Class notes
MNB1501
- Institution
- University Of South Africa (Unisa)
Lecture notes of 10 pages for the course MNB 1501-Business Management 1A at Unisa (NEEDED FOR MNB)
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MNB1601/001/4/2017Learning Unit 10
Purchasing and supply management
STUDY CHAPTER 15 (section 15.1 – 15.3) IN ITBM
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Contents of this learning unit
−− Purchasing and supply in perspective
−− The importance of the purchasing and supply function for the business
−− The management task of the purchasing and supply manager
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OVERVIEW
Study section 15.1 in ITBM
Purchasing and supply management is one of the greatest areas of opportunity in any
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organisation. This is because purchased equipment, inventory and services make up the
lion's share of the overall cost structure of any enterprise. Successful organisations today
understand that managing the purchasing or sourcing cycle within a broader supply
context is a key capability for improving product and service performance, and should
be elevated to the same level of importance as that of engineering or finance.
Leading purchasing, sourcing and supply executives now deal with a broad range of com-
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plex issues. This requires a multidisciplinary focus and the engagement of business unit
leaders across the enterprise, in order to deliver major performance gains. In top-perform-
ing organisations, purchasing goes well beyond the traditional function of providing the
right requirements at the right place, purchased from the right source, at the right price
in the right quantity. Achieving more than all this is by no means an easy task!
Fortunately, there are a vast number of international (and some South African) organisa-
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tions that have pushed the purchasing, sourcing and supply frontiers forward. Purchas-
ing is given a strategic slant, focusing on the sourcing and management of an optimal
number of suppliers with whom an organisation can establish long-term relationships
to the mutual benefit of all. Not only can we learn lessons from their examples, but we
can also identify the critical factors that make it possible for purchasing and sourcing to
add value and be recognised at the highest levels, within the broader context of supply
management.
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, Purchasing, sourcing and supply management leaders should have a strategic vision of
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what the function can deliver, with an organisation to support this vision. That means
aggressive targets backed up by the right incentives and resources, as well as an execu-
tive management team pushing line executives to make the hard decisions needed to
advance the interests of the whole company over parochial preferences. Consider the
case of South African Breweries (SAB). The company has realised the importance of these
elements in the purchasing and supply strategy. In 2007 SAB launched a new strategy
named the five-year R5-billion capital-project strategy to address these needs. To make this
strategy successful SAB has to manage its relationships with the suppliers, have the right
quantities of products available and also have the right systems and processes in place.
In this learning unit, we put the purchasing and supply function in perspective, explain
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its importance and discuss the management tasks and tools.
Learning objectives
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The outcomes of studying this chapter on leadership are that you should be able to
yy demonstrate an understanding of the purchasing (or sourcing) function within the broader
context of supply management
yy describe the broadening of the provision function by summarising other concepts in or
approaches to the provision of materials to a business
yy demonstrate an understanding of the importance of the purchasing and supply function
to the business by summarising the reasons for its importance
yy describe the management task of the purchasing and supply function by highlighting its
planning, organising and control
yy demonstrate an understanding of the tools available to purchasing and supply by sum-
marising each tool respectively
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KEY TERMS
purchasing and supply function purchasing and supply organisation
organisational structure
purchasing management centralisation
supply management decentralisation capital markets
provision function cross-functional sourcing teams
expenditure purchasing and supply control
inventory holding assessment
profit leverage purchasing and supply planning
management task strategic management level
hierarchical level operational management level
tactical management level
Refer to the end of chapter 15 in the prescribed book to familiarise yourself with the key
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terms for this learning unit before continuing.
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