MNP2601 Summary For Exam.

Unit 1 – Purchasing Function in perspective Distinguish between purchasing and supply management concepts Purchasing Management (P,N,E,F)  Process of buying, locating & selecting a supplier  Negotiating price, quality, quantity  Ensuring delivery  Functional approach Supply Management (M,S,R)  Management of resources the organisation needs to attain objectives  Strategic focus and systems approach  Regards suppliers as extensions of the firm Discuss objectives of purchasing management (S,M,M,M,D)  Supply organisations with a flow of materials to meet needs  Maintain effective supplier relationships  Maintain and develop quality  Maintain internal relationships  Develop staff, policies and procedures Discuss objectives of supply management (C,I,M,E,C)  Contribute to overall business strategies  Integrate supply objectives with corporate objectives  Manage supply base  Ensure timely, cost effective information system in place  Contribute to multi functional teams and provide outstanding customer service Discuss importance of P & S function (G,I,I,S,I,F,I)  Globalisation  International orientation  Information technology development  Short product life span  Increased supply risks  Focus on quality and environment  Increased costs Discuss influence purchasing has on profit and return of investment Profit leverage Effect of saving on bottom line – small % of saving in purchase price contributes to large increase in profit Return on investment Profit margin – more efficient purchases lower purchasing cost – gross income and total income increase – higher profit margin Asset turnover – more efficient purchases decrease extent of assets employed (like inventory) – increase turnover Discuss elements of purchasing procedure (O,S,S,S,N,O,F,R,H,A,C,M) Origin of need – From user (qty, time) Specification  Purchase requisitions for routine purchases  Travelling requisitions for standard purchases  Material lists for production material requirements  Kanbans for information cards for JIT Source identification  Price lists, Catalogues, quotations  EDI, e-procurement, electronic catalogues Selecting suppliers  Standard products – recommended supplier on requisition  Specialised – recommended by user (quotations)  High value – comprehensive selection (Material lists) Negotiating and bidding  Formal tenders or negotiation with potential suppliers Ordering and contracting  Issue official order (legally binding) – ensure completion  Several copies given to other departments involved in process Follow up and expedite  Follow up done by mail, letter or phone  Constant monitoring of supplier progress Receiving, inspecting and distributing  Stores should receive and inspect  Complete receiving note and note shortages/damages  Distribute to end customer Handling faulty consignments and rejections  Responsibility of purchasing to negotiate faults with supplier – maintain good relationship Analyzing invoice  Compare with order and delivery note Closing order  Payment done by finance  Must have all documents – order, invoice, receiving note, quotations Measuring supplier performance  Performance evaluation and feedback to supplier on performance