Purchasing and Supply Management Chapter 1 Purchasing and Supply Management ©McGraw-Hill Education. All rights reserved.

Key Question Addressed in Chapter 1 What can supply and suppliers do to help the organization increase revenues? and/or decrease costs? ©McGraw-Hill Education. All rights reserved.

Purchasing, Procurement and Supply Management* “The integration of related functions to provide effective and efficient materials and services to the organization.” Includes: Operational and strategic responsibilities The standard steps in the acquisition process In some organizations: receiving, inspection, warehousing, inventory control, materials handling, packaging, scheduling, in/outbound transportation, and disposal *Terms are used interchangeably in this text. ©McGraw-Hill Education. All rights reserved.

Logistics Management “Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” --Council of Supply Chain Management Professionals (CSCMP) ©McGraw-Hill Education. All rights reserved.

Supply Chain Management “The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration.” --Institute for Supply Management (ISM) Glossary ©McGraw-Hill Education. All rights reserved.

Profit-Leverage Effect After 10% Spend Decrease Before Spend Decrease Revenue $100M Less Purchases -60M Less Other Costs -32M Profit 8M $100M -54M (60 x 0.9) -32M 14M (8 x 1.75) ©McGraw-Hill Education. All rights reserved.

Return-on-Assets Factors ©McGraw-Hill Education. All rights reserved.

Purchasing’s Operational and Strategic Contributions 1. Supply Contribution Operational Strategic Trouble Prevention Opportunity Maximization ©McGraw-Hill Education. All rights reserved.

Purchasing’s Operational and Strategic Contributions 2. Supply Contribution Direct Indirect Enhancing Performance of Others Bottom-Line Impact ©McGraw-Hill Education. All rights reserved.

Purchasing’s Operational and Strategic Contributions 3. Supply Contribution Negative Neutral Positive Operationally deficient Strategically deficient Directly deficient Indirectly deficient Operationally acceptable Strategically deficient Directly acceptable Indirectly deficient Operationally acceptable Strategically acceptable Directly acceptable Indirectly acceptable ©McGraw-Hill Education. All rights reserved.