12-1 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

12-2 Purchasing, Inventory, And Quality Control Purchasing & Suppliers Purchasing & Suppliers Purchasing Procedures & Inventory Control Purchasing Procedures & Inventory Control Planning & Quality Control Planning & Quality Control Chapter 12

12-3 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Purchasing “…determines the company’s needs and then finds, orders, and assures delivery of those items.” Must Consider Quality Control Must Consider Quality Control

12-4 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Purchasing Involves: Just-In-Time Supplier-Base Downsizing Fully Integrated Production Networks Stockouts Royalty-Free/CORBIS

12-5 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Special Situations Affecting Purchasing Expected Changes In Price Orders For Specialty Goods Short Supply Of Materials Expected Changes In Product Demand

12-6 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Sources Of Suppliers Yellow Pages- Thomas Register of American Manufacturers- McRae Bluebook

12-7 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Types Of Suppliers Brokers Brokers Jobbers Jobbers Wholesalers Wholesalers Producers Producers PhotoLink/Getty Images

12-8 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Supplier Selection/Standards  Price  Quality  Service  Reliability  Evaluate Performance PhotoLink/Getty Images

12-9 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Purchase Order Flowchart

12-10 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Requisition Origination 1)Inventory Low- Observation 2)Need For Item- Automatic Recognition 3)Manager Request 4)Customer Request Ryan McVay/Getty Images

12-11 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Semiannual Production Schedule

12-12 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Orders PurchaseStanding

12-13 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Purchasing & Computers Track Items Spot Needs Identify Sources Of Supply Provide Information For Ordering For Ordering Checking Accuracy Of Receipts Checking Accuracy Of Receipts

12-14 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Inventory “…formal list of all the property of a business, or the property so listed.” John A. Rizzo/Getty Images

12-15 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Material Flow & Inventory

12-16 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Goods Flow & Inventory

12-17 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Types Of Inventory  Finished Goods  Work-In-Process  Repair Parts  Supplies Office Office Store Store Shop Shop  Miscellaneous

12-18 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. The Rule “…approximately 80 percent of a company’s income usually comes from20 percent of its products.”

12-19 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Inventory Carrying Costs $Storage $Insurance/Taxes $Lost Opportunity $Theft/Destruction $Obsolescence/Deterioration

12-20 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Economic Order Quantity “…is the quantity to purchase that balances the cost of placing the order with the cost of carrying the inventory.”

12-21 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Handling Demand Variations  Allow To Occur  Use Self-Service/Hire Temps  Inventory Buildups/Drawdowns  Complementary Products  Subcontract  Lose Sales  Inducements During Low Demand Royalty-Free/CORBIS

12-22 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Scheduling “…setting the times and sequences required to do work.”

12-23 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Quality “…product characteristics and/or the probability of meeting established standards.” Standards = Customer Expectations

12-24 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Quality Involves  Look  Capacity  Accomplishment  Creativity  Reliability  Etc. Total Quality Management –  Strength  Color  Taste  Smell  Content  Weight  Tone

12-25 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Improving & Controlling Quality o Quality Circles o Design o Good Process John A. Rizzo/Getty Images

12-26 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Quality Circle Operation

12-27 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Deming’s 14 Points 1.Create Constancy 2.Adopt Philosophy 3.Cease Inspection 4.End Price Tag Awards 5.Constant Improvement 6.Train 7.Lead 8.Drive Out Fear 9.Break Down Barriers 10.Eliminate Slogans 11.Eliminate Quotas 12.Pride Of Workmanship 13.Educate 14.Transform

12-28 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Quality Control Steps Set Standards Measure Performance Compare Performance Make Corrections

12-29 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Quality Control Feedback

12-30 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Changing Inventory Levels (Discussion Question #3)