFQ (Request for Quotation) and receive comparable bids
    6. Evaluate bids and select the supplier
    1. contract can be:
    –Fixed price (predetermined price and completion date)
    –Cost-reimbursable (paid by completed work (hours and materials + profit)
    –Fixed-price plus incentive fee: (This type of contract is designed to motivate suppliers by means of rewards to execute the work above the agreed standard.)
    –Agreement with price-adjustment: This type of contract is used mainly for agreements with a long-term delivery, or when very specific, market- sensitive materials are processed.
    1. Fixed-price or cost-reimbursable? (3)
    • Available time: when there is not enough time for a tender procedure and price negotiations, a cost-reimbursable contract is preferred.
    • Technical expertise: when specialized knowledge and skills are required, a cost-reimbursable contract is often preferred.
    • Degree of knowledge: when higher degree of knowledge of the industry, about methods and price arrangements, are required, a cost-reimbursable contract is often preferred.
    1. purchasing process: 3. Negotiating and contracting (non payment terms 6 + negotiating 3)
    contracting (non payment terms)
    •Delivery quantities
    •Delivery frequencies
    •Delivery locations
    •Quality level
    •Technical specifications
    •Duration of the contract, and so on.
    negotiating
    • Take it or leave it offers: a powerful buyer essentially dictates the terms to the suppliers
    • Competitive tendering: suppliers are played off one another
    • Bargaining: the buyer and a single supplier might bargain in some general and unstructured way
    1. purchasing process: 4. Ordering and expediting
    • Exception expediting: buyer only takes action when the organization sends out signals of material shortages
    • Routine status check: preventing materials supply and quality problems - few days before promised delivery, the buyer contacts the supplier to confirm delivery date
    • Advanced status check: for critical purchase parts - a detailed production plan will be handed over to the buyer and during the process the buyer will carry out periodic checks
    1. purchasing process: 5. Follow up and evaluating (4)
    • The buyer's role continues after the product has been taken into production, or the installation has been put into operation.
    • Compare invoice with the original order
    • Solve delivery issues
    • Supplier assessment (keep track of supplier's quality, delivery record, competitiveness and innovativeness)
    1. Aspects of the purchasing process
    • Business needs are leading: Business needs and requirements are the input for the purchasing process model
    • Process approach: the various steps in the model are closely connected and the quality of the output of the preceding steps determines to a large extent the quality of the subsequent steps
    • Defining the interfaces: the output of each phase has to be clearly defined, preferably with a document
    • Determining responsibilities: purchasing is considered to be a cross-functional responsibility. Therefore, the tasks, responsibilities and authority of the parties involved should be clearly indicated in each phase
    •Combining different skills, different types of knowledge and expertise
    1. Examples of supplier selection dimensions (7)
    • Supplier Status
    • Delivery Capability
    • Processes
    • Technical Status
    • Supplier Culture
    • Financial/Commercial
    • Support
    1. Some methods for supporting pre-qualification of suppliers
    • Conjunctive screening: A supplier is acceptable if the supplier equals or exceeds a minimum score on each criterion.
    • Disjunctive screening: A supplier is acceptable if the supplier at least equals or exceeds a minimum score on one criterion.
    • Lexicographical screening: Criteria are ranked in order of importance. Suppliers are first evaluated on the most important criterion. Suppliers that pass this criterion are then evaluated on the second criterion and so on.
    1. Benefits of Decision Making models in Purchasing Decisions (3+4)
    Effectiveness by:
    •Solving the right problem
    •More precisely model the decision situation
    •Taking relevant criteria into account
    Efficiency by:
    •Automated and faster computation and analysis of decision-making information
    •Storage of purchasing decision making processes and access to this information
    •Eliminating redundant criteria and alternatives from the decision or evaluation process
    •Communication and justification of the outcome of decision-making processes
    1. Major bottlenecks and problems (8)
    • Contract are too general or incomplete.
    • Too detailed specification (The specifications of the product or service are sometimes written to the capabilities of specific suppliers)
    • Inadequate supplier selection (Failure to check the supplier's (bank) references, can produce very unpleasant surprises like bankruptcy)
    • Personal relationships (Purchase orders are placed with suppliers with whom the user has a friendly relationship, As a result such suppliers may not be as competitive)
    • Too much emphasis on price (Especially buying capital equipment decisions need to be based upon total-cost-of- ownership (TCO) rather than on price only)
    • Problems in delivery phase (over time or incomplete delivery, quality problems can put the continuity of the business process in danger.)
    • Poor administrative processes (Putting a sound administrative system in place could lead to significant savings. )
    • Suppliers are not systematically assessed (This results in unprofessional suppliers and repeating problems.)
    1. Transaction vs relation-oriented purchasing situation (7 vs 7)
    Transactional
    •Many alternatives
    •Every deal is a new business, no-one should benefit from past performance
    •Exploit the potential of competition
    •Short-term, arm's length, avoid coming too close
    •Renewal and effectivess by change of partner, choose the most efficient supplier at any time
    •Buying 'products' or 'services'
    •Price orientation, strong in achieving favorable prices in well-specified products/services
    Relational
    •One or few alternatives
    •A deal is part of a relationship and the relationship is part of a network context
    •Exploit the potential for cooperation
    •Long-term with tough demands and joint development
    •Renewal and effectiveness by collaboration and 'team effects', combine resources and knowledge
    •Buying 'capabilities' or 'performance'
    •Cost and value orientation, strong in achieving low total costs of supply and developing new values
    1. tco (3(7,7,13))
    Costs before purchasing:
    •Identifying the need
    •Analyzing the need
    •Supplier search
    •Supplier evaluation and quality audit
    •Supplier selection
    •Supplier development
    Costs of purchasing:
    •Purchase price
    •Ordering cost
    •Information exchange between the parties
    •Organizing the delivery
    •Quality control
    •Follow-up and evaluation
    •Payment terms
    Costs after purchasing:
    •Maintenance, services and spare parts
    •Product support and training
    •Energy costs
    •Licence fees
    •Collaboration with the supplier, exploiting supplier capabilities and joint product development
    •Other personnel costs
    •Faulty products and their return
    •Repairs and rework
    •Costs due to loss of revenue
    •Loss of image
    •Recycling and disposal
    1. Two groups of opportunities for reduction of purchasing costs (2)
    Spend-level opportunities:
    • can be identified by viewing the aggregate amounts of purchasing spend without the need to go to the level of individual transactions.
    • The analysis can be done by category, by supplier and by period of time.
    Transaction-level opportunities:
    • are analyzed at the level of individual transactions, such as purchase orders, invoices and payments.
    1. Spend-level opportunities(4(2,2,2,2))
    1. Supply rationalization
    •Indicated by fragmentation of the number of suppliers per category
    •Cured by consolidation of the supply base
    1. Demand aggregation
    •Indicated by category and/or business unit fragmentation by supplier
    •Cured by contract consolidation across business units
    1. Bypass of the formal procurement process of the organization
    •Maverick buying ...indicated by purchases from non-authorized suppliers, Purchasing organization approval limit violations and spend outside company contracts
    •Cured by disciplined use of procurement processes and centralized contracts
    1. Supplier performance
    •Indicated by the use of poor performing suppliers and suppliers with weak credit ratings increasing the risk of poor performance
    • Cured by consistent supplier auditing and use of preferred suppliers
    1. Transaction costs (def +3)
    • Transactions (exchanges) between companies are based on contracts and establishment and control of contracts carries cost
    • Transaction-specific investments: The amount of transaction-specific investments increases transaction costs
    •Frequency of transactions: The frequency of transactions increases transaction costs
    • Level of insecurity: The insecurity of the purchasing situation increases transaction costs
    1. Transaction-level opportunities (3 + expl(3 lausetta))
    • Contractual term opportunities
    • Payment term opportunities
    • Invoice processing opportunities
    • Transaction-level savings opportunities usually require more work than the spend-level opportunities.
    • They cannot be readily identified by examining aggregate spend data, they require analysis of individual transactions, such as, purchase orders, invoices and payments.
    • Individual transactions must be mined, and bad purchasing behavior found from the large volumes of data.
    1. Contractual term opportunities (3(2,2,4))
    Contract violations
    –can be identified by comparing the contract line-item details with the actual transaction details, which might require manual work.
    –Within contract compliance, unrealized discounts and rebates can be a source of spend leakage.
    Quantity violations.
    –Often the contract determines a ceiling on the quantity that can be ordered.
    –If there is no visibility into the specified quantity limit, purchasing can exceed the limit, which can result in a higher price for the units exceeding the contract volumes.
    Delivery date violations.
    –Most contracts define strict delivery terms in the form of acceptable delivery times.
    –Violation of the agreed delivery terms means backorders or increased inventory costs.
    –Because of delivery date violations, the company can claim penalties.
    –Or alternatively, the company can use the information about violations to negotiate a better contract upon renewal.
    1. Payment-term opportunities (4)
    • Meaning that the company needs to be consistent in following the payment terms in the contracts.
    • Paying early means losing the interest for the time between paying the invoice and what was the required date of payment.
    • The other side of this is that paying early might have resulted in price discounts.
    • The purchase-to-pay process offers attractive potential for analyzing information related to invoice-processing savings opportunities.
    1. Invoice-processing opportunities (5)
    • Related to the purchasing officers (POs) approval limits.
    • Limits are usually set for the employees on how much they are allowed to order items in the indirect category without approval from someone higher in the organization.
    • To circumvent such approval, employees can divide individual purchases into two or more POs, each of them below the given limit.
    • Such circumventing can increase processing costs because more POs and payments need to be processed.
    • This kind of behavior can be observed in the transaction-level information to ensure that the approval limits are set at the right level and guide the purchasing behavior in the desired direction.
    1. Electronic procurement solutions (2(0,1(3))
    • Internet enabled solutions aimed at supporting the purchasing process
    • Electronic data exchange needed for efficient transaction processing
    • Can be divided into three types:
    1.Electronic marketplaces
    2.Electronic auctions
    3.Electronic catalogue, order and payment solutions
    1. Electronic marketplaces (2)
    • A virtual marketplace where transactions between business-to-business partners can be made
    • Simplifies the process of searching and finding suitable partners
    1. Electronic auctions (3)
    • A tool used by the buyer to invite suppliers to bid simultaneously based on a predetermined purchasing specification over the Internet
    –Open Request for Information (RFI) and Request for Proposal (RFP)
    –Auction
    1. Open RFI / RFP (4)
    • Potential suppliers are requested to qualify before the auction
    • RFI is sent to suppliers to get important background information, financial status, customer references, information about expertise and experience, etc.
    • RFP to get information about supplier's competitiveness in the particular purchasing situation
    • After evaluating the initial proposals, the final list of invited suppliers for the auction will be prepared
    1. Reversed auction (2 (0,3))
    • In a reverse auction, multiple suppliers compete to sell their product or service to a buyer, usually driving the price down.
    --(A company wants to purchase office supplies worth €50,000. Instead of asking for quotes in the traditional way, they run a reverse auction. Several suppliers log into the platform and keep underbidding each other until the price drops to, say, €42,000. The buyer then awards the contract to the supplier with the lowest acceptable bid.)
    •Suppliers can follow how the prices are developing:
    1. Actual prices as they are offered
    2. Ranking of the supplier / suppliers
    3. The price difference between the supplier's price and the best price
    1. Conditions for succesful auctions (6)
    1. Standardized products and services bought in large volumes
    2. A commitment for high-volume
    3. Sufficient competition among suppliers (or buyers in the forward auction)
    4. Equal conditions for suppliers
    5. The buyer should be interesting for the suppliers
    6. Specifications to the suppliers being clear and not subject to change
    1. Advantages and disadvantages of e-auctions (2ad, 2dis)
    ADVANTAGES
    • Very effective competition between suppliers
    • A larger number of suppliers than would be possible in face-to-face negotiations
    DISADVANTAGES
    • Takes time and effort to prepare
    • An investment required for the systems
    1. Small-order problem defined and 6 things they can lead to (def +6)
    • Small-order problem refers to the situation where a company makes many small purchases/orders, rather than consolidating them into fewer, larger orders. (non critical items in kraljic)
    • Small orders can lead to:
    1.Higher ordering and transaction costs
    1. More invoices and paperwork
    2. Higher transportation/delivery costs
    3. Less purchasing power and weaker price negotiations
    4. More work for procurement staff
    5. Difficulty achieving economies of scale
    1. Typical situation requiring efficient solutions (5)
    • Requirements coming from internal customers concern simple products of low expense
    • Large number of orders is a laborious task if a single order is placed for every request
    • Catalogue buying with a specific supplier
    • Mutually agreed product range including list prices for products
    • Fully automated order to payment process
    1. Types of customer-supplier relationships (kuva ja 3types)
    1. Arms length, 2. T1, 3. T2, 4. T3, 5. Joint ventures & 6. vertical integration
    Type I:
    •Organizations coordinate activities and planning on a limited basis
    •Usually a short-term focus but can be repeated.
    • Might involve only one division or functional area.
    Type II:
    • Integration of activities involving multiple divisions and functions.
    • Not expected to last ‘forever’, but the relationship has a long-term horizon.
    Type III:
    • Organizations share a significant level of integration.
    • Each party views the other as a partner of its own firm.
    • Typically, no ‘end date’.
    1. Joint focus on value / cost (6questieons)
    1. How can we reduce joint costs?
    2. How can we increase joint value creation?
    3. How can we jointly bring new products to market sooner?
    4. How can we rapidly respond to changing market conditions?
    5. How can we reduce contractual and other bureaucratic relationships?
    6. How can we develop ways to jointly exploit the most capital intensive assets?
    1. 4 Reasons for partnership failures
    • Conflict of interests
    • Insufficient business volumes
    • Lack of openness
    • Not enough sufficient resources for managing the relationship
    1. Purchasing and Supply Organization (def)
    It refers to how Purchasing and Supply Management activities and competencies are organized and structured in the firm
    1. Organizational Structure(3)
    • Organizations need to be efficient, flexible, and innovative in order to achieve a competitive advantage.
    • An organizational structure defines how activities such as task allocation, coordination and supervision are directed toward the achievement of organizational aims.
    • Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch or department.
    1. organization structure types (kuva4)
    Kuvavastaus
    1. factors influencing pso design (kuva)
    External factors:
    • Environmental complexity
    •# of supply sources
    •Pace of technological advance
    •Entry barriers
    •Logistics costs
    • Environmental dynamics
    • Changing supply market
    •Market growth or decline
    Internal factors:
    •Procurement strategy
    •Supplier management practices
    •Purchasing maturity
    •Cross-functional alignment processes
    •Technology in use
    •Procurement coherence
    •Corporate Strategic Initiatives
    PSO
    • Macro-level dimenesions
    • Micro-level dimensions
    Purchasing performance
    • Cost
    • Time
    • Quality
    • Flexibility
    • Innovation
    • Sustainability
    1. Macro-level dimensions of the PSO (4)
    • Category: Departments are organized by what is bought (e.g. IT Services, Raw Materials, etc.).
    • Business Unit: Departments are organized by market customer segments (e.g. B2B versus B2C lines of business).
    • Geography: Departments are organized according to geographical footprint (e.g. North America, Latin America, Asia Pacific).
    • Activity: Departments are organized into different activity clusters (e.g. strategic sourcing and another for transactional purchasing).
    1. Micro-level characteristics of the PSO (5)
    • Formalization: The extent to which purchasing tasks/roles are defined by various formal documents describing rules, procedures and policies.
    • Centralization: The degree to which authority, responsibility and power are concentrated within an organization or buying unit.
    • Specialization: The degree to which purchasing activities are conducted by specialized departments, committees and skilled personnel.
    • Standardization: The degree to which organizational activities or organizational routines are precisely defined.
    • Participation: The extent to which various organizational members are involved in decision making.
    1. Tasks, responsibilities and authorities of purchasing organization (3(5,4,7))
    Operational purchasing decisions (short term impact):
    •Ordering process
    •Expediting activities related to released orders
    •Invoice verification and payment
    •Troubleshooting
    •Monitoring and evaluation of supplier performance
    Tactical purchasing decisions (medium term impact):
    •Selection and contracting of suppliers
    •Preparing and developing value analysis programs
    •Adopting and conducting quality certification programs for suppliers
    •Programs aimed at supply-base reduction
    Strategic purchasing decisions (long term impact):
    •Outsourcing of activities and/or functions
    •Establishing long term contracts with preferred suppliers
    •Adopting a supplier strategy based on multi- versus single sourcing
    •Deciding on financial participation in suppliers (backward integration)
    •Development and issuing operational guidelines, procedures and task descriptions, which provide authority to the purchasing department
    •Development and implementation of auditing and review programs
    •Major investments
    1. Relationship between decision levels (last Q) and management positions (kuva)
    Kuvavastaus
    1. Organizational structures within purchasing (2)
    • Decentralized purchasing: Business unit purchasing is responsible for all purchasing decisions
    • Centralized purchasing: central purchasing department is responsible for all strategic and tactical purchasing decisions
    • hybrid
    1. Advantages and disadvantages of decentralised purchasing (5vs5)
    Advantages:
    •Direct responsibility of operatingcompanies
    •Stronger customer orientation
    •Less bureaucratic purchasing procedures/higher operational flexibility
    •Less friction costs due to coordination
    •Direct communication with suppliers
    Disadvantages:
    •Dispersed purchasing power, lack of economies of scale
    •No uniform way of handling towards suppliers
    •Scattered supply market research
    •Limited possibilities for building up specific expertise on purchasing, supply markets and components
    •Different commercial purchasing conditions among different operating companies
    1. Centralized versus decentralized purchasing: some criteria to consider (7)
    • Commonality of purchasing requirements
    • Geographic location
    • Supply market structure
    • Savings potential
    • Expertise required
    • Price fluctuations
    • Customer demand
    1. DECENTRAL vs CENTRAL vs HYBRID STRUCTURES IN PHOTOS
    Kuvavastaus
    1. The objective of Sustainable Supply Chain Management
    is to create, protect and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market.
    1. An Ecosystem View of the Supply Chain
    Kuvavastaus
    1. Sustainability concerns (3)
    • Economic goals in supply chains: Cost, quality, speed of delivery, flexibility, resource utilization, visibility and innovativeness
    • Social issues: respect of human and workers' rights - child labour, bonded labour, health and safety, working conditions, gender equality, poverty alleviation, etc.
    –Environmental problems: pollution, climate change, decline in ecosystems & biodiversity, deforestation, soil degradation, resource depletion and fresh water crisis.
    1. What is green supply chain management?(7)
    • Reduction of energy use & renewable alternatives
    • Cutting water volumes & countering contamination
    • Reducing, scrubbing or sequestering greenhouse gas
    • Decreasing quantities of waste
    • Recycling
    • Packaging material reductions
    • Reverse logistics
    1. Modern slavery (3)
    • Modern slavery is an umbrella term used to capture multiple forms of exploitation generally at the intersection of compromised safety and freedom in the context of labor.
    • It is estimated that over 40 million persons are exploited through forms of modern slavery globally, however, the actual number of individuals in forced work is likely much higher.
    • Recent surveys suggest that only 6% of firms audit their suppliers' labor practices beyond tier one and that only 10% of Boards appreciate how limited their monitoring of modern slavery risk actually is.
    1. Sustainability Benefits (5)
    • Stimulates innovation and builds new capabilities ( e.g. Patagonia's quest for recycled inputs led to new product development. )
    • Market positioning and firm-customer bonding (e.g. the Dutch coffee brand Max Havelaar, and Ford and General Motors encouraging minority suppliers.)
    • Increase sales, revenues and profits (E.g. Coca-Cola )
    • Positive publicity and good corporate reputation - (e.g. McDonald's, Wal-Mart. )
    • Greater organisational and employee commitment when properly communicated (e.g. Patagonia, McDonald's.)
    1. Paradox in sustainable procurement (4)
    • Strong cost reduction targets lead to focusing to the cost
    • Conventional purchasing practices and strong cost reduction targets lead to aggressive price negotiation, inaccurate forecasting, late orders, short lead times and last minute changes
    • Put suppliers under intense pressure and might lead to poor working conditions and low pay for workers
    • Procurement team represents the organization and is responsible for awarding business to suppliers. Any unethical behavior will have a negative impact on the brand image of the organization
    1. Practices for Green Sourcing (6)
    1. Make Green part of the RFI/RFP process and filter out non-green suppliers
    ( - What % of their waste stream is recycled?
    • What % of their raw materials are from recycling?
    • What $'s have they invested in Green initiatives? )
    1. Require or encourage suppliers to undertake independent environmental certification, e.g. ISO 14000 family
    1. Build environmental criteria into supplier contract conditions
    1. Supply base environmental performance management
    1. Conduct life cycle analysis in cooperation with suppliers
    1. Coordinate minimization of environmental impact in the extended supply chain
    1. Supplier assessment and monitoring (def)
    Practices by which a buyer guides, assesses, monitors, and controls suppliers' internal actions regarding working hours and conditions, health and safety, employees' welfare, and the avoidance of the use of child labour
    1. Audits (def + 4types)
    The procedures through which internal or external auditors systematically check whether a supplier is complying with the requirements contained in a given code of conduct
    Types
    1. Technical and social audits
    2. Social audits assess labor standards
    3. Pre-arranged or randomly
    4. Buyer auditor or third-party auditor
    1. Collaboration with suppliers (def + 6)
    Practices by which buyers work closely with suppliers to build their capabilities in order to effectively improve performance
    1. Training and education (workers and managers)
    2. Sharing knowledge via regular meetings
    3. Mutual investments
    4. Supplier facility visits
    5. Innovations in products, processes, and business models
    6. New product/processes development together with supplier to reduce supplier employee health and safety risks
    1. Kraljic model and sustainability...
    Kuvavastaus
    1. Classification of the drivers of sustainable supply chain management
    External Drivers:
    • Market Pressures
    • Societal Pressures
    • Regulatory Pressures
    Internal Drivers:
    • Corporate Strategy
    • Organization’s Culture
    • Organization’s Resources
    • Organization’s Characteristics
    1. Classification of the drivers of sustainable supply chain management: External drivers of sscm
    Societal Pressure:
    • NGO pressure
    • Media/press
    • Value-based networks
    • Public pressure (societal group)
    • Consumer organizations
    • Social well-being/community focus
    Regulatory Pressure:
    • Government legislation
    • Regional (e.g. the E.U.) or international regulators
    • Professional/trade associations
    • Financial benefits
    • Certifications
    Market Pressure:
    • Competitive advantage
    • Competitors’ pressure
    • Shareholders’/investors’ pressure
    • Institutional pressure
    • Suppliers’ pressure
    • Customers’ pressure
    • Reputation/image
    • Globalization
    1. Classification of the drivers of sustainable supply chain management: Internal drivers of sscm
    Corporate Strategy:
    • Top management commitment
    • Organization strategy
    • Cost-related pressures
    • Operational/economic performance
    Organizational Culture:
    • Socio-cultural responsibility
    • Innovativeness
    • Code of business conduct
    • Information dissemination
    • Health and safety
    Organizational Resources:
    • Organizational resources
    • Resource depletion
    • Human capital (skills and capabilities)
    • Employees’ pressure/involvement
    • Physical capital (technology and equipment)
    • Training & development
    Organizational Characteristics:
    • Position in supply chain
    • Industrial sector
    • Size
    • Geographical location
    • Degree of internationalization
    • Current level of sustainability actions
    1. Three Aspects Covered by ESG initiatives
    1. Environmental.
    • These criteria may include corporate climate policies, energy use, waste management and treatment of animals.
    1. Social.
    • These criteria cover the company's relationship with stakeholders other than investors, such as employees or community members.
    • Meeting ESG's social criteria may involve implementing diversity, equity and inclusion initiatives, making donations, encouraging employees to volunteer and engaging in supply chain sustainability and ethics practices.
    1. Governance.
    • These criteria hold companies to ethical accounting and financial reporting standards and also include factors such as board diversity, executive compensation and rules on ethical business practices.
    1. Security vs Sustainbality (3)
    • Finland is among the leading countries prioritizing sustainability initiatives. However, it seems that recently climate change and sustainability have found a new rival: security.
    • Nearly two-thirds support reducing Europe's technological dependence on China, for example in batteries and electric cars, even if that would slow climate action.
    –When respondents were asked what issues the EU should emphasise more in the future, topics related to self-sufficiency and security were ranked highly.
    1. Four major developments in digital capabilities for procurement
    1. Electronic exchange
    • Electronic Data Interchange (EDI) and electronic transactions
    • Exchange structured business documents: PO, invoices
    1. Enterprise integration
    • Enterprise Resource Planning (ERP) and e-procurement
    • Connect purchasing information and workflows across departments
    1. Networked procurement
    • B2B platforms and e-SCM
    • Supplier connectivity and collaboration
    1. Data-rich platforms
    • Cloud, mobile, analytics
    • Visibility across systems and partners. Access, share, and analyze procurement data.
    1. digital tools in procurement process: 1. Determine specification
    Spend analytics and digital requirement workflows
    1. Review historical spend and demand
    1. Group similar purchases into categories
    1. Compare previous requirements and usage
    1. Create and approve a clear specification
    1. digital tools in procurement process: 2. Select supplier
    Supplier discovery and e-sourcing platforms
    1. Search the market for possible suppliers
    1. Collect supplier profiles and documents
    1. Issue an RFI or RFQ
    1. Compare alternatives and create a shortlist
    1. digital tools in procurement process: 3. Contracting
    Contract lifecycle management (CLM)
    1. Create contracts using approved templates
    1. Route legal and business review
    1. Compare versions and record approvals
    1. Sign, archive, and monitor obligations
    1. digital tools in procurement process: 4. Ordering
    ERP / E-procurement + Supplier Portal
    1. Convert an approved request into a PO
    1. Send the PO to the supplier
    1. Record acknowledgement and order status
    1. Connect the PO with invoicing and payment
    1. digital tools in procurement process: 5. Expediting
    Order tracking and logistics visibility
    1. Track shipment and delivery milestones
    1. Compare planned and expected arrival
    1. Flag delays and missing events
    1. Prioritize supplier contact or recovery action
    1. digital tools in procurement process: 6. Follow-up and evaluation
    tools: Supplier scorecards + improvement tracking
    1. Collect delivery, quality, cost, and ESG evidence
    1. Compare results with targets
    1. Create corrective or improvement plans
    1. Support renewal, development, or exit decisions
    1. AI in procurement process
    1. Specification - AI can:
    • Classify spend
    • analyze demand
    • draft requirements
    1. Selection - AI can:
    • Scout suppliers
    • screen profiles
    • analyze bids
    1. Contract - AI can:
    • Extract clauses
    • review text
    • flag obligations
    1. Order - AI can:
    • Guide buying
    • detect exceptions or possible fraud
    1. Expedite - AI can:
    • Predict delays
    • detect risk signals
    • prioritize action
    1. Evaluation - AI can:
    • Detect anomalies
    • compare suppliers
    • analyze ESG text
    1. AI Recognized potential, limited implementation
    Recognizing AI opportunities does not guarantee successful implementation.
    Potential
    • Automation of routine work
    • More information processed
    • Earlier risk signals
    • Better decision support
    Why progress stalls
    • Data
    • Integration
    • Skills
    • Governance
    • Trust
    Implementation Challenges
    • Move beyond pilots
    • Integrate with systems
    • Develop capabilities
    • Demonstrate benefits
    1. Risks in SSM
    • In today’s volatile environment, procurement professionals must actively manage risks to ensure supply continuity and value for money.
    • Nearly 90% of companies experienced supply-related incidents/disruptions in 2024, underlining how disruptions have become “the norm, not the exception” (McKinsey, 2025).
    • From raw material shortages and geopolitical upheavals to supplier failures, modern procurement faces a wide array of uncertainties.
    1. What is risk
    • Risk is the chance, in quantitative terms, of a defined hazard occurring
    • Risk is tied to not meeting business objectives
    • Risk represents an upside of capitalizing on an opportunity and a downside of an unwanted event
    1. Risk management process
    Kuvavastaus
    1. Risk management process: Risk Identification aims to… (3)
    • discover all relevant risks
    • reveal different risk types/ sources
    • develop an understanding of the events and conditions driving risks
    1. Risk management process: Risk assessment (3,(0,0,2))
    • Risk has two critical elements, severity (magnitude) and likelihood (probability)
    • Risk Assessment aims to prioritize risks based on the two elements
    • Risk can be assessed using data (if available) or expert judgement and scenarios
    --> formal or informal
    --> quantitative or qualitative
    1. Risk management process: Risk Treatment is about making decisions with regards to... (2)
    • accepting a known or assessed risk and/ or
    • implementing actions to reduce the consequences or probability of occurrence
    1. Risk management process: Risk Treatment (accepting) (3)
    • No standard guidelines to determine how much risk an organization should accept.
    • Acceptable level is context-dependent
    • Accepted risks still require continuous tracking
    1. Risk management process: Risk Treatment (Avoiding) (2)
    • Eliminate the types of events that could trigger a risk
    • For example, discontinue specific products, suppliers, or geographical markets if supply is unreliable
    1. Risk management process: Risk Treatment (share / transfer) (2)
    • Assign responsibility to another party
    • For example insurances, contracts
    1. Risk management process: Risk Treatment (mitigation) (2)
    • Reduce risk to an acceptable level → either probability or consequence
    • For example, spare inventory, suppliers in different geographical regions
    1. From Risk to Resilience (riskmanagement3 resilience1)
    Risk management
    • Focuses on foreseeable events via risk identification
    • Depends on statistical information (probability and impact) via risk assessment
    • Simplified view of the world e.g. risk interactions are not considered
    Supply Chain Resilience
    • Acknowledges that disruptions are inevitable as one cannot identify, assess, treat and monitor all possible risks up front (dynamic view of the world)
    • Survive, adapt and grow in the face of turbulent change
    • Understand supply chain vulnerabilities and develop capabilities to cope with disruptions via e.g., flexibility, visibility, velocity and collaboration
    1. Proactive vs. Reactive
    • Good procurement risk management is proactive.
    • It’s about anticipating what could go wrong and acting in advance – not just firefighting after the fact.
    • Proactive efforts (like qualifying backup suppliers or including the right contract clauses) can make the difference between a minor hiccup and a major crisis.
    1. Integration into Procurement Processes(3)
    • Embed risk thinking into every procurement task (spend analysis, supplier selection, etc.).
    • For example, spend analysis isn’t just about saving money – it can reveal risk (e.g. too much spend in one region).
    • Supplier selection isn’t just about best price – it must weight risk factors (financial stability, geopolitical location, etc.).
    1. Continous improvement(2)
    • Each procurement disruption or issue should feed back lessons so that organizations learn and adapt.
    • Procurement managers should create a culture where risk management is continuous and lessons are documented.
    1. Phases of the service purchasing process (3)
    Phase 1: pre-purchasing — Activities that start when the buying firm identifies its needs and service forms, estimates the scope and budget and the level of interaction, and shortlists promising suppliers.
    Phase 2: purchasing — Activities that take place when the buying firm interacts with the providers, such as requesting for information, specifying the requested service in detail, supplier selection, and contracting with chosen suppliers.
    Phase 3: delivery and follow-up — Activities after the contracting phase like collaborating in the service delivery, monitoring, and evaluating service delivery
    1. Service purchasing process (6)
    1. Requirements and specifications
    2. Supply market knowledge
    3. Designing interaction between buyer and supplier
    4. Supplier selection
    5. Contracting
    6. Delivery follow-up
    1. Key points of service purchasing process (2(0,3))
    • The systematic purchasing process is the most important thing that the purchasing professional can provide to the experts in the other functional areas of the organization, for buying any type of business service.
    • The focus should be on the first three steps of the purchasing process to make the highest impact:
    1. help to define the requirements
    2. provide supply market knowledge
    3. design the interaction pattern for the buyer-supplier relationship, together with the internal customers in the organization.
    1. Key points of service purchasing process (2(0,1)
    • Always question the purchasing needs and ask for consideration of do-or-buy alternatives
    • Different types of services demand different types of purchasing approaches.
    --For complex services with a long delivery time designing the right type of interaction interface will pay off in higher value and better satisfaction with the service delivery process.
    1. How to address service procurement
    challenges (3(1,2,1))
    1. Understanding the service systems
    • Who are the actors?
    • What are the resources and activities?
    1. Understanding buyer-supplier “Interactions”
    • What are the preferred interaction elements?
    • What are the preferred supplier interfaces?
    1. Understanding different categorizations of services
    • How categorization of services affect its process?
    1. Implications of service classifications (5)
    • Capabilities required on both sides
    • Functional disciplines involved in service development and delivery
    • Relation-specific investments needed
    • Organization of interactions between the customer and the supplier
    • Key issues to address in the customer-supplier dialogue
    1. 2 ways of categorizing services (2(2,4))
    1. Categorization based on type of service
    • e.g. Industrial services (with an emphasis on increased efficiency of the buying company’s activities e.g. Temporary labour or security)
    • vs. Knowledge-intensive services (with an emphasis on innovation and enhanced value-creation of the buying company. e.g. Marketing & media, tech consulting)
    1. Categorization based on usage of the services
    • Component services – They are passed on to end-customers without being transformed by the buying company (e.g. external field maintenance professionals contracted by the manufacturer of production machinery.)
    • Semi-manufactured services – They are transformed before they become part of the buying company’s offering to end customers (e.g. daily weather forecasts procured by an airline to create detailed flight plans.)
    • Instrumental services – They remain within the buying company and affect how the buying company’s primary processes are carried out (e.g. management consultancy aimed at developing and implementing a new business strategy for a telecom company.)
    • Consumption services – They remain within the buying company and do not affect how the
    customer’s primary processes are carried out (e.g. gardening services bought by a bank.)
    1. What are the four ways of focusing a service contract? (4)
    1. focus on the resources and capabilities of the supplier (input)
    1. focus on processes/production of the delivery (process)
    1. focus on the function or performance of the delivery (output)
    1. focus on the value for the user (outcome)
    1. Pricing models according to the focus of the contract
    • Input: € / hour, day, month
    • Process: € / transaction
    • Output: € / deliverable
    • Outcome: € / value of impact
    1. Procurement in humanitarian logistics/operations (def)
    is acquiring the possession of relief goods, services (financial, tech), and/or equipments by the humanitarian organizations through monetary payments to the suppliers/service providers
    1. Why is procurement especially critical in the humanitarian sector? (6)
    • Procurement can account for up to 65% of total disaster relief costs
    • Scarce resources and intense competition make sourcing more difficult
    • Operations often take place in devastated areas with weak infrastructure and varying regulation
    • Organizations must balance local vs. global sourcing in terms of price, quality, and availability
    • Donors and governments can influence procurement decisions
    • Successful procurement directly affects the speed and availability of aid and can ultimately save lives
    1. What are the main supplier selection criteria for goods in humanitarian operations? (8)
    • Supplier performance
    • Legal and governance
    • Sustainable operations and policies
    • Responsiveness
    • Partnership strategy
    • Operational factors
    • Local/international trade knowledge
    • Availability and accessibility
    1. What are key operational challenges in humanitarian operations? (4)
    • Access and security: insecurity, damaged infrastructure, looting
    • Geography and terrain: large territories and hard-to-reach areas
    • Logistics and infrastructure: limited storage/cold chain, fuel shortages, high costs, restricted cash availability
    • Coordination: many actors such as NGOs, UN agencies, military and local communities complicate aid delivery
    1. What trade-offs must be considered in humanitarian supplier evaluation? (2)
    • Emergency vs. non-emergency situations
    • Short-term programs vs. long-term programs
    1. Why is humanitarian supplier selection a multi-criteria decision rather than only a price decision? (3)
    • Suppliers must be compared across several dimensions
    • Relevant criteria can include effectiveness, coverage, timeliness, storage requirements, cost, delivery conditions and supplier reputation/trust
    • The cheapest supplier is therefore not necessarily the most suitable option
    1. What are the main challenges and requirements when procuring financial services in humanitarian operations? (4)
    • High level of technical expertise in both purchasing and Cash & Voucher Assistance (CVA)
    • Large initial investment of time, money and information
    • Need to balance procurement performance with ethics and regulations
    • Procurement should consider best value for money, fairness, integrity and transparency
    1. What are the benefits of joint procurement in humanitarian operations? (4)
    • Lower procurement costs
    • Economies of scale
    • Improved relationships between humanitarian organizations
    • Better access to information and data across teams, organizations and networks
    1. What are the main objectives of public procurement? (5)
    • Efficient use of public funds / value for money
    • Promotion of high-quality, innovative and sustainable procurement
    • Achievement of broader societal and public policy objectives
    • Equal opportunities and fair competition for suppliers
    • These principles are also reflected in Finland's Public Procurement Act.
    1. How does public procurement differ from private-sector procurement? (3)
    • Public procurement is regulated by procurement legislation based on EU directives
    • Private-sector procurement has much more freedom, although competition law still applies
    • Public procurement regulation mainly determines how the procurement process is conducted, while the contracting authority can define what it needs and its specifications within principles such as non-discrimination
    1. What are the five main stages of the public procurement procedure? (5)
    • Preparation and planning
    • Publication and transparency
    • Submission of tenders, opening and selection
    • Evaluation and awarding
    • Contract implementation
    1. What are the main steps of a restricted procedure? (9)
    1. Contracting authority identifies the procurement need and may conduct market research / RFI
    1. A contract notice is published
    1. Interested suppliers submit requests to participate
    1. Qualified suppliers are selected and receive the request for tender
    1. Suppliers are evaluated for suitability
    1. Tenders are checked against mandatory requirements
    1. Compliant tenders are compared using predefined criteria
    1. Procurement decision is made
    1. A contract is signed
    1. What are the main procurement procedures? (4)
    • Restricted procedure: only qualified suppliers are invited to submit bids
    • Open procedure: all interested suppliers may submit a bid
    • Negotiated procedure: buyer and suppliers negotiate to adjust bids to requirements
    • Direct procurement: procurement without a competitive procedure, allowed only under specific circumstances
    1. Direct procurement and when can it be used? (5)
    • Procurement is conducted without a competitive tendering process
    • It is allowed only in specific circumstances
    • One example is when only one supplier is technically capable of supplying the solution
    • Another example is when no acceptable tenders were received in competitive tendering
    • Direct procurement cannot be used simply to avoid competition
    1. Why are government budget laws important in defence procurement? (4)
    • Government spending is controlled through the state budget
    • Long-term contracts that bind future parliamentary periods require multi-year authorization
    • Major defence procurement contracts cannot be signed before the necessary budget authorization is in effect
    • Budgeting can therefore affect the timing of major procurement projects
    1. What is TFEU Article 346 and why is it relevant to defence procurement? (4)
    • Allows a Member State to withhold information if disclosure would harm its essential security interests
    • Allows measures necessary to protect essential security interests related to arms, munitions and war material
    • Provides a national-security exception to normal EU procurement rules
    • The exception must not distort competition concerning products that are not specifically military
    1. What are the benefits of joint procurement and Hansel framework agreements? (3)
    • Less procurement work because centralized tendering can replace multiple separate competitions
    • Larger purchasing volumes can create savings
    • Government organizations can use existing framework agreements instead of organizing their own full tendering process
    1. Why is defence procurement described as strategy-driven? (6)
    • Defence planning begins with security strategy and capability requirements
    • Planning scenarios identify capability gaps
    • Procurement and acquisition projects are used to address these gaps
    • Resources are limited, so competing investments must be prioritized within budget limits
    • Projects can have positive or negative synergies
    • The overall investment portfolio must therefore be considered
    1. Why are requirements and evaluation criteria especially important in defence procurement? (4)
    • Defence procurements can contain a large number of detailed technical requirements
    • Mandatory requirements determine whether a tender is acceptable
    • Desirable features can be rewarded with additional quality points
    • Requirements and evaluation criteria ultimately determine the winning bid
    1. What rules apply to award criteria and their weights in public procurement? (5)
    • The contracting authority must define the award criteria
    • The relative weighting of the criteria must be stated in the procurement documents
    • Criteria must remain unchanged during the procurement procedure
    • Their relative weights must also remain unchanged
    • The economically most advantageous tender can consider both price/cost and quality

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