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Unit 1 – Purchasing Function in perspectiveDistinguish 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
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