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Consolidated Purchasing In ABB India's Integrated Supply management organization

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Consolidated Purchasing In ABB India's Integrated Supply management organization 1. Introduction 1.1 About the company 1.1.1 Asea Brown Boveri (ABB) ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. ABB was founded in 1988 following the merger of ASEA of V�ster�s, Sweden and BBC Brown Boveri Ltd of Baden, Switzerland. The many groundbreaking technological achievements of both companies go back almost 120 years. ABB Fact-sheet * Headquarters: Zurich, Switzerland * About 139,000 employees in more than 100 countries * Orders in 2003: US$ 18.7 billion * Revenues in 2003: US$ 18.79 billion * Listed on stock exchanges in London/Zurich, Stockholm, Frankfurt and New York ABB Business Strategy ABB leverages its technology leadership, global presence, application knowledge and local expertise to offer products and services that allow its customers to optimize their operations. Its integration platform, Industrial IT, enables its customers to manage their installations better and link up in real time with their own suppliers and customers. The result is a leap in efficiency, quality and competitiveness. ABB focuses on its core businesses in power and automation technologies and has simplified its organization. This ensures that its customers have quick and easy access to ABB's offerings, when and where they need it - whether they buy from them directly or through distributors, wholesalers, system integrators or other partners. ABB Business culture & principles To build value, performance and leadership into ABB, responsibility, respect and determination are key. ABB sums up its business principle as follows - "Assuming responsibility, and acting with respect and determination makes it possible to nurture ABB's traditional strengths - our technology leadership, our pioneering spirit and our ability to be at home everywhere. That is our legacy, and our future. The key to success lies in how well all of us understand and apply the business principles - demonstrating personal, professional and corporate responsibility, showing respect for the views and needs of others and applying our shared determination to win." ...read more.


* More influence with key suppliers (better problem-solving). * Elimination of redundant activities. * Better utilization of purchasing talent and expertise * Pooling of risks * Better leveraging & negotiation power with supplier 3. Research Design 3.1 General Methodology 3.2 Data collection from business units The data of copper purchases for each business units for year 2003 & 04 was done in the attached excel sheet format. Some of the critical data collected was volume, value; copper items purchased, convertor details, price break up details, etc. 3.2.1 ABB India copper purchases Raw copper manufactured by primary & secondary producers is mainly in form of continuous cast copper rods & copper cathodes (billets) of various sizes. None of the business units are directly using the copper in raw form. Currently the copper purchases made by business units fall under 3 categories: 1) Some of the business units like PTTR-PT & PTTR-DT purchase raw copper from the primary producers & give to the intermediaries/convertors.These intermediaries convert the raw copper in finished form, as required by the business unit. This can be wire, tube, strip, enameled plated wires, paper covered conductors, etc. 2) Some of the business units directly purchase the finished copper item from the intermediaries without interacting with the raw copper manufacturers. 3) Certain business units are importing their requirement, due to non-availability of vendors in India, for that special item. A few also purchase imported material for their export order, as per ABB directive. Spend Spectrum - Copper 3.2.3 Cost savings We can identify six main areas for cost savings: 1) Bulk monthly purchase from primary producers 2) Reducing the number of convertors/ vendor rationalization 3) Global sourcing 4) Sales tax exemption/ other duty benefits 5) Product value analysis/standardization 6) Clubbing purchases with project businesses 3.2.4 Overall Process * Make a commodity team * Approach supplier with total package * Negotiate total package by the team with the help of expertise available within organization * Making long term contract with vendor * Making of monthly purchase order depending on the forecasted monthly requirement 3.2.5 Commodity team process 1. ...read more.


Claim management o Insurance claims o Changes by client o Third party claims COMPARISON OF DOMESTIC AND GLOBAL PURCHASING Domestic Global Single language and nationality Multilingual/multinational/multicultural Factors Supplier information usually accurate and Acquiring supplier information Collection easy. Sometimes a formidable task, requiring Higher budgets and more personnel. Political factors frequently unimportant Political factors frequently vital Relative freedom from government interference Government influences business Decision Uniform financial climate Variety of financial climates Single currency Currencies differing in stability and Real value Low admission cost Can get best technology Fits "just in time" Get best price and quality Avoids risk of trade rule changes Need for counter trade credits Shorter communication Must have volume to cover overhead Costs Plant visits and technical assistance easier Need to coordinate international Buying activities. PAYMENT TERMS C&F (CFR): Cost and Freight. The seller must pay the costs and freight necessary to transport the goods to the named destination. But the risk of loss or the risk of damage to the goods, as well as any cost increases, is transferred from the seller o the buyer when the goods pass the ship's rail in the port of shipment. CIF (CIF): Cost, Insurance, and Freight. This term is basically the same as C&F, with the addition that the seller has the responsibility to procure marine insurance against the risk of loss or damage during carriage .The seller contracts with the insurer and pays the insurance premium. Ex Works (EXW).The seller makes the goods available on its premises. In particular, the seller is not responsible for loading goods into the vehicle provided by the buyer. The buyer assumes full cost and risk involved with transferring goods from the sellers plant to the destination. This arrangement provides minimum risk to the seller. Delivery Duty Paid (DDP). While the term ex work signifies the sellers' minimum obligation, delivered duty paid when followed by words naming the buyer's plant, denotes the other extreme-the seller's maximum obligation. Delivered Duty Paid may be used irrespective of the mode of transportation. ...read more.

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