Summary of Purchasing & supply chain management given in the pre-master course of Technology & operations management in the 1 semester. The summary is based on the slides given in the lectures supported by the book.
1.1 Core concepts
What is purchasing management -> management of firms external resources
- Ensuring supply of goods to perform the firm’s primary and support activities (Van Weele,
2010)
Purchasing today – trends book p.3-5
- From administrative to strategic function
- From buying materials/parts to buying competence
- From cost focus to performance focus
What is supply chain management (SCM)
- The management of upstream and downstream relations with suppliers and customers to
deliver superior customer value at less costs to the SC as a whole (Christopher, 1998)
Relation between purchasing and SCM
- Two different views by Larsen & Halldorsson, 2002
- Traditionalist conceive SCM as a strategic aspect of purchasing, with emphasis on supplier
development
- Relabelling simply change the name of purchasing to SCM, purchasing has already evolved to
SCM.
, - Unionist This perspective sees purchasing as part of SCM; SCM completely subsumes
purchasing.
- Intersectionist -> The intersection concept is that SCM is not the union of logistics,
operations, and purchasing. Rather, it includes elements from all of these disciplines.
The books takes a unionist perspective!!!
SCM and Purchasing relatedness
- Relationships
- Management of activities
- Performance
But they have a different focus, scope and performance aims!
1.2 TCE & RBV
(Out)sourcing -> what to make in-house? vs. what to buy?
Why outsource?
- Decrease production costs
- Access to good-quality suppliers
- Gain access to markets
- Gain access to scarce resources
Global sourcing -> practice of contracting out activities or functions to specialized suppliers around
the world
- Progress towards global sourcing (in levels)
o Level 1 Domestic -> no knowledge of international opportunities
o Level 2&3 International -> some infrastructure
o Level 4&5 Global -> global infrastructure
, Transaction costs -> cost incurred in making any economic exchange for instance buying and selling
goods and services gathering market information, price, invoicing and payment, writing a contract,
and process of negotiation between buyer and supplier.
Transaction Cost Economics (TCE) -> make or buy decision based on minimization of transaction costs
- Assets specificity to what extent are assets unique to a specific task (asset uniqueness)
- Potential for opportunistic behaviour, what are the cost of reducing uncertainty
- Make or buy?
o High? Make (high assets specificity and high potential for opportunistic behaviour)
o Low? Buy
o Hybrid long term contracts, alliances
Resource-based view (RBV) -> focuses on the unique resources and capabilities within a company:
- Sources of sustainable competitive advantage like: skills, resources, competencies
- VRIN Valuable, Rare, Inimitable and Non-substitutable
- Core? Then make
- Non-core? Then outsource
Extended resource-based view -> RBV but with relations outside the company (strategic resources)
- Collaboration to obtain sources of sustainable competitive advantage
Interaction approach -> buyer-supplier relationship and network theory
- Protect internal resources by access important resources through external relationships
What are core competencies? (by Hamel & Prahalad, 1990):
- Deliver customer value
- Differentiate firm from competitors
- Can potentially be extended and developed
- Characteristics: Valuable, Rare, Inimitable, Non-substitutable (VRIN)
- Make or buy? -> closer to the core of business keep it in-house!
Example Coca Cola make or buy based on RBV
Outsourcing and purchasing & SCM
Outsourcing decision…
- Contracting out activities to specialized suppliers
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller tobiasschiphorst. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.88. You're not tied to anything after your purchase.
