Procurement and

Inventory Decisions
Logistics, Operations and Supply Chain Management
 Points of Discussion

• Definition of Procurement • Definition of Inventory Management

• Procurement Methodologies • Process of Inventory Management

• Successful Procurement Process • Techniques of Inventory Management

• Procurement Process Workflow • Inventory Cost Reduction
• Steps Involved in Procurement • Difference Between Inventory and Order
Management
• 3Ps of Procurement
• Difference Between Procurement and • Case Study: Globe Telecom, Inc
Purchasing
• Pillars of Procurement
• Importance of Procurement Software
Procurement
 What is Procurement?

• It is a strategic process that involves

the acquisition of goods and services.
• It is a method of discovering and
agreeing to terms and purchasing
goods, services, or other works from
an external source, often with the use
of a tendering or competitive bidding
process. 
 Procurement Methodologies
Types How it is being used?
Direct Procurement It is the acquisition of the inputs that a company needs to
make its end product.
Indirect Procurement Refers to the acquisition of services or inputs that are not
directly utilized in the production of a company’s
products but are necessary for a day-to-day operation.
Goods Procurement It is the purchase of tangible goods which also involves
software subscriptions.
Purchasing Services Refers to the procurement of people-based services like
individual contractors, contingent labors or security
services
Successful Procurement Process
Procurement Process Workflow
Steps Involved in Procurement
3 Ps of Procurement
 Difference Between Purchasing and
Procurement
Purchasing Procurement
• Buying goods and services • Matches the company’s needs using strategic sourcing

• Buy materials with the exact need • Requires strategy before finalizing deals

• Normal transaction • Budgeting through a structured process

• Usually works with known vendors • Involves vendor and supplier selection process

• Less concerned with the risk • Values relationships with stakeholders

• Skillsets on conflict resolution, communication • With analytic thinking, inventory management

Pillars of Procurement
Importance of Procurement Software
• Allows companies or enterprises to automate the
following:
• Purchasing Procedures

• Inventory Management
• Contract Lifecycle Management
• Invoicing Management

• Centralized area through ERP, Oracle, SAP

• Create purchase order
• Vendor management
• Reminders and cancellation
• Trend analysis
Inventory Management
 What is Inventory Management?

• It refers to the process of ordering,

storing, using and selling a
company’s inventory.
• A crucial component of supply chain
management to track stock levels
and movement of goods .
 Process of Inventory Management
1. Goods are delivered to the facility

2. Inspect, sort and store goods

3. Monitor inventory levels

4. Stock orders are placed

5. Stock orders are approved

6. Take goods from stock

7. Update inventory levels

8. Low stock levels to reorder

Techniques in Inventory Management
1. Economic Order Quantity – focuses on total cost, demand rate

2. Minimum Order Quantity – smallest amount of inventory

3. ABC Analysis – overall impact on inventory cost categorization

4. Just-in-Time Inventory Management – receiving inventory on as needed

basis

5. Safety Stock Inventory – extra inventory/safety net

Techniques in Inventory Management
6. FIFO and LIFO – replenishment and usage order

7. Reorder Point Formula – level of stocks to trigger reordering

8. Batch Tracking – monitoring of similar goods

9. Consignment Inventory – vendor-vendee agreement on sale of

products

10. Perpetual Inventory Management – real-time counting of inventory

Techniques in Inventory Management
11. Drop Shipping – shipping directly products to customer

12. Lean Manufacturing – eliminating wastes

13. Six Sigma – improving business performance

14. Lean Six Sigma – standardization of processes

15. Demand Forecasting – based on data of historical sales

Techniques in Inventory Management
16. Cross-docking – direct unloading of materials of supplier to
eliminates warehousing and other related costs

17. Bulk Shipments – shipping of inventory based on volume or

pallets to reduce cost
 Inventory Cost Reduction
Get rid of
the
deadstock

Choose
Avoid better
over software
stocking

Reduce
supplier
lead time
Difference Between Inventory Management
and Order Management
Inventory Management Order Management
• Tracks stock levels • Tracks customer orders

• Monitors movement of goods • Stops in ordering process

• Follows up on the fulfillment of orders • Optional follow ups

* Inventory management is an important aspect of order management, since order

fulfillment requires the right amount of inventory to be available.
Sample Case Study
 Case Study: Globe Telecom, Inc.
Globe Telecom, Inc., commonly shortened as
Globe, is a major provider of
telecommunications services in the Philippines.

The company is the largest mobile network

operator in the Philippines and one of the largest
fixed line, and broadband networks.

Globe is one of the largest and most profitable

companies in the country, and has been
consistently recognized both locally and
internationally for its corporate governance
practices.
 Snapshot of Financial Statements
Total Assets:
Case Study: Globe Telecom, Inc.
2019: P 304,290,737.00
2018: P 299,498,109.00

Total Liabilities:
2019: P 223,043,740.00
2018: P 226,354,602.00
Balance Sheet

Total Equity:
2019: P 81,246,997.00
2018: P 73,143,507.00
 Snapshot of Financial Statements
Revenues:
Case Study: Globe Telecom, Inc.
2019: P 166,660,337.00
2018: P 151,172,806.00
2017: P 135,280,731.00

Net Income:
2019: P 22,283,757.00
Income Statement

2018: P 18,625,943.00
2017: P 15,084,213.00
 Snapshot of Financial Statements
Net Cash Flow from
Case Study: Globe Telecom, Inc.
Operating Activities:
2019: P 74,042,219.00
2018: P 57,850,529.00
2017: P 50,304,262.00
Cash Flow Statement

Net Cash Flow from

Investing Activities:
2019: (P 55,030,779.00)
2018: (P 42,651,753.00)
2017: (P 55,422,015.00)
 Snapshot of Financial Statements
Net Cash Flow from
Case Study: Globe Telecom, Inc.
Financing Activities:
2019: (P 33,257,353.00)
2018: (P 3,435,046.00)
2017: P 7,814,350.00
Cash Flow Statement
 Snapshot of Financial Statements
Case Study: Globe Telecom, Inc.

Schedule on Inventories
 Snapshot of Financial Statements
Case Study: Globe Telecom, Inc.

Schedule on Inventories
 Objectives
Case Study: Globe Telecom, Inc.

Time Frame Year 2018 -2019 wherein there is an increase of inventory obsolescence.

Viewpoint Top Management  Inventory Management  R&D  IT Department

• To identify the inventory management techniques of Globe Telcom.

Objectives • To identify the inventory turn over ration of Globe Telecom.
 Statement of the Problem
Case Study: Globe Telecom, Inc.

Main Problem:

How will Globe Telecom, Inc. deal challenges on inventory

obsolescence to always keep up with new technology and
devices.
 Areas of Consideration
Case Study: Globe Telecom, Inc.
Strengths Weakness
1. Largest and most 1. Inventory Turnover of
advanced 1.72
2. Uses multi marketing 2. Decline in supplies by
channels P140M in 2019
3. Has over 500 retailers 3. Inventory
nationwide obsolescence

Opportunitie Threats
s 1. Tight competition
1. Increasing new 2. Rise of 3rd telco in the
networks of technologies Philippines
2. Research and 3. NTC Regulations
development on latest
trends 4. Political and Socio-
economic Risks
 Alternative Course of Action
Case Study: Globe Telecom, Inc.

To deal with challenges on inventory obsolescence, the following are suggested:

1. Focus on better market trends and demand forecasting.

2. Strengthen relationships with suppliers for the involvement
on planning, sales, marketing processes of the products
particularly the handsets.
3. Facility and services upgrades especially internet speed on
rural areas.
4. Study methods on inventory management.
 Conclusion
Case Study: Globe Telecom, Inc.

Telecommunication is an expensive business. The players have to be large enough and produce sufficient cash flow to
absorb the costs of expanding and developing networks and services since technology is changing so fast. Globe
maintains its standing as one of the largest and most technologically advanced mobile, fixed line and broadband
networks in the country however in this kind of industry stock obsolescence cannot be avoided.

• Globe’s inventory turnover in December 2019 is 1.79 which means the sales are weak and there is an excess on the
old inventory.
• It measures the percentage of Inventories the company currently has on hand to support the current amount of
Revenue.
• Globe Telecom's Inventory-to-Revenue for the quarter that ended in Dec. 2019 was 0.09.
• The costs of inventories are calculated using the moving average method.
• Net realizable value represents the estimated selling price less all estimated costs of completion and costs
necessary to make the sale.
• The inventory obsolescence is attributed to market competition such as mobile, fixed line and home broadband.
Thank you.