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MNP2601 NOTES
- Institution
- University Of South Africa (Unisa)
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Chapter 1 – The purchasing function in perspectiveDEFINE THE CONCEPT LOGISTICS (MAIN ELEMENTS)
The part of SCM that plans, implements and controls the efficient, effective forward and reverse flow in
storage of goods services and related information between the point of origin and point of consumption in
order to meet customers’ requirements.
Important activities included in logistics management are:
Traffic and transportation Warehousing
Inventory management The processing of returned goods.
Packaging and handling Customer service
Logistics is therefore strongly focused on the physical flow of material goods and services, with a strong
emphasis integrating all these activities so that the total cost in the logistics system is minimized.
DEFINE THE CONCEPT SUPPLY CHAIN MANAGEMENT (SCM) (6 ELEMENTS)
SCM is a management philosophy aimed at integrating a network of upstream linkages, internal linkages
inside the organization and downstream linkages in performing specific processes and activities.These will
ultimately create value for the customer in the form of products and services.
MAIN DIFFERENCES BETWEEN LOGISTICS AND SUPPLY CHAIN MANAGEMENT (10) P20
Logistics Supply chain management (SCM)
It is a framework for the managment of all Uses the logistic framework and extends the concept of
activities related to material and product, services and information flow beyon the
information flows within an organisation. boundaries of the single orgnaisation to other firms and
The scope is the entire organisation entities through linkages, often of an informal nature
It si the integration philosophy which seeks to optimise
Can be regarded as a “functional silo” of a value added over the activities of many organisations and
particular organisation specifically over ever-changing combinations of firms and
entities
It manages business processes across the functional and
It manages business activiteis in order to organisational boundaries of a network of organisations,
optimise customer service and to minimise and aims at optimising customer satisfaction and
cost for a particular organisation eliminating activities and processes that add cost and not
value over the entire supply chain
The focus is on the management of the The focus is on the management of relationships across
flow of products, services and information the entire supply chain
Logistic management focusses on SCM is aimed at optimising benefits for all participants in
optimising wealth for a single firm the entire supply chain
1
,Chapter 2 – The task of purchasing and supply
management
ADVANTAGES AND DISADVANTAGES OF CENTRALISED AND DECENTRALISED ORGANISATIONAL
STRUCTURES FOR PURCHASING AND SUPPLY MANAGEMENT
Type of Advantages Disadvantages
structure
1. Materials and products are standardised 1. There is a slow response time to regional
2. Negotiating power is increased and plants
volume discounts are made possible 2. There is resentment from geographically
3. Staff are afforded the opportunity of dispersed business unit management
becoming experts 3. There is a tendency to bypass the central
Centralised 4. Control is improved buying office
5. Administrative costs are reduced 4. There is less integration with user
6. Supplier relations are enhanced departments
7. Information systems integration is 5. Staff structure is top heavy
facilitated 6. There is lack of insight into the
8. Duplication of effort is eliminated requirements of dispersed plant units
1. There are better relations between 1. There is loss of economies of scale
decentralised purchasing and other 2. Suppliers are confused by dealing with
functions many offices
2. There is good service delivery to regional 3. There is duplication of staff and facilities
plants 4. Control over the function is much more
3. There is faster reaction time to user difficult
Decentralised departments in emergencies 5. There is a greater likelihood of
4. Support of local suppliers generates communications breakdown
goodwill 6. There is focus on local units and under-
5. There is greater autonomy for profit emphasis on strategic issues
centres
6. Interdivisional competition can improve
purchasing performance
Chapter 4 – Purchasing and supply policies and
strategies
STRATEGIC SOURCING MATRIX
High Bottleneck Critical
Substitution difficult Substitution difficult
Monopolistic markets Strategic importance
High barriers to entry High value in total purchasing spend
Risk and Geographical/political complexity
complexity Routine Leverage
Substitution possible Substitution possible
Alternative suppliers and products Alternative suppliers and products
Low 2
, available available
Standard product specifications Standard product specifications
Low Amount spent High
MAKE OR BUY:
The following circumstances will favor buying requirements or outsourcing services:
If the enterprise has a strong purchasing corps
When there are inadequate facilities or better investment possibilities
When the operational staff knowledge and skills are inadequate
When the demand for product and services is a relatively small
When it’s cheaper to buy than to make
The following circumstances are more favorable for making the product or insourcing the service:
When it costs the enterprise less to produce a product or service
When there are no or few reliable suppliers
When there is capacity available for use
When the enterprises quality requirements are very stringent
For competitive, political or social and environmental reasons
For emotional reasons
RATIONALE FOR OUTSOURCING
Tactical reasons are to: Strategic reasons include:
Reduce operating and control costs Improve company focused
Three up internal resources Maintain access to world class capabilities
Receive important cash infusion Gain access to resources that are not available
internally
Improve performance
Accelerate re-engineering benefits
Improve customer satisfaction
Increase flexibility and risks
DISADVANTAGES OF OUTSOURCING
Outsourcing contractors or service providers become dependent on the enterprise – captive supplier
An enterprise can become over involved in the development of contractors or service providers.
3
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