Week 1 - Introduction Flashcards
What is purchasing? (Weele, 2009)
Is the management of the companies external resources in such a way that the supply of all goods, services, capabilities and knowledge which are most necessary for running, maintaining and managing the company’s primary support activities is secured at the most favourable conditions
What is procurement?
Procurement explores supply market opportunities and to implement resourcing strategies that deliver the best possible supply outcomes to the organisation, its stakeholders and customers
What is supply chain management? (Christopher, 2005)
Is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to supply chain as a whole
3 components of professional procurement
• Supplier relationship management
• Contract management
• Category management
Roles of a buyer (8)
• Category management
• Supplier relationship management
• Contract management
• Stakeholder management
• Risk management
• Negotiation
• Project management
• Corporate social responsibility
How has purchasing evolved since then 90s?
Many more factors/components in purchasing from being just about contract management to now being strategic sourcing, supply chain management and strategic world class
What are the 3 phases of traditional purchasing?
• Identification phase
• Ordering phase
• Post-ordering phrase
What happens in the identification phase? (2)
• A requisition is issued by the stores, stock control or a potential user
• A bill of materials issued by the drawing office, production control or equivalent department
What happens in the ordering phase of traditional purchasing? (5)
• Enquiries or requests for quotation (RFQ)
• Quotations from suppliers
• Possible further negotiations
• Purchasing order placed
• Order acknowledgement by the supplier
What happens in the post-ordering phase? (5)
• Order expedition
• Advice notice check
• Goods received check
• Invoicing
• Order files archiving
What are the inefficiencies in traditional purchasing? (4)
• A sequence of non-value addicting clerical activities
• Excessive documentation
• Excessive time in processing orders both internally and externally
• Excessive cost of purely transactional activities
How can inefficiencies in traditional purchasing be reduced?
By transforming excessive documentation into value-added processes by reducing, eliminating or combing steps whenever possible
What 3 function influences changes in purchasing?
• Changes in management attitudes
• Changes in the nature of markets
• Changes in the nature of customers
How can changes in management attitudes influence purchasing? (3)
• Recognition that purchasing is essential and strategic
• Identification of the high cost of procurement
• Increasing concerns about the risks in supply chain management
How can changes in the nature of markets influence purchasing? (4)
• Fiercer competition
• Global operations
• Power
• Concentration of ownership
How can changes in the nature of customers influence purchasing? (3)
• Growing emphasis on customer satisfaction
• More knowledgable and demanding customers
• More diverse customers
Why is purchasing important? (3)
• A firm’s operation depends on the external materials and services acquired through purchasing
• Purchasing forms an essential link between organisation and gives the trigger for moving materials through supply chains
• Purchasing affects broader organisational performance
What are the strategic roles of purchasing? (7)
• Due diligence
• Risk management of the supply chain
• Relationship management
• Continuous improvement of supplier performance
• Supplier’s investment in right first time
• Supplier’s investment in inventory
• Supplier’s investment in procurement expertise
Examples of purchasing objectives (6)
• Support organisational goals and objectives
• Develop integrated purchasing strategies that support organisational strategies
• Support operational requirements
• Using purchasing resources efficiently and effectively
• Supply base management
• Develop strong relationships with other functions
What components of an organisation enables good purchasing (4)
• Human Resources
• Organisational design
• Information Technology
• Measures of performance
Which purchasing skills are needed in HR to enable good purchasing in organisations? (5)
• Supplier relationship management
• Total cost analysis
• Purchasing strategies
• Supplier analysis
• Competitive market analysis
Outline the activities in the purchasing process (6)
• Define specification - Recognise user need for materials
• Select supplier
• Contract agreement - approve of terms
• Ordering
• Expediting - receive materials
• Evaluation - measure and manage supplier performance
What are the elements and document in defining the specification? (purchasing process)
• Elements: Functional specification, technical changes, bringing supplier-knowledge to engineering
• Documents: Functional specification, norm/spec control
What are the elements and document in selecting supplier in the purchasing process?
• Elements: Pre-qualification of suppliers, Request for quotation (RFQ)
• Documents: Supplier selection proposal
