Reading lecture 1 Flashcards
Purchasing
everything a company gets an invoice for
direct purchasing
all components bought that will be part of the final product
indirect purchasing
all components bought for support activities
ordering
placing an order with a supplier and accepting his sales terms and conditions
buying
comparing different bids from suppliers and accepting the most attractive one
purchasing
asking for different quotations
challenges the specifications of the customer
procurement
looks at the acquisition price and total cost of ownership
sourcing
choose the best possible supplier for our requirements on a global scale
supply chain management
the management of the different parties involved in order to be efficient
value chain management
generate and mobilize the expertise of our suppliers to help us deliver better products
how to achieve purchasing excellence
- strategic management processes
- enabling processes
they have to be performed in a balance
strategic management processes
- insourcing/outsourcing
- develop commodity strategies
- establish a world class supply base
- supplier relationships
- integrate suppliers in new product development processes
- integrate suppliers in order fulfillment processes
- supplier development and quality management
- manage costs across the SC
enabling processes
- establish globally integrated supply chain strategies
- develop organization and teaming strategies
- deploy globalization
- develop purchasing and supply chain measurements
- develop and implement enabling IT systems
- establish HR development and training
procurement maturity
- it broadly refers to achieving the organizations goals
objectives of PSM
- rationalization
- development
- structure
rationalization
- related to efficiency
- optimal price for the products and services that you require
development
- has to do with innovation
- how to work together with suppliers in order to innovate processes and final products
structure
balancing dependence with suppliers
purchasing strategy
the goals, objectives, and strategies of the PSM function
two key drivers of PSM
- purchasing importance
- complexity of supply market
Kraljic elaborated purchasing maturity development model
- organizations have to develop from left to right because it increases the maturity and cumulative savings and overall value contribution to the organization
- if you want to change the organization you need to go to the back stages of the maturity
drivers of PSM maturity
- competition in end user markets
- economic financial crises
- changes in supply market structure
- speed of technology developments
- corporate strategic intent-
- changes in management and organizations
importance of purchasing
- cost of materials
- value added profile
- profitability profile
complexity of the supply market
- monopoly/oligopoly
- pace of technological advance
- entry barriers
- logistics costs
shaping the supply strategy: the four stage approach
- classification
- market analysis
- strategic positioning
- action plans
classification
sorting items on different categories:
- strategic items
- bottleneck items
- leverage items
- noncritical items
strategic items
high profit impact, high supply risk
bottleneck items
low profit impact, high supply risk
leverage items
high profit impact, low supply risk
noncritical items
low profit impact, low supply risk
market analysis
- companies weight the bargaining power of suppliers with its own strength
- supplier capacity utilization indicates the risk of bottlenecks
strategic positioning
- high company strength, low supply market strength –> exploit
- medium company strength, medium supply strength –> balance
- low company strength, and high supply market strength –> diversify
action plans
see photo in notes
strengthening the organization
- effective relations
- systems support
- staff and skills requirement
effective relations
- purchasing function must reflect the corporate setup
- ## centralization increases the purchasing clout but it decreases flexibility
systems support
- purchasing departments need proper data on business plans and objective for prices, rescheduling supply quantities, and balancing raw materials inventory
- improve systems support allow to focus on long term analytic work and planning
staff and skills requirements
companies must upgrade the skills and experience it requires from key purchasing people
the 6 step purchasing process
- define specifications
- select supplier
- contract supplier
- order
- expedite and monitor
- follow up and evaluate
