23 nov - open innovation alliance and procurement

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BA#244:#Supply#Chain#Management#

Survey#

!  Access!LinkedIn!Group!

Supply#Chain#Management#

!  Not!just!a!flow!of!goods,!but!also!a!flow!of!informa=on!

Open#Innovation#Alliances#

!  Closed!Innova=on!!  Contract@based!

!  Open!Innova=on!!  “the!use!of!purposive)inflows)and)ou/lows)of)

knowledge!to!accelerate)internal)innova6on,!and!expand!the!markets!for!external)use)of)innova6on,!respec=vely”!(Chesbrough!et!al.!2006,!p.!2)!

!  Operates!on!a!‘module’!basis!with!diverse!roles!

!  Open!membership,!transparency,!self@regula=on!

Research#Question#

!  How!does!the!market!evaluate!a!firm’s!strategic!

decision!to!par=cipate!in!OIAs?!

!  What!is!the!impact!on!the!market!valua=ons!of!

firms!that!already!par=cipate!in!the!OIA!when!a!

market!leader!joins!the!exis=ng!alliance?!

!  What!do!OIAs!mean!to!nonpar=cipa=ng!rivals!and!

their!market!valua=on?!

Significance#

!  Ongoing!value!crea=on!aSer!ini=al!forma=on!of!OIA!

!  Effect!of!IT!investments!(OIA!par=cipa=on)!on!rivals!

!  Iden=fies!factors!that!adds!value!to!OIA!cons=tuents!–!type!of!innova=on!and!degree!of!

openness!

!  Managers!in!high!tech!and!knowledge!intensive!

industries!can!choose!the!“best”!alliance!to!join!and!

can!base!their!decisions!on!many!criteria!

Measures#

!  Abnormal!Stock!Returns!

!  Difference!between!actual!return!and!expected!

return!

!  Broad!index!(e.g.!S&P!500)!or!na=onal!index!(Nikkei!

225)!is!used!as!a!benchmark!to!determine!expected!

return!

!  Events!!  Triggers!abnormal!returns!

!  e.g.!M&A,!dividend!announcement,!company!

earning!announcement,!lawsuits!

Strategic#Alliances#Announcement#

!  Posi=ve!effect!due!to:!!  Reduced!transac=on!costs!

!  Organiza=onal!learning!and!resource!pooling!

Strategic#Alliances#Announcement#

!  June!20,!2016,!Walmart!and!JD.com!(B2C)!

!  JD.com!will!take!ownership!of!Yihaodian!(B2C)!

!  Sam’s!Club!China!will!open!a!flagship!store!in!JD.com!

expanding!reach!to!600M!customers!for!imported!

products!

• Business!transac=ons!carried!out!online!via!the!internet!

E@Commerce!

• Owned!by!Alibaba!Group!of!Jack!Ma!

• Consumer@to@consumer!(C2C)!

• World’s!top!10!most!visited!website!

Taobao!

EACOMMERCE#IN#CHINA#

• Boyfriend!for!hire!@!£103!to!£103,300!a!day,!with!extra!charge!for!holding!hands,!joint!internet!surfing,!and!shopping!

Taobao!

EACOMMERCE#IN#CHINA#

• Chinese!online!grocery!business!• Business@to@Consumer!(B2C)!

• Owned!by!Walmart!

Yihaodian!

EACOMMERCE#IN#CHINA#

Hypotheses#

!  H1:!Posi6ve!abnormal!stock!returns!will!accrue!to!

firms!that!par6cipate)in)an)OIA)

!  H2:!The!announcement!of!the!entry)of)a)market)leader!company!into!an!exis=ng!OIA!will!result!in!

posi6ve!abnormal!returns!for!current)OIA)member!firms!

!  H3:!The!announcement!of!OIAs!will!result!in!

posi6ve!abnormal!stock!returns!for!the!rival!firms!

that!compete!with!the!firms!par=cipa=ng!in!OIAs!

Hypotheses#

!  H4:!All!else!being!equal,!firms!that!par=cipate!in!an!OIA!

with!more)heterogeneous)partners!will!experience!higher!abnormal!returns!than!firms!that!join!an!OIA!with!

more!homogeneous!partners!

!  H5:!All!else!being!equal,!firms!that!par=cipate!in!an!OIA!

driven!by!radical)innova6on!will!experience!higher!abnormal!returns!than!firms!that!join!an!OIA!focusing!on!

incremental!innova=on!

!  H6:!All!else!being!equal,!firms!that!par=cipate!in!an!OIA!

with!full)access)and)decision)authority!will!experience!higher!abnormal!returns!than!firms!that!join!an!OIA!with!

limited!access!and!decision!authority!

Data#

!  PR!Newswire!and!Business!Wire!news!between!

January!1,!2000,!and!August!30,!2009!

!  Abnormal!returns!and!financial!data!from!the!

WRDS!database!(wrds.wharton.upenn.edu/)!

Results#

!  H1:!Supported!

!  H2:!Supported!

!  H3:!Supported!

!  H4:!Not!Supported!

!  H5:!Supported!

!  H6:!Opposite!

Implications#

!  H1:!Encourage)IT)ini6a6ves)(OIA)!that!are!codeveloped!and!comanaged!in!a!mul=firm,!open!collabora=ve!

environment!

!  H2:!OIA!founders!should!con=nue!making!efforts!to!

encourage)market)leaders)to)join!their!collabora=ons!!

!  H3:!If)knowledge)spillover!to!external!par=es!(e.g.,!rivals)!can)be)detrimental!to!the!firm’s!own!survival,!it!

should!remain)independent!and!enhance!its!compe==veness!through!closed)innova6on!paradigms.!

Implications#

!  H5:!Cons=tuents!of!OIAs!should!focus!on!radical)innova6ons!rather!than!incremental!innova=ons!!

!  H6:!High)degree)of)openness!is!associated!with)substan6al)costs!such!as!knowledge!spillover!and!value!appropria=on!by!rivals!

!  OIAs!could!adjust)their)degree)of)openness)depending!on!the!lifecycle!of!the!technological!innova=ons!

!  “co@ope==on”!

Internal#Supply#Chain#

Procurement! Produc=on! Storage! Distribu=on! Sales!and!

Marke=ng!

Contexts#of#Procurement#and#Supply#

!  Purchasing!!  Involves!the!acquisi6on)of)supplies!or!inputs!to!

the!organiza=on’s!ac=vi=es!

!  Done!by!purchasing!department,!or!individuals!

and!teams!in!other!departments!

Contexts#of#Procurement#and#Supply#

!  Purchasing!objec=ve!is!to!buy!materials!

!  of!the!Right!Quality)!  in!the!Right!Quan6ty)!  delivered!to!the!Right!Place)!  at!the!Right!Time)!  at!the!Right!Price)

Sample#Purchase#Order#(PO)#

!  of!the!Right!Quality!

!  in!the!Right!Quan=ty!

!  delivered!to!the!Right!Place!

!  at!the!Right!Time!

!  at!the!Right!Price!

!

Purchasing#

Purchase!

Order!

Step!1!

Monitor!

and!Chase!

Delivery!

Step!2!

Receipt!of!

Delivery!

Step!3!

Payment!

of!the!

Supplier!

Step!4!

Procurement#

!  Wider!term!than!Purchasing!

!  Proac=ve!

!  Rela=onal!

!  Strategic!

!  Integrated!

Procurement#

!  ‘Is!the!process!undertaken!by!the!organiza=onal!unit!that,!either!as!a!func=on!or!as!a!part!of!an!

integrated!supply!chain,!is!responsible!for!

procuring!or!assis=ng!users!to!procure,!in!the!most)efficient)manner,!required!supplies!at!the!right!=me,!quality,!quan=ty,!and!price,!and!the!

management)of)suppliers.’!(Lysons!&!Farrington)!

Scale#and#Scope#of#Procurement#

!  Goods!–!tangible!items,!which!can!be!consumed!

!  Services!–!ac=ons!performed,!which!confer!a!

benefit,!but!do)not)result)in)the)ownership!of!anything!

!  Construc=onal!works!–!projects!such!as!construc=on,!altera=on,!repair,!maintenance,!or!

demoli=on!of!buildings!or!structures!

Characteristics#of#Projects#

!  Unique!–!done!only!once!

!  Specific!deliverable!

!  Specific!due!date!

!  Resources!–!Time,!Cost!

!  Cross!organiza=onal!par=cipa=on!

“A!temporary!endeavor!undertaken!to!create!a!unique!product!or!service”!

Project!Management!Ins=tute,!2000!

Examples#

!  Security!Guarding!for!the!Bri=sh!Embassy!Dubai!

!  Installa=on!of!Car!Park!Shades!

!  CCTV!Maintenance!

PROCUREMENT#

Define!

business!

need!

Step!1!

Market!

Intelligence!

Step!2!

Sourcing!

Step!3!

Nego=a=on!

of!contracts!

Step!4!

Purchase!

Order!

Step!5!

Monitor!

and!Chase!

Delivery!

Step!6!

Receipt!of!

Delivery!

Step!7!

Payment!of!

the!

Supplier!

Step!8!

• Contract!Management!

• Supplier!Rela=onship!

Management!

• Dispute!Resolu=on!

Step!9!

DIRECT#AND#INDIRECT#PROCUREMENTS#

Direct!Procurement!

Direct!inputs!to!the!produc6on)process)

Items!procured!are!either!for!resale!or!for!incorpora=on!in!goods!for!sale!

Indirect!Procurement!

Indirectly!suppor=ng!the!produc=on!process!

Maintenance,!Repair,!and!Opera=ng!supplies!(MRO)!

Services!and!other!opera=ng!expenses!

DIRECT#AND#INDIRECT#PROCUREMENTS#

DIRECT#AND#INDIRECT#PROCUREMENTS#

Direct!Procurement!

Quality!has!direct!impact!on!goods!

Held!on!stock!

Indirect!Procurement!

STOCK#AND#NONASTOCK#PROCUREMENTS#

Stock!

Based!on!Demand!Forecast!

Cost!of!storage!space!and!insurance!

Cost!of!stock!wastage!due!to!deteriora=on!or!obsolescence!

Perishable!Goods!

Non@Stock!

STOCK#AND#NON#STOCK#PROCUREMENTS#

CAPITAL##AND#OPERATIONAL#EXPENDITURE#

Capital!Goods!

Length!of!Lifecycle!–!1+!years!

High!Acquisi=on!Cost!–!based!on!threshold!value!

CAPITAL##AND#OPERATIONAL#EXPENDITURE#

Capital!Goods!@!Total!Cost!of!Ownership!

!

!

Purchase!Price!

!

Delivery!

Installa=on!

Maintenance!and!Repair!

Operator!Training!

Energy!

Labor!

Disposal!Cost!

CAPITAL##AND#OPERATIONAL#EXPENDITURE#

Opera=ng!Expenditure!

Benefits!the!organiza=on!just!briefly!

!

!

Administra=on!expenses!

Telephone!Bills!

Sta=onery!

SERVICE#PROCUREMENTS#Service!

An!ac=vity!or!benefit!that!one!party!can!offer!to!another!that!is!essen=ally!intangible!

and!does!not!result!in!the!ownership!of!anything!

Something!is!done!for!you!

Characteris=cs!of!Service!

Intangible!–!cannot!be!‘inspected’!

Inseparability!–!produced!and!consumed!at!the!same!=me!

Heterogeneity!–!rela=vely!non!uniform!output!

Perishability!–!cannot!be!stored!for!later!use!

Ownership!–!no!transfer!of!ownership!

SEGMENTING#EXTERNAL#EXPENDITURE#

Procurement!Porsolio!Segmenta=on!

Analyzing!expenditure!by!categorizing!items!or!suppliers!according!to!priority,!value,!or!

importance!to!the!organiza=on!

Pareto!Analysis!

80/20!Rule!

80%!of!spend!being!directed!towards!just!20%!of!the!suppliers!

Cri=cal!Few!vs.!Trivial!Many!

SEGMENTING#EXTERNAL#EXPENDITURE#

Kraljic!(Procurement!Posi=oning)!Matrix!

Importance!to!the!organiza=on!vs.!Complexity!of!the!supply!market!

Leverage!items! Strategic!items!

Mul=ple!suppliers,!chiefly!local,!

bidding!

e.g.!local!produce!

Established!global!suppliers!

Long@term!availability!

e.g.!core!processors!

Non@cri=cal!items! Bovleneck!Items!

Established!local!suppliers!for!call@off!

!

e.g.!sta=onery!

Global,!predominantly!new!suppliers!

with!new!technology,!buffer!stock!

e.g.!unique!spare!parts,!specialized!

consultancy!services!

Complexity+of+Supply+Market+

Low ! ! ! !High!

Impo

rtan

ce+of+the+Item

+

Low

!!High!

KRALJIC#(PROCUREMENT#POSITIONING)#MATRIX#

Leverage!items! Strategic!items!

Standardize!specs!to!easily!switch!

suppliers,!bidding!

!

e.g.!printed!material!for!a!marke=ng!

firm!

Long@term!mutually!beneficial!

strategic!rela=onships!

!

e.g.!core!processors!bought!by!a!

laptop!manufacturer!

Non@cri=cal!/!Rou=ne!items! Bovleneck!Items!

Vendor@managed!inventory,!Blanket!

order!(call@off),!Online!ordering!

!

e.g.!sta=onery!

Medium@!or!long@term!contracts,!

develop!alterna=ve!or!back@up!

suppliers,!buffer!stock!

!

e.g.!unique!spare!parts,!specialized!

consultancy!services,!sole!supplier!

Complexity+of+Supply+Market+

Low ! ! ! !High!

Impo

rtan

ce+of+the+Item

+/+Spend+

Low

!!High!

Number+of+Suppliers+in+the+Market+

High ! ! ! !Low!

TENDERING�

Requests for Information, Quotations, Proposals (RFI, RFQ, RFP)

1�

2�3�

RFI – requests generic information to test the market RFQ – requests an actual price RFP – requests both price and a comprehensive description of services�

Request for Quotation (RFQ)

Contact details of the purchaser

Date by which to reply

Quantity and Description of Goods or Services required

Required Date and place of delivery

(Buyer’s standard terms and conditions)

(Terms of payment)�

Coverage� Value�

Overall!Annual!Cover!per!Member� PHP!300,000!/!annum�

In@pa=ent!services� Covered�

Out@pa=ent!services� Covered�

Dental!Care!and!Maternity� Not!Covered�

Number!of!Male!Employees� 56�

Number!of!Female!Employees� 50�

Last!Year’s!U=liza=on� 65%�

Hospital!Network� All!Ter=ary!hospitals!in!Maka=!City�

Request for Quotation (RFQ) Please quote for below services. This is for employees of the British

Embassy in Riyadh. Hope to receive before 22 April 2016.

Michael Juadiong

09178581557; michaelrobert.juadiong@gmail.com

Bapa� Gulfy� Med�

4,597! 8,344� 6,236�

Request for Quotation (RFQ)

All quotes above are in PHP per person

Invitation to Tender (ITT)

A more formalized competitive bidding, in which suppliers

are issued an ITT for a contract, with the buyer intending to

choose the supplier submitting the best proposal or the

lowest price.

Invitation to Tender (ITT)

ATT 1: Instructions to Tenderer

ATT 2: Evaluation Criteria

ATT 3: Proposed Contract Documents

ATT 4: Conditions of Contract

ATT 5: Statement of Services and KPIs

ATT 6: Price Schedule

ATT 7: Declaration by Supplier�

Selection and Award Criteria

It is important to state at the onset that:

•  The buyer will not be bound to accept the lowest price

quoted

•  Post-tender negotiation may be entered into

Use of Weighted points systems for assessment

Selec=on!Criteria�

These are the factors to be evaluated

Weights�

Cross@func=onal!team�

Points�

Maximum ratings for each factor

Approves the Selection Criteria and Weights, comprising of relevant stakeholders

Assigned numerical ratings to each competing supplier, based on the collective judgment of the team

Criteria� Perfect)Score)/)Weight� Supplier)A� Supplier)B�

Technical Approach� 40� 35� 30�

Production Facilities� 10� 10� 10�

Ability to Meet Schedule� 10� 5� 5�

Price� 40� 30� 40�

Use of Weighted points systems for assessment

Example: Technical – 60% Commercial – 40%

Balancing Technical and Commercial Award Criteria

HIGHEST COMMERCIAL

SCORE�

BEST VALUE

MOST ECONOMICALLY ADVANTAGEOUS

TENDER (MEAT)�

HIGHEST TECHNICAL

SCORE�

!!End#