Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Purchasing.

Slides:



Advertisements
Similar presentations
Make vs Buy Decision D0394 Perancangan Sistem Manufaktur Pertemuan IX - X.
Advertisements

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Introduction.
Supply Chain Management
5.6 Production Planning The last one!!. The cost of STOCKS Stocks are materials and goods required to allow the production and supply of products to the.
Besterfield: Quality Control, 8 th ed..© 2009 Pearson Education, Upper Saddle River, NJ All rights reserved Supplier Partnership By Engr Mian Khurram.
8-1 © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
8–18–1 Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Strategy, Balanced Scorecard, and Strategic Profitability Analysis.
OH 2-1 Agenda Sign in for all classes to earn credit for class Sign up for Presentations A test final test question will come from each of the group presentations.
Purchasing Overview Purchasing Purchasing Activity
Materials Management BUS 3 – 141 Mr. Jess Marino Spring, 2011.
The Purchasing Process
Strategy, Balanced Scorecard, and Strategic Profitability Analysis
1 Chapter 12 Purchasing Tools and Techniques IDIS 424 Spring 2004.
Purchasing & SCM.
Chapter 41 Procurement and Supply Management. Chapter 4Management of Business Logistics, 7 th Ed.2 Learning Objectives Understand the role and nature.
Supplier Selection & Evaluation
5-1 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1-1.
The Master Budget and Flexible Budgeting
Purchasing.
The Purchasing Function
Supply Management Chapter 7.
Chapter 15, Section 1 Purchasing Items Needed by a Business
Accounting for Purchases and Cash Payments
Kimball Bullington, Ph.D. - MGMT Materials Management Systems Purchasing Chapter 7.
Chapter 6 Sourcing. Objectives After reading the chapter and reviewing the materials presented the students will be able to: Explain the difference between.
Purchasing. Objective The basic objective of the purchasing function is to ensure continuity of supply of raw materials, sub-contracted items and spare.
Introduction to Materials Management
Purchasing & Stock Handling
Needles Powers Principles of Financial Accounting 12e Accounting for Merchandising Operations 6 C H A P T E R ©human/iStockphoto.
25 Pricing Decisions, Including Target Costing and Transfer Pricing
CHAPTER 4: Procurement.
CHAPTER 2 THE ORGANIZATIONAL BUYING PROCESS. Important Topics of the Chapter Changing Role of Business Buyer. The Business Buying Process. Business Buying.
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Business Functions, Processes, and Data Requirements
Chapter 2 The Character of Business Marketing.
Differential Analysis and Product Pricing Chapter 12.
Department of Marketing & Decision Sciences Part 5 – Distribution Wholesaling and Physical Distribution.
Network of Suppliers warehouses, operations, warehouses, distribution centers, retail outlets, and customers. Supply Chain.
Costing and accounting system Session 1-2. Types of inventory Direct material ▫Which represent direct material in inventory awaiting manufacture. Work.
1 Bab 9 Pricing. 2 Hoetomo Lembito General Economic Considerations »Conditions Of Competition »Variable-Margin Pricing »Product Differentiation »Six Categories.
O BJECTIVES To Explain purchasing and the aim of purchasing function. To find out purchasing stages. To find out purchasing cycle. To identify the responsibilities.
8–18–1 Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Introduction to Materials Management Chapter 4 – Material Requirements Planning.
Office of Procurement Services.  Vendor Application Website: 
Chapter 24 Stock Handling and Inventory Control Section 24.1 The Stock Handling Process Section 24.2 Inventory Control Section 24.1 The Stock Handling.
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 8 Customer Value Analysis.
CHAPTER Section 14.1 Recordkeeping Section 14.2 Accounting Systems Recordkeeping & Accounting.
Inventory Management Definition: STOCK:
Entrepreneurship & the Economy
©2013 Cengage Learning. All Rights Reserved. Business Management, 13e Pricing and Promotion The Business Buying Decision Pricing and.
Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Production.
Chapters 5 and 6 Unit V Flashcards. Expenses incurred that are not related to marketing the company’s goods and services. Administrative expenses #1 SHOWNEXT.
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 12 Merchandise Purchases and Accounts Payable.
Principles of Business & Finance Objective 4.02
4.00 Understand business operations management.
Chapter 22 Procurement Cycle and Documents
Small Business Management, 18e
Unit V Flashcards Chapters 5 and 6.
Supply Chain Management Principles
4.00 Understand business operations management.
Industrial Purchasing System A method used by businesses to buy products and/or services. A purchasing system manages the entire acquisition process, from.
Chapter 14 Sourcing Decisions in a Supply Chain
Accounts Receivable and Inventory Management
What’s Happening with Supply.
Principles of Business & Finance Objective 4.02
Chapter 14 Sourcing Decisions in a Supply Chain
4.00 Understand business operations management.
Purchasing Overview Purchasing Purchasing Activity
Presentation transcript:

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Purchasing Chapter 7

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Purchasing “the process of buying” Requires input from: –Marketing –Engineering –Manufacturing –Manufacturing Planning and Control what materials to order when to order them

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Objectives of Purchasing Obtain goods and services: –of the required quantity and quality –at the lowest possible cost –at the best possible service and delivery –while maintaining and developing suppliers

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Purchasing Functions Determining purchasing specifications –right quality –right quantity –right time (delivery) –right place (delivery) Selecting supplier –right source

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Purchasing Functions (continued) Negotiating terms and conditions –right price Issuing and administering purchase orders

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Purchasing Cycle 1. Receive and analyse purchase requisitions 2. Select suppliers, issue quotations 3. Determine the right price 4. Issue purchase orders 5. Followup to assure correct delivery 6. Receive and accept the goods 7. Approve invoice for payment

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Receiving and Analyzing Requisitions From planners (MRP system) and all other users Purchasing will: –Identify originator, account number, approvals –Check material specifications –Verify quantity and unit of measure –Verify delivery date and place –Ensure all supplemental information

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Selecting Suppliers Often from a list of approved suppliers For small items: –internet –catalogues –trade journals For large items, issue a request for quotation

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Requesting Quotations Written inquiries sent to enough suppliers –to ensure competitive and reliable quotes are received Quotes are analyzed –price –compliance to specification –technical suitability –often with the involvement of the originator

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Determining the Right Price Usually the lowest May involve negotiations Responsibility of the Purchasing Department

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Issuing a Purchase Order Legal document Forms a contract with the supplier upon acceptance Copies to: Supplier Originator Accounting Receiving Purchasing file

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Follow-up and Delivery Ensure on-time delivery Negotiate any changes Take corrective action: –expedite as required –find alternative sources of supply –work with suppliers to resolve problems –reschedule production?

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Receiving and Accepting Goods Receiving inspects goods for correct quantity and any damage Accepts goods and generates a receiving report –send to quality for further inspection –hold goods damaged in transit Copies to Accounting, Purchasing

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Approving Invoice for Payment Agreement with: Original Purchase Order Receiving Report Invoice –price including discounts –quantity Send approval to Accounts Payable

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. (SKIP)Establishing Specifications Purchasing can help to make the “best buy” Quantity requirements Price Requirements Functional Requirements

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Skip-Quantity Requirements Small volume –find a standard item Large items –design for economies of scale –reduce cost –satisfy functional needs

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Skip-Price Requirements Relates to the use of the item Relates to the selling price of the finished product

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Skip-Functional Specifications What the item is expected to do Set by the end user –performance expectations –aesthetic expectations Example: functional specifications for a car –run reliably? make you look cool? safety?

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Skip-Selecting Suppliers The right supplier: –can supply the quality needed –has the capacity to deliver the quantity need and on time (JIT deliveries?) –makes a profit, but at a good price –contributes to the improvement of your product

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Factors in Selecting Suppliers Technical ability Manufacturing capability Reliability After-sales service Location Other considerations Price

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Technical Ability Do they have the technical capability? Is there a program of product development and improvement? Can they assist in improving your product? Their products become part of your product

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Manufacturing Capability Can they consistently meet the specifications and quality desired? –quality control programs –competent personnel Do they have good manufacturing planning and control systems? –to supply information on delivery

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Reliability Reputable Stable Financially strong We’re in this together

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. After-Sales Service Service organization Supply of spare parts Technical support

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Supplier Location Location may effect delivery time Local inventories May be required for after-sales service –will your customers require service?

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Other Considerations Credit terms Willingness to hold inventory JIT Information technology Reciprocal business

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Price Not always the lowest May include other services

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Supplier Selection On-going relationship Mutual benefit Supplier can depend on future business Buyer can be: –assured supply of quality products –technical support –product improvements / problem solving

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Identifying Suppliers Internet Catalogues Salespeople Trade magazines Trade directories Salespeople of the buyer’s firm

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Supplier Selection Weighted-Point Plan FactorsThings that must be considered as part of what we will be buying WeightsThe relative importance of each of the factors Rating How well each supplier compares on each factor RankingThe weight times the rating

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Weighted-Point Plan 1.Select the factors 2.Assign a weight to each factor 3. Rate the suppliers for each factor 4. Rank each supplier multiply the weight by the rate for each factor

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Weighted-Point Plan Figure 7.1 Supplier rating

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Example Using the following factor ratings data, determine which supplier that should be chosen on the bases of maximum composite score, A, B, or C. Suppliers Factor Weight A B C Technical ability Manufacturing capability Reliability After-sales service 0, Location Price And if all factors have equal weight, which supplier should be chosen?

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. End

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Price Determination Direct influence on company’s profit 50% of cost of goods sold (CoGS) Package of: –function –quantity –service –price “you only get what you pay for”

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Basis for Pricing Fair price –competitive –gives seller a profit –allows buyer to make a profit Upper limit –established by buyers Lower limit –established by sellers

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Analyzing Costs Fixed Costs –costs incurred no matter the volume of sales equipment, insurance, overhead Variable Costs –costs which vary with the volume produced direct labor, direct materials

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Analyzing Costs Total cost = fixed cost + (var cost/unit)(volume) Unit cost = total cost volume = fixed cost + variable cost per unit volume

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Break Even Point The volume of sales where total revenue equals total costs A seller must have sufficient volume to make a profit Knowing the seller’s break even point is useful in negotiations –increased volume may lower price paid

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Break Even Point -example Fixed Cost = $5,000 Variable Cost = $6.50 / unit Selling Price = $15 per unit Average Cost = $5,000 ÷ $6.50 = $11.50 per unit To find the Break Even Point Let X = Number of Units $15X = $5,000 + $6.50X $8.50X = $5,000 X = units The volume must exceed units to make a profit

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Price Negotiation Buyer needs knowledge of seller’s costs Buyer must have sufficient clout Should benefit both supplier and buyer Savings must justify the time and effort required

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Negotiations - Type of Product Commodities –price is determined by the market –concern for future contracts Standard products –price set by catalogue listings –little room for negotiation Small value items –try to reduce ordering costs or increase volume Made-to-order items (negotiation possible) –quotations from a number of sources

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Contract Buying Long term contract with a supplier for small volume items –Authorize releases against the contract when goods are needed Supplier may be given a copy of the material requirements plan Requires close coordination Works best with Buyer / Planner concept

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Supplier Responsiveness and Reliability Material requirements often change Suppliers must be able to react to change Flexibility –in volume –in products needed Reliable –in delivery promises

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Contract Buying Assures supplier of a certain amount of business Suppliers are more responsive to buyer’s needs Assures buyer that capacity will be available when needed Buyer can delay actual ordering

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Close Relationship with Suppliers The need to understand each others capabilities and constraints Cooperation and team work Very frequent communications Between the buyer/planner and the supplier’s production planner

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Electronic Data Interchange (EDI) Electronic exchange of information between customers and suppliers –purchase orders –invoices –material requirements plans Reduces time involved Avoids costly paper work

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. Vendor Managed Inventory Supplier maintains an inventory of certain items at the customer’s plant Customer only pays for the inventory when it is actually used Usually for standard, small value items –fasteners –electrical components

Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ All Rights Reserved. The Internet Internet –open public access to posted information –valuable source of supplier and product information Intranet –internal to company personnel only Extranet –between participating companies