Purchasing & Procurement

Management

Purchasing Mgt.
It include supplier identification and
selection, buying, negotiation and
contracting, supply market research,
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..)
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
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

Importance
Average 55% revenue is spent on
purchasing.

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

Importance
Cost Reduction.

Maximize profit.

Effective time & material management.

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

and Supply
1.Capable Human Resources
(1) supplier relationship management, (2)
total cost analysis, (3) purchasing
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 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
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
Objectives
For example, let's assume an organization has an
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
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 Responsibilities
Evaluate and Select Suppliers

Review Specifications

Act as the Primary Contact with
Suppliers

Determine the Method of Awarding
Purchase Contracts

E-Procurement and the Procure to
Pay Process

Improving the Purchasing

Process

Online Requisitioning Systems from Users

to Purchasing
Procurement Cards Issued to Users
Electronic Purchasing Commerce through
the Internet
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
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 of Season 1