The Challenge of

Purchasing

and Supply Management

Instructor: Mr. Rizwan tanveer malik

Purchasing & Supply Chain Management

A supply chain consists of three types of entities:

• Customers

• A producer

• The producer's suppliers.

Supply chain management oversees and optimizes the processes of acquiring inputs from suppliers (purchasing), converting those inputs into a finished product (production), and delivering those products or outputs - to customers (fulfillment).

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 subsystem.

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.

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

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.”

Simplified One-Stage Decision Tree

Purchasing’s Operational and Strategic Contributions

Supply Contribution

Operational

Trouble Prevention

Strategic

Opportunity Maximization

Cont.

Supply Contribution

Direct

Bottom-Line Impact

Indirect

Enhancing Performance of others

Purchasing’s Operational and Strategic Contributions

Supply Contribution

Negative

Operationally deficient Strategically deficient

Directly deficient Indirectly deficient

Neutral

Operationally acceptable

Strategically deficient Directly acceptable Indirectly deficient

Positive

Operationally acceptable

Strategically acceptable Directly acceptable

Indirectly acceptable

Return on Assets Factors

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

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

Cont.

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

Professionalism in Purchasing

• New assignments

• Education

• College recruitment

• Training programs

• Salary levels

• Professional associations

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