Purchasing & Procurement Purchasing & Procurement Management Management Management Management

Purchasing Mgt.Purchasing Mgt.

It include supplier identification and selection, buying, negotiation and contracting, supply market research, supplier measurement and improvement, supplier measurement and improvement, and purchasing systems development.

Purchasing has been referred to as doing "the five rights": getting the right quality, in the right quantity, at the right time, for the right price, from the right source.

Purchasing Mgt.(Cont..)Purchasing Mgt.(Cont..)

Supply management is not just a new name for purchasing but a more inclusive concept

We feel supply management is a strategic approach to planning for and acquiring the organization's current and future needs through effectively managing the supply base, utilizing a process orientation in supply base, utilizing a process orientation in conjunction with cross-functional teams (CFTs) to achieve the organizational mission.

, the Institute for Supply Management defines supply management as the identification, acquisition, access, positioning, and management of resources and related capabilities an organization needs or potentially needs in the attainment of its strategic objectives

ImportanceImportance

Average 55% revenue is spent on purchasing.

Among the supplier Japanese companies like Toyota, Honda scored median with like Toyota, Honda scored median with 399 of 500. where American giants like General Motors was scored below median with 164 of 500

ImportanceImportance

Cost Reduction.

Maximize profit.

Effective time & material management.

Use of exact needed resources. Use of exact needed resources.

Ensure success of business mission.

Cost leadership in the market.

Source of competitive advantage.

Good Relationship with Supplier.

Four Enablers of Purchasing Four Enablers of Purchasing and Supplyand Supply

1.Capable Human Resources

(1) supplier relationship management, (2) total cost analysis, (3) purchasing strategies, (4) supplier analysis, and (5) strategies, (4) supplier analysis, and (5) competitive market analysis.

2.Proper Organizational Design

formal system of communication, division of labor, coordination, control, authority, and responsibility

3.Real-Time and Shared Information Technology Capabilities

4.Right Measures and Measurement Systems: Roadblocks :(1) too many metrics, (2) debate over the correct metrics, (3) constantly changing metrics, and (4) old data.

Overcoming these roadblocks requires(1) know what it wants to measure,(2)has a process in place to measure it, and has accessibility to the right data. (3) taking action on the measurement data. (4)Finally, as with any planning system, the targets are revised to reflect the realities of the marketplace, competition, and changing goals of the organization.

Purchasing ObjectivesPurchasing Objectives Objective 1: Supply Continuity

Objective 2: Manage the Purchasing Process Efficiently and Effectively Determining staffing levels

Developing and adhering to administrative budgets Providing professional training and growth opportunities for

employees Introducing procure to pay systems that lead to improved Introducing procure to pay systems that lead to improved

spending visibility, efficient invoicing and payment, and user satisfaction

Objective 3: Develop Supply Base Management

(1) selects suppliers that are competitive, (2) identifies new suppliers that have the potential for excellent performance and develops closer relationships with these suppliers, (3) improves existing suppliers, and (4) develops new suppliers that are not competitive.

Objective 4: Develop Aligned Goals with Internal Functional Stakeholders

Objective 5: Support Organizational Goals and ObjectivesFor example, let's assume an organization has an objective of reducing the amount of inventory across its objective of reducing the amount of inventory across its supply chain. Purchasing can work with suppliers to deliver smaller quantities more frequently, leading to inventory reductions.

Objective 6: Develop Integrated Purchasing Strategies That Support Organizational Strategies Monitoring supply markets and trends (e.g., material price increases, shortages, changes in suppliers) and interpreting the impact of these trends on company interpreting the impact of these trends on company strategies

Identifying the critical materials and services required to support company strategies in key performance areas, particularly during new-product development

Developing supply options and contingency plans that support company plans

Supporting the organization's need for a diverse and globally competitive supply base

Purchasing ResponsibilitiesPurchasing Responsibilities

Evaluate and Select Suppliers

Review Specifications

Act as the Primary Contact with SuppliersSuppliers

Determine the Method of Awarding Purchase Contracts

E-Procurement and the Procure to Pay Process

Improving the Purchasing Improving the Purchasing ProcessProcess

Online Requisitioning Systems from Users to Purchasing

Procurement Cards Issued to Users Electronic Purchasing Commerce through the Internet

Transmitting purchase orders to suppliers Transmitting purchase orders to suppliers Following up on the status of orders Submitting requests for quotes to suppliers Placing orders with suppliers Making electronic funds transfer payments Establishing electronic data interchange

capability

Longer-Term Purchase Agreements Online Ordering Systems to Suppliers Immediate visibility to back-ordered items Faster order input time, which contributes to

reduced order cycle times Reduced ordering errors Reduced ordering errors

Order tracking capabilities Order acknowledgment from the supplier,

often with shipping commitment dates Ability to batch multiple items from multiple

users on a single online order Faster order cycle time from input to delivery

Purchasing Process Redesign

Online Ordering through Electronic Catalogs

End End of Season of Season 11