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
Position in enterprise structure
Centralised – Authority for function in one person or team
Advantages
• Standardisation
• Increased buying power – bulk purchases
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
Position in enterprise structure
Centralised – Authority for function in one person or team
Advantages
• Standardisation
• Increased buying power – bulk purchases
