1 BM_M0050/GSLM 54700 Purchasing and Supply Management.
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Transcript of 1 BM_M0050/GSLM 54700 Purchasing and Supply Management.
1
BM_M0050/GSLM 54700
Purchasing and Supply Management
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Outline
What to Teach and How to Teach House-keeping Issues Importance of Purchasing and Supply Management
observations from news observations from Industrial Statistics observations from Business Operations observations from Companies
An Overview of Purchasing factors, process, types, levels and issues
Evolution of Purchasing and SCM
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What and How to Teach?
introduce purchasing and supply management processes, modes, and interactions among
various players in a supply chain
illustrate with industrial cases and practices
stimulate students to think about subtleties and to ask questions instead of feeding facts
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House-keeping Issues
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House-Keeping Issues
Course Webpage
Course Outline
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Importance of Purchasing and Supply Management
Observations from News
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Meaty and Spicy Positions
Suppose that you ask a person working in
High-Tech: Which position in a company (1) is most likely to a pay a crucial role, to
some extent meaty and spicy (2) has most confidence from the boss, and (3) most commanding in interaction with
outside
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Meaty and Spicy Positions
according to 商業周刊 1369 期 p44-46 , 80% to 90% of persons working in High-Tech would say that the position is purchasing
a key person in a procurement committee detained for allegedly bribery of NT$100mill legal income (stock, salary, and bonus) in 15
years: NT$600 mill
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Importance of Purchasing and Supply Management
Observations from Industrial Statistics
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Simple Question
Total Cost of Material / Value of Shipments = ???
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Importance* of Purchasing and Supply Management
Manufacturing Sector of US
199019911992199319941995199619971998199920002001200220032004
A/B (%)Total Value of Shipments (B) (US$ mill)
Total Cost of Material (A) (US$ mill)
*許振邦( 2007)採購與供應管理
GDP of Taiwan (2012) US$ 467 billion
2,912,2282,878,1643,004,8003,127,6203,348,0193,594,3593,715,4283,834,7003,899,8094,031,8844,208,5823,967,6983,914,6234,015,0804,265,784
54.1%53.2%52.3%52.7%52.4%52.8%53.2%52.7%51.9%51.7%53.4%53.1%51.7%52.1%52.7%
1,574,6171,531,2211,571,7731,647,4921,752,7351,897,5701,975,3622,020,4762,024,0802,084,3162,245,8392,105,3372,023,3122,091,5852,247,844
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Importance* of Purchasing and Supply Management
Miscellaneous mfg339Furniture & related product mfg337Transportation equipment mfg336Electrical equipment, appliance, & component mfg335Computer & electronic mfg334Machinery mfg333Fabricated metal product mfg332Primary metal mfg331Non-iron metal product mfg 327Plastics & rubber product mfg326Chemical mfg325Petroleum & coal product mfg324Printing & related support activities323Paper mfg322Wood product mfg321Leather & allied product mfg316Apparel mfg315Textile product mills314Textile mills313Beverage & tobacco product mfg312Food mfg311
A/B (%)Total Value of Shipments
(B) (US$ mill)Total Cost of Material (A)
(US$ mill)Industrial SectorsNAICS
*許振邦( 2007)採購與供應管理
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Questions
heaviest in % of mat. cost industrial sector = material / sales = %
2nd heaviest in % of mat. cost industrial sector = material / sales = %
lightest in % of mat. cost industrial sector = material / sales = %
2nd lightest in % mat. cost industrial sector = material / sales = %
largest in sales industrial sector = value of shipments =
2nd largest in sales industrial sector = value of shipments =
smallest in sales industrial sector = value of shipments =
2nd smallest in sales industrial sector = value of shipments =
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Importance* of Purchasing and Supply Management
Miscellaneous mfg339Furniture & related product mfg337Transportation equipment mfg336Electrical equipment, appliance, & component mfg335Computer & electronic mfg334Machinery mfg333Fabricated metal product mfg332Primary metal mfg331Non-iron metal product mfg 327Plastics & rubber product mfg326Chemical mfg325Petroleum & coal product mfg324Printing & related support activities323Paper mfg322Wood product mfg321Leather & allied product mfg316Apparel mfg315Textile product mills314Textile mills313Beverage & tobacco product mfg312Food mfg311
A/B (%)Total Value of Shipments
(B) (US$ mill)Total Cost of Material (A)
(US$ mill)Industrial SectorsNAICS
*許振邦( 2007)採購與供應管理
91.0%312,884253,339
61.3%666,502408,310
36.2%112,27040,658
38.7% 93,19336,112
44.9%528,215237,304
52.3% 5,7563,013
43.8% 80,15335,091
41.1%361,937148,580
49.1% 33,49516,45155.6% 33,25418,48159.0% 40,25723,742
56.4%511,450288,359
50.7%269,203136,58045.2%259,875117,544
50.2%182,54791,629
60.6%178,995108,551
53.0%153,96980,087
49.7%104,24451,798
58.3%103,42060,264
42.4%101,86943,202
36.8%132,28748,73452.7%4,265,7842,247,844
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Comments
Petroleum & Coal Product Mfg sales: US$312.884 billion
mat. / sales = 91.0%
Beverage & tobacco product mfg sales: US$112.27 billion
mat. / sales = 36.2%
differences in modes of operations
procurement
price fluctuation common in real life, e.g., paper pulp, DRAM, TFT-LCD …
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Importance of Purchasing and Supply Management
Observations from Business Operations
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Importance of Purchasing and Supply Management
assumption: linear changes of sales and cost w.r.t. the production quantity
how to increase profit?
$10Profit$40 Others
$50 Material
Cost$100Sales
sales? price? cost?
10% increase in
sales
$11Profit$44 Others
$55 Material
Cost$110Sales
10% increase in profit
$20Profit$40 Others
$50 Material
Cost$110Sales
100% increase in profit
10% increase in price with
30% decrease in
demand$14Profit$28 Others
$35 Material
Cost$77Sales
40% increase in profit
10% increase in
price without change in demand
$12.5Profit$40 Others
$47.5 Material
Cost$100Sales
25% increase in profit
5% decrease in
material cost
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Questions
which is a good way to increase profit?
is it always possible to raise price?
is it always possible to reduce material cost?
in general how can cost be reduced continuously?
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Importance of Purchasing and Supply Management
Observations from Companies
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Which Company is Stronger?
Company A: 1891 stores, average revenue US$7.25 mill per store, total revenue ~ US$13.7 billion
Company B: 229 stores, each store earning about half as that of Company A, total revenue ~ US$ 0.83 billion
statistic taken around 1979 23 years later
Company A filed for Chapter 11 Company B became one of the most successful companies in the
world
Company A: K Mart; Company B: Wal-Mart main reason: Wal-Mart has one of the best skills in supply
management
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Another Strong Company
consecutively 15 years best seller among competitors in country
18% market share, largest in country sales ~ NT$ 46 billion prestigious national award of science and technology rigorous and rigid quality control procedures aired
nationwide 2008 Sept: news of unsafe products 2008 Dec: declared for bankruptcy reasons: excessive unhealthy ingredient turning into
poisonous
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Another Strong Company
Sanlu Group in Shijiazhuang selling milk powder melamine
66% nitrogen by mass industrial usage, e.g., fabrication of fire retarding material causing kidney damage by forming round, yellow crystal in kidney safety limits: EU 0.2 mg/kg of body; Canada, WHO 0.2 mg/kg of
body; US 0.063 mg/day
300,000 infants babies affected, at least 6 dead of problems caused by melamine in the milk powder
Consequences: more than the failure of a company ….
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An Overview of Purchasing
Factors, Process, Types, Levels and Issues
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Factors Affecting Operations and Modes of Purchasing Personnel
type of industry Coca Cola vs. Formosa Petrochemical Corporation
size of company Walmart vs. a corner store
position in a supply chain a supplier, a wholesaler, a distributor, a retailer
type of product capital equipment, spare parts, consumables, …
position in a company a VP vs. a clerk
…
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Types of Products
for self-consumption
capital equipment, e.g., machinery
spare parts, maintenance service, consumables
for production processes or customers
raw material
semi-finished products and components finished products, e.g., Carrefour, a retail channel, or Li & Fung, a traderservices, e.g., transportation and third-party purchasing
production support items
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Aspects to Consider in a Transaction
main aspects: supplier, time, price, quantity, quality
means to align incentives by various contract mechanisms
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A Typical Purchasing Process
needs identification from needs, requirement, forecast, planning, and new product development
requisition raised by an unit (a person) with iterative discussion between purchasing and the requesting unit
setting the specification request for quotation supplier identification and selection contract negotiation
issuing a purchase order (PO) upon agreement on negotiation following up the PO
receipt, including checking and following up invoice settlement payment record maintenance
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Strategic Level Issues of purchasing
from purchasing to procurement and eventually to supply management value analysis material, supplier, market analysis new product development continuous measurement and management of suppliers performance development of supplier relationship continuous improvement of the procurement process supporting organizational goals and objectives development of integrated purchasing strategies …
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
events and phenomena: consequences background and trend: driving forces
any idea about the timeline of the following events (some major, some minor): Collapse of Communism in Eastern Europe, Completion of Transc
ontinental Railway, Disintegration of USSR, Industrial Revolution, Iranian Revolution, Iran–Iraq War, Vietnam War, Oil and energy crises, Oil Embargo, $1.5 billion federal bailout of Chrysler, Open-Door of China, Trouble of US automobile industry, US Civil War, Watt steam engine, WWI , WW II
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
any idea about the timeline of the following events some major, some minor
Industrial Revolution (1750 – 1850)
Watt steam engine (1765)
US Civil War (1861 – 1865)
Completion of Transcontinental Railway (5/1869)
WWI (1914 – 1918)
WW II (1939 – 1945)
Vietnam War (1964 (?) – 1975) Oil and energy crises in 70’s
Embargo (10/1973 to 3/1974)
Iranian Revolution (1979)
Trouble of US automobile industry (late 70’s)
$1.5 billion federal bailout of Chrysler (1979)
Open-Door of China (1979)
Iran–Iraq War (9/1980 to 8/1988)
Collapse of Communism in Eastern Europe (1989)
Disintegration of USSR (1991)
First Iraq War (1991)
Second Iraq War (2003)
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
http://thegulfblog.com/tag/oil-price-graph/
Ind. R
ev.
Civil
War
completion of transcontinental railway
WWI WWII
Vietnam War
Oil Embargo
Iranian Revolution; Open door of China
Trouble of US Auto. Ind.
Iran-Iraq War
Collapse of Communism in Eastern Europe
disintegration of USSR, 1st
Iraq War
2nd Iraq War
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GATT GATT (General Agreement on Tariffs and Trade)(General Agreement on Tariffs and Trade) & & WTO WTO (World Trade Organization)(World Trade Organization)
rounds of negotiation of GATT
http://en.wikipedia.org/wiki/GATT
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
a result of the interaction with the economic environment and technology advancement
gradually from clerical (before 1949) to
mechanical (1950-1969) to
proactive (1970-1989) to
strategic supply management (1990 onwards)
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
19001850 19401947
mid-1960slate 1970slate 1970s
1999
Growth of Purchasing
Fundamentals, 1900 – 1939
The Early Years, 1850 –
1900
The War Years, 1940
– 1946
The Quiet Years, 1947 –
mid-1960s
mid-mid-1960s – 1960s –
late 1970slate 1970s
The Global Era, Late
1970s – 1999
beyond 2000, Integrated
Supply Chain Management
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
The Early Years, 1850 – 1900 definition of the purchasing process and the
realization of purchasing towards company profit
importance of purchasing came along with industrialization and improvement in transportation
heavy material cost in heavy industry
Supply Department in Pennsylvania Railroad (1866) first book on purchasing, The Handling of Railway
Supplies – Their Purchase and Disposition (1887)
Railroad mileage increase by groups of statesSource: Chauncey Depew (ed.), One Hundred Years of American Commerce 1795-1895 p 111
1850 1860 1870 1880 1890
New England 2,507 3,660 4,494 5,982 6,831
Middle States 3,202 6,705 10,964 15,872 21,536
Southern States 2,036 8,838 11,192 14,778 29,209
Western States and Territories 1,276 11,400 24,587 52,589 62,394
Pacific States and Territories 23 1,677 4,080 9,804
Totals 9,021 30,626 52,914 93,301 129,774
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
Growth of Purchasing Fundamentals, 1900 – 1939 slow growth of purchasing and gradual
recognition of purchasing as a field
diffusion of the importance of purchasing to non-railway fields
first non-railway purchasing book, The Book on Buying (1905)
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
The War Years, 1940 – 1946 growth in importance of purchasing to secure
materials during the war
growth of the discipline 9 colleges with courses related to purchasing in 1933,
and 49 colleges in 1945
members of the National Association of Purchasing Agents 3,400 in 1934 to 9,400 in 1945
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
The Quiet Years, 1947 – mid-1960s overshadowing of purchasing by marketing and
finance due to relatively dull competition and availability of materials
valuable developments in purchasing value analysis by GE
Purchasing Analysis Department by Ford Motor
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
Materials Management Comes of Age, mid-1960s – late Materials Management Comes of Age, mid-1960s – late 1970s1970s pressure in material availability unstable economic environment, pressure in material availability unstable economic environment,
e.g., Vietnam War and Oil Embargo e.g., Vietnam War and Oil Embargo boom of material control concepts: materials planning and control, boom of material control concepts: materials planning and control,
inventory planning and control, materials and procurement inventory planning and control, materials and procurement research, purchase, incoming traffic, receiving, incoming quality research, purchase, incoming traffic, receiving, incoming quality control, stores, materials movement, scrap and surplus disposal, …control, stores, materials movement, scrap and surplus disposal, …
purchasingpurchasing primarily price-base by squeezing suppliersprimarily price-base by squeezing suppliers local and regional sourcing local and regional sourcing suggestion of more active role for purchasingsuggestion of more active role for purchasing
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
The Global Era, Late 1970s – 1999 intensive global competition
realization of the importance of the management of the process to transform raw materials to end products of customers
Supply Chain Management
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Evolution of Evolution of Purchasing and SCM in USAPurchasing and SCM in USA
Integrated Supply Chain Management, beyond 2000 emphasis on integration and collaboration
enterprisewide system and integrated internet linkage
ideas such as supplier development, supplier design involvement, adoption of full-service suppliers, total cost concepts on supplier selection, long-term supplier relationship, …
co-ordination and collaboration of purchasing with customer requirements, operations, logistics, finance, human resoruces, accounting, marketing, information systems
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Evolution of Evolution of Purchasing and SCMPurchasing and SCM
what would happen in the future? oil reserve, new sources of energy, food supply,
water supply ….