Lecture Purchasing and supply chain management (3/e): Chapter 1 - W. C. Benton

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 ã The3powerfulforces • Economics • • • European Union’s (EU) financial crises Technology • Internet, ERP, etc • Technologydisplacinglabor Zeitgeist ã Accountabilityoffinancialinstitutions ã 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 ã ã 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 ã Contributestothebottomline ã Increasesefficiencyandproductivity ã 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 ã TheTwoMainDecisions: Whereshouldthepurchasingfunctionsbelocatedinthe organization? Whatlevelofauthorityshouldthepurchasingfunctionhave? PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Purchasing:CentralizeorDecentralize? PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. FutureofCentralizedPurchasing ã ã 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 ã 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 ã 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? ?