Browsing by Author "Wacker, Christian Oliver"

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    Supply management and procurement at a South African FMCG company : a practical example of developing a decision support tool for managing direct material cost
    (Stellenbosch : Stellenbosch University, 2016-03) Wacker, Christian Oliver; Louw, Johannes Jacobus; De Swardt, Abraham Esbra; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Logistics.
    ENGLISH ABSTRACT: One of the functions within the supply chain of manufacturing companies is the procurement of direct materials that are needed for the production of products sold to consumers. Even though the process of purchasing materials was always required within the manufacturing process, it only recently gained attention on management level. Today, organisations set up centralised procurement functions that develop global sourcing strategies in order to align procurement processes, people and technology. The goal is to reduce total cost while maintaining high quality, availability and service levels. However, procurement functions are challenged by a number of risks during its global sourcing activities that can have major impacts on direct material cost. Johnson & Johnson is a major global player within the Fast Moving Consumer Goods (FMCG) industry and acknowledged a significant sense of uncertainty relating to the identification and measurement of direct material cost drivers within their global procurement function. Even though Johnson & Johnson is aware that the economic environment has an impact on its procurement spend, it has a limited ability to measure and quantify these effects. Based on the case of Johnson & Johnson, this study’s objective was to develop a decision support tool that measures and analyses the impact of cost drivers on direct material cost. The aim was to develop a model that can be used by procurement professionals in industry in order to provide insight into the procurement cost structure and to identify opportunities that can lead to risk and cost reduction. A case study research design was followed, which included secondary and primary research to collect qualitative and quantitative data. The research methods included observations and input discussions at the company, as well as a comprehensive model development process, which was used in order to create the decision support tool. As the decision support tool was developed on the case of Johnson & Johnson, data were collected from the company in order to test the model and generate outputs. Following the individual process steps of the development process resulted in a highly structured and documented approach to develop the decision support tool. Two major cost drivers of procurement spend when conducting global sourcing were identified: fluctuating exchange rates and volatile commodity markets. Both of these cost drivers were analysed and included during the decision-support tool development process. As a result, a decision support tool is presented that provides functionality to measure the exposure and the potential impact value of the first-tier currency impact, second-tier currency impact as well as the inflation impact. Furthermore, “what-if” and scenario analyses provide a predictive view based on actual forecasts. As an additional output, the decision support tool provides detailed insight and transparency of the total procurement spend, providing important information for decision makers.