Lecture Purchasing and supply chain management (3rd/e): Chapter 2 - W. C. Benton

Chapter 2 - Purchasing decisions and business strategy. In chapter 2, a framework for linking purchasing decisions with the firm’s competitive strategy is presented. The framework offers a systematic approach for designing purchasing strategies consistent with a firm’s competitive strategy. Supply management can play a significant role in making a firm competitive.

Chapter2: PurchasingDecisions andBusinessStrategy PurchasingandSupplyChainManagement 3rdedition PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. PurchasingandSupplyChainManagement,3rdedition,W.C.Benton,Jr., Previously Inmostindustrialfirms, materialconstitutes6080percentofthetotalrevenuedollars Competitiveleveragecanbedevelopedthrough purchasedinputs Linkthecompetitivestrategywiththepurchasingpolicy PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Components of Purchasing Strategy • • Purchasing actions are determined by  • the firm’s competitive priorities • its resource capabilities • theenvironment Purchasingstrategymustconsider competitivepriorities organizationsstrengthsandweaknesses competitiveenvironment PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Example PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Purchasing/BuyingCriteria Mustreflectfirmscompetitivepriorities Example: Costpriority • • high priority to purchasing costs Flexibility priority • high priority to lead time in buying material Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            External Environment  • Environmental Factors • Inflation rate • Monetary policy • Fiscal policies • Technological development • Industrycapacity Marketgrowth Globalstability PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplyChainStrategy Reasonsfortheemergenceofsupplierpartnershipsasa competitive weapon: • Increased competition • Deregulation • Relaxed antitrust requirements • Increased use of electronic data interchange (EDI)  • Increasedjustưinưtime(JIT)manufacturing PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. SupplierPartnerships Companiesparticipateinavarietyofsupplier relationshipsandroles Asupplier • A customer • An end­user of products Supplier partnerships can be categorized using five  factors: (1) degree of risk/reward (2) type of relationship Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            The Integrated Buying Model • In buying decisions, • multiple goals must be satisfied  • within the constraints Cost Supplier Lead Time Quality PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. TheStrategicSourcingPlan Thepurchasingfunctionmustbeintegratedintothe firmsoverallstrategicplan Astrategicsourcingplanrequires: A complete understanding of corporate strategies and marketing  plans  • An extensive evaluation/study of current suppliers, how  performance is measured, and the expectation of suppliers  relative to the industry • Study of the degree of global purchasing opportunities Identification of total costs associated with current purchasing  department/ function, budgets, staffing, and so forth 10 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Questions? 11 PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. ... Link the competitive strategy with the purchasing policy PurchasingandSupplyChainManagement,3rdedition,Copyright 20 13,W.C.BentonJr.,Allrightsreserved. Componentsof PurchasingStrategy Purchasingactionsaredeterminedby... PurchasingandSupplyChainManagement,3rdedition,Copyright 20 13,W.C.BentonJr.,Allrightsreserved. Example PurchasingandSupplyChainManagement,3rdedition,Copyright 20 13,W.C.BentonJr.,Allrightsreserved. Purchasing/ BuyingCriteria Mustreflectfirmscompetitivepriorities... PurchasingandSupplyChainManagement,3rdedition,Copyright 20 13,W.C.BentonJr.,Allrightsreserved. Questions? 11 PurchasingandSupplyChainManagement,3rdedition,Copyright 20 13,W.C.BentonJr.,Allrightsreserved.