The Purchasing Process IDIS 424 Spring 2004 Chapter 2 The Purchasing Process IDIS 424 Spring 2004

The Purchasing Cycle 1. Identify or Anticipate Material & Service Needs 2. Evaluate Suppliers 5. Continuously Measure and Manage Supplier Performance 3. Select Suppliers 4. Release and Receive Purchase Requirements

Identify or Anticipate Material and Service Needs Purchase requisitions Forecasts and customer orders Reorder point systems Stock checks Cross-functional new product development teams

Evaluate Suppliers Develop list of potential suppliers Look at past performance Determine important performance criteria Visit supplier facilities as required

Select Suppliers Evaluate past performance or site visit data Analyze request for quotations or proposals. Negotiate with suppliers as required Make selection decision and issue purchase order or finalize contract.

Release and Receive Purchase Requirements Transmit purchase requirements electronically, by fax or through the mail. Shorten order cycle time through electronic data interchange and bar-code technology.

Continuously Measure and Manage Supplier Performance Do not assume that purchasing cycle ends with receipt of material or service Identify improvement opportunities or supplier nonperformance

How Purchasing Communicates with Suppliers Traditional Point-To-Point

Traditional Purchasing Communication Model Engineering Engineering Quality Control Quality Control Purchasing Sales Production Planning Production Planning Transportation Transportation

Point-To-Point Purchasing Communication Model Engineering Engineering Quality Control Quality Control Purchasing Sales Production Planning Production Planning Transportation Transportation

Purchasing Documents Purchase Requisition Request for Quotation Purchase Order Blanket Purchase Order Purchase Release

Purchasing Documents Raw Materials Components Semi-finished Products MRO (Maintenance, repair, and operating items) Services Capital Equipment