2. Purchasing and Supply Management.
Chapter 1
Purchasing and Supply Management.
This is a test

3. Corporate Supply Challenges
Need to control unit costs
Need to reduce the total cost of acquisition
The increasing influence of suppliers on the purchaser’s ability to respond to end-customers needs
Increased reliance on fewer suppliers
Trend towards reliance on suppliers for design and build responsibilities for complete subassemblies and subsystems

4. The Evolution of the Supply Function
The Handling of Railway Supplies – Their Purchase and Disposition
Published in 1887
Attention in first half of 1900s to reliable access to supply of raw materials, supplies and services
Two vexing problems in the decade of the 1970s put senior management attention on the supply function:
international shortage of basic raw materials
price inflation

5. The Evolution of the Supply Function
By 1990s firms faced challenges of global “supply chains” and an increased reliance on suppliers
Outsourcing has led to increased reliance on suppliers for key components and services
Technological developments in the early 21st century provides expectations for supply chain integration, lower transaction costs and faster response times.
The Internet and B2B e-commerce

6. The Evolution of the Supply Function
Clerical and tactical
Focus on policies and procedures
Key challenge: availability of supply
and cost management
Strategic orientation
Global supply chains
Executive level leadership
Key challenge: Technology and
the Internet
early
1900s
early
21st century

7. Evolution of the Supply Chain
Pre 1939
2000-Future
Clerical
World War II
Managerial emphasis
Purchasing strategy
Integration into corporate strategy
Integration with supply networks and information technology

8. The Buyer/Planner Concept
Combines planning and purchasing functions into one position
Planners: Determine what materials are needed and when
Buyers: Handle sourcing and buying
Charged with responsibility for a specific line of inventory
Duties may include: establishing schedules, issues and analyzes quotations, places orders, monitors supplier performance, and keeps abreast of market trends, supplier capacities and technologies.

9. Major Logistics Activities
customer service
demand forecasting/planning
inventory management
logistics communications
material handling
order processing
packaging
parts and service support
plant and warehouse site selection
purchasing
return goods handling
reverse logistics
traffic and transportation
warehouse storage

10. 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.”

11. Simplified One-Stage Decision Tree

12. Purchasing’s Operational and Strategic Contributions
1. Supply Contribution
Operational
Strategic
Trouble Prevention
Opportunity Maximization

13. Purchasing’s Operational and Strategic Contributions
2. Supply Contribution
Direct
Indirect
Enhancing Performance
of others
Bottom-Line Impact

14. 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

15. Return on Assets Factors

16. The Opportunities for Contribution of the Purchasing/Supply Function
Profit-leverage effect
Return-on-assets effect
Information source
Effect on efficiency
Effect on competitive position and customer satisfaction
Effect on image
Training ground
Management strategy and social policy

17. Characteristics of an Integrated Strategic Procurement and Sourcing Function
Executive Leadership
Executive committee support for integration across company and strategic business unit corporate plans
Strategic Positioning
External/internal customer focus
Matrix management
High-level positioning - second, third or fourth levels
Functional Leadership
Company-wide customer-focused leadership
Establish integrated visions workers at results and processes
Drives supply base/supplier management strategies company-wide
Integration
Cross-functional, cross-location teaming
Part of the technology, manufacturing and SBU planning process

18. Characteristics of an Integrated Strategic Procurement and Sourcing Function
Supply Base Strategy
Quality driven
Design standardization
Concurrent engineering
Supply base optimization
Commercial strategy emerging
Supplier Management
Focused on supplier development
Joint performance improvement efforts
Value focused
Total cost improvement
Supplier benchmarking
Measurement
Customer orientation
Total value/cost focused
Benchmarking with best in class
Systems
Global databases
Historical performance data
Strategic
EDI, Internet, EFT, CAD, CAM

19. Professionalism in Purchasing
New assignments
Education
College recruitment
Training programs
Salary levels
Professional associations

20. Challenges Facing Purchasing
B2B e-commerce
Supply chain management
Measurement
Purchase of non-traditional goods and services
Contribution to corporate strategy
Recognition by senior management