Summary MNP2601

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




Unit 2 – Task of P&S Management

, Planning

Discuss levels of purchasing and supply planning

Strategic -Organisational planning at highest level – Top Management mission and long term
objectives

Tactical – Implementation of strategic plans - Executed at middle management

Operational – Material requirements planning, P&S system planning – done at lowest level

Strategic Tactical Operational
Ensure availability of purchased Enter long term contracts with Maintain sound relations with
requirements at competitive reliable suppliers suppliers – ethics, contract,
price timely ordering
Develop suppliers Put together a project team Study situation in supplier
responsible for developing market and provide technical
suppliers support
Keep inventory investment low Study alternative inventory Conduct inventory analysis,
control systems or flow of reduce a cat and improve
materials understanding with suppliers


P&S Strategy (L,C,I,H,A)

 Link with organisation
 Close relation with suppliers
 Integrate with other functions
 HR must emphasize efficiency
 Atmosphere of department

Phases of design strategy

I – Enterprise objectives as basis

II – Analyse P&S environment

III – Analyse P&S opportunities and risks

IV – Set P&S objectives

V – Develop P&S strategy

VI – Evaluation




Organisation