Summary Purchasing Management
Chapter 1
Primary activities: Those activities that are required to offer the company’s value proposition to its
customers. They consist of:
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Services
Support activities: Those value activities that are required to support the company’s primary activities.
These include:
Procurement
Technology development
Human resource management
Facilities management
Direct purchasing: Purchasing of all materials and products that are used for manufacturing
companies’ end products.
Indirect purchasing: Purchasing of all materials, components, and services that are used to support
the company’s infrastructure and back-office activities.
The purchasing function covers specifically activities aimed at:
Determining the purchasing specifications (in terms of required quality and quantities) of the
goods and services that need to be bought.
Selecting the best possible supplier and developing procedures and routines to be able to do
this.
Preparing and conducting negotiations with the supplier in order to establish an agreement
and to write up the legal contract.
Placing the order with the selected supplier or to develop efficient purchase order and
handling routines.
Monitoring and control of the order to secure supply (expediting).
Follow-up and evaluation (settling claims, keeping product and supplier files up-to-date,
supplier rating and supplier ranking).
Sourcing: Finding, selecting, contracting and managing the best possible source of supply on a
worldwide basis.
The DuPont analysis shows that purchasing contributes to improving the company’s RONA (Return On
Net Assets) in three ways:
1. Reduction of all direct materials costs.
2. Reduction of the net working capital employed by the company.
3. Improving the company’s revenue generating potential.
Purchasing and supply strategies of industrial companies have undergone major changes. Several
examples of these changes are presented below:
Global sourcing: Proactively integrating and coordinating common items and materials,
processes, designs, technologies and suppliers across worldwide purchasing, engineering and
operating locations.
Leveraged purchasing and supply strategies.
Chapter 1
Primary activities: Those activities that are required to offer the company’s value proposition to its
customers. They consist of:
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Services
Support activities: Those value activities that are required to support the company’s primary activities.
These include:
Procurement
Technology development
Human resource management
Facilities management
Direct purchasing: Purchasing of all materials and products that are used for manufacturing
companies’ end products.
Indirect purchasing: Purchasing of all materials, components, and services that are used to support
the company’s infrastructure and back-office activities.
The purchasing function covers specifically activities aimed at:
Determining the purchasing specifications (in terms of required quality and quantities) of the
goods and services that need to be bought.
Selecting the best possible supplier and developing procedures and routines to be able to do
this.
Preparing and conducting negotiations with the supplier in order to establish an agreement
and to write up the legal contract.
Placing the order with the selected supplier or to develop efficient purchase order and
handling routines.
Monitoring and control of the order to secure supply (expediting).
Follow-up and evaluation (settling claims, keeping product and supplier files up-to-date,
supplier rating and supplier ranking).
Sourcing: Finding, selecting, contracting and managing the best possible source of supply on a
worldwide basis.
The DuPont analysis shows that purchasing contributes to improving the company’s RONA (Return On
Net Assets) in three ways:
1. Reduction of all direct materials costs.
2. Reduction of the net working capital employed by the company.
3. Improving the company’s revenue generating potential.
Purchasing and supply strategies of industrial companies have undergone major changes. Several
examples of these changes are presented below:
Global sourcing: Proactively integrating and coordinating common items and materials,
processes, designs, technologies and suppliers across worldwide purchasing, engineering and
operating locations.
Leveraged purchasing and supply strategies.
