Chapter 1 - Purchasing and supply chain management. This chapter’s objectives are to: Understand the purchasing function’s contribution to profitability, identify the relationship between the purchasing function and other functional areas, explore the basic historical development of the purchasing function,...
PurchasingandSupplyChainManagement 3rdedition Chapter1: Purchasingandsupplychainmanagement PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013, NewEraofOpennessandAccountability The3powerfulforces • Economics • • • European Union’s (EU) financial crises Technology • Internet, ERP, etc • Technologydisplacinglabor Zeitgeist Accountabilityoffinancialinstitutions Shiftingfocusfromlabortosupplychain PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. ChangesinPurchasingFunctions Environment Present • • • PAST • • • • Technology driven manufacturers New technologies More profit contribution by supply management But operated just like the Old Models Laborintensive manufacturers Large standardized batches Neglect materials and parts management Need to understand the relationship between the purchasingfunctionandotherfunctionalareas! PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. PurchasingDollarResponsibility Thecostofacquiring,storing,andmovingmaterialsis anincreasinglylargeportionofthecostofgoodssold. Thedollarresponsibilityofsupplymanagementisvery largeinbothrelativeandabsoluteterms Materialsrelated costs Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved. Integrated Purchasing and Supply Management (ISM) Fundamentals of Purchasing and Supply Management Special Purchasing Applications Price/Cost Analysis Purchasing Administration ISM Materials Management PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplymanagementAsakeyStrategic Function Contributestothebottomline Increasesefficiencyandproductivity Improvescompetitivepositionandcustomer satisfaction • Impacts the organization’s image and social policy Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved. Example • An order quantity decision… • 3 Different objectives • Purchasing manager: • • PIC manager: • • “Minimize annual ordering cost.” “Minimize workinprocess inventory.” Traffic manager: • Minimizetransportationcost. PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. OrganizingthePurchasingFunction TheTwoMainDecisions: Whereshouldthepurchasingfunctionsbelocatedinthe organization? Whatlevelofauthorityshouldthepurchasingfunctionhave? PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Purchasing:CentralizeorDecentralize? PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. FutureofCentralizedPurchasing Majorityofsignificantdollarưvaluedpurchaseswillbe centralized • Computerbased management information systems • Stronger emphasis on becoming lean • Stable price through Longterm agreements Centralized procurement as a competitive weapon • E.g., Honda of America 10 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Previously The2MainDecisions: Whereshouldthepurchasingfunctionsbelocatedinthe organization? Whatlevelofauthorityshouldthepurchasingfunctionhave? 11 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. ExampleofSMOrganizations 1) BasicSupplyManagementOrganization 12 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. CareersinPurchasing andSupplyManagement This is the best time for the next generation of managers to pursue a career in purchasing supply • • Supply professionals must possess a comprehensive skill set The average salary for a supply management professional is $92,165. 13 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved. Requirements for ISM’s Professional Credentials 14 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved. Questions? 15 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved. ... Basic Supply Management Organization 12 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2 013 , W. C. Benton Jr., All rights reserved. Careers in Purchasing and Supply Management. .. What level of authority should the purchasing function have? 11 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2 013 , W. C. Benton Jr., All rights reserved. Example of SM Organizations 1) Basic Supply Management Organization... Materialsrelated costs Purchasing and Supply Chain Management, 3rd edition, Copyright © 2 013 , W. C. Benton Jr., All rights reserved. Integrated Purchasing and Supply Management (ISM) Fundamentals of Purchasing and