CHAPTER 11 Procurement

© 2008 Prentice Hall 11-2 Learning Objectives F To understand the relationship between supply management and logistics F To understand steps in selecting a supplier

© 2008 Prentice Hall 11-3 Learning Objectives F To recognize the potential of e-procurement F To learn about quality programs

© 2008 Prentice Hall 11-4 Supply Management F Key Terms –E-procurement –Global sourcing –Import quotas F Key Terms –ISO 9000 –Make or buy –Procurement card

© 2008 Prentice Hall 11-5 Supply Management F Key Terms –Purchase order –Purchasing ethics –Request for Proposal (RFP) F Key Terms –Request for Quotation (RFQ) –Six Sigma –Supplier development

© 2008 Prentice Hall 11-6 Supply Management F Supply management is “ the identification, acquisition, access, positioning, and management of resources the organization needs or potentially needs in the attainment of its strategic objectives.” Institute of Supply Management F Similar in meaning to procurement, purchasing

© 2008 Prentice Hall 11-7 Purchase for Use in Manufacture F Make or buy –Availability of trained labor –Physical capacity F Purchase orders are a commitment to buy –Indicate quantities and qualities desired –Indicate dates by which the materials must be delivered

© 2008 Prentice Hall 11-8 Figure 11-1: Use of Bar Codes Throughout a Manufacturing Process

© 2008 Prentice Hall 11-9 Figure 11-2: Flow of Information, Products, Cash, Orders, etc., within a Manufacturing Firm

© 2008 Prentice Hall Purchase for Use in Manufacturing F MRP Systems manage production inventory F Just-in-Time (JIT) and Kanban were initially developed to improve quality F JIT II ties together information systems and employees of suppliers and firms F Supplier Product Integration refers to the acquisition of components, rather than individual parts

© 2008 Prentice Hall Purchasing for Resale F Objective is to buy merchandise that can be marked up and resold to others at a profit F Quality of product and timing of arrival are important

© 2008 Prentice Hall Procuring Services F Request for Proposal (RFP) F Request for Quotation (RFQ) F Examples of procured services –Legal, accounting, computer and software consultants –Building maintenance –Printing –Landscape work –Janitorial services

© 2008 Prentice Hall Global Sourcing F Global sourcing applies to buying components and inputs anywhere in the world F Import quotas are absolute numeric limits on the items imported from specific countries within a specific time frame

© 2008 Prentice Hall E-Procurement F E-procurement is the business-to-business purchase of supplies and services via the Internet F Procurement cards

© 2008 Prentice Hall Figure 11-3: A Configuration of Internet Messaging to Provide for Secure Transmission

© 2008 Prentice Hall Quality Programs F Important to match quality levels of all buyers and sellers in the supply chain F ISO 9000 F ISO F Six Sigma

© 2008 Prentice Hall Supplier Selection and Management F Supplier management is charged with keeping existing suppliers happy F Selecting vendors depends on: –Delivery –Facilities and capacity, geographic location –Performance history –Price and quality –Technical capability –Warranties and claim policies

© 2008 Prentice Hall Supplier Development F Supplier development is any effort of a buying firm to increase performance of the supplier F Strategic goals to develop suppliers –Increase supplier financial strength –Improve management and technical capabilities –Improve ability to develop new products

© 2008 Prentice Hall Supplier Development F Performance goals for suppliers include: –Better quality products –Lower prices –Improved delivery performance –Increased overall responsiveness –Maintenance of quality controls in the supplier organization

© 2008 Prentice Hall Purchasing Ethics F Breaches of purchasing ethics include: –Accepting lavish gifts –Bribes –Kickbacks F Areas of ethical concern: –Handling confidential information –Purchasing for one’s private use –Interfering with a legitimate bidding process –Conflicts of interest