Summary
Summary MNP3701 FULLY SUMMARIZED NOTES FROM BOOK
- Course
- MNP3701 - Strategic Sourcing
- Institution
- University Of South Africa (Unisa)
MNP3701 FULLY SUMMARIZED NOTES FROM BOOK
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MNP3701 Extensive Notes from theprescribed book - Operations Management -
Purchasing and Supply ChainManagement
(Hardcover, 7th edition)
,MNP3701 - Strategic Sourcing 2022
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PART 1 INTRODUCTION
Study unit 1Introduction to purchasing and supply chain management
Explain and illustrate the following concepts of purchasing and supply management:
Purchasing: is the systematic process of deciding what, when and how much to purchase, the act of purchasing it and the
process ensuring that what is required is received on time in the quantity and quality specified.
Strategic purchasing: is the process of planning implementing evaluating and controlling strategic and operating decisions for
directing all activities of the purchasing function towards opportunities consistent with the firm’s capabilities to achieve its long-
term goals
Supply management: is like a management function…is the identification, acquisition, access, positioning and management of
resources and related capabilities and organization needs or potentially needs in the attainment of its strategic objectives.
Supply chain management: SCM is a management philosophy aimed at proactively integrating and coordinating a network (or
web) of upstream linkages (sources of supply), internal linkages (inside the organization, according to the value chain approach)
and downstream linkages (distribution and ultimate customers) in performing specific key business processes and activities that
will ultimately create and optimize value for the customer in the form of products and services specifically aimed at satisfying
customer demands and expectations.
Value chain: Interlinked value-adding activities that convert inputs into outputs which, in turn, add to the bottom line and help
create competitive advantage. A value chain typically consists of inbound distribution or logistics, manufacturing operations,
outbound distribution or logistics, marketing and selling and after-sales services. These activities are supported by purchasing or
procurement, research and development, human resource development and corporate infrastructure.
Extended value chain: multiples levels of suppliers and customers form the extended vale chain concept which states that
success is a function of successfully managing a linked group of firms past first level suppliers or customers
Supply chain: The supply chain is a network of organizations that are involved, through upstream and downstream linkages, in
the different processes and activities that produce value in the form of products and services that satisfy the ultimate customers‟
needs.
Supply chain vs value chains
Supply chains is a set of 3 or more organizations linked directly by one or more of the upstream or downstream flows of product,
services, finances and information from a source to the customer. It is important to acknowledge that anytime business is
conducted a supply chain will exist.
Value chains The process or activities by which a company adds value to an article, including production, marketing, and the
provision of after-sales services. Includes support activities. Composed of primary and support activities‟ that can lead to a
competitive advantage when configured properly.
Supply Chain illustration PAGE 15
Put the phrase "a new competitive environment" in perspective
New competitive environment
• Increasing numbers of world-class competitors (domestically and internationally)
• Forced to improve internal process
• Demanding customer base; higher quality, reduced prices, faster delivery
• Widely available information sources due to Technology (Internet, Twitter, social media)
• Balance of power between buyers and suppliers
• Greater outsourcing
Why Purchasing Is important/The importance of effective purchasing in an organization PAGE 8
• Increased value and savings – As companies struggle to increase customer value by improving performances, many
companies are turning their attention to purchasing and supply management. The impact suppliers can have on the firm’s
total cost. The supply base is important part of the supply chain. Supplier capabilities can help differentiate a producer’s
final good or service, increasing their value to the final customer.
• Building relationships and driving innovation – Building relationships to jointly reduce costs of the product and
service (P&S) and in turn the supplier contributes innovative ideas that add value to P&S
• Improving Quality and reputation – outsourcing, relationships - firms are looking to outsource to concentrate on areas
of specialization and competence
• Reducing time to market – early including of suppliers and engineers to improve product and process design
• Managing supplier risk- such as poor-quality natural disasters and high transport costs
• Generating economic impact – ISM report on business - purchasers have the power to move financial markets
• Contributing to competitive advantage – effective purchasing, reputation
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Purchasing and supply chain benefits/ Explain how an organisation can achieve purchasing and supply chain
benefits
• To minimize inventory losses and investment in inventory
• Innovative products - To purchasing goods and services of the required quality, competitively at minimum cost
• Better supply chain relationships - To trace or develop reliable alternative sources and maintain sound lasting relations
with reliable suppliers
• Reduced product lines - To develop and operationalize policy procedures and systems that will ensure that the
administrative costs of purchasing are kept to a minimum
• Standardisation
• Partnerships - To identify and analyses problem areas and rectify them effectively.
Supply chain umbrella PAGE 18
Activities: Supply chain management.
• Purchasing
• Inbound transportation
• Quality control
• Demand and supply planning
• Receiving, materials handling and storage
• Order processing
• Production planning, scheduling and control
• Warehousing/distribution
• Shipping
• Outbound transportation
• Customer service
Four enablers of purchasing and supply chain management PAGE 20
• Capable human resources Supply chain professionals should have certain knowledge and skills which should include:
Supplier relationship management; total cost analysis; purchasing strategies; supplier analysis and competitive market
analysis. Therefore, effective supply chain management requires close collaboration with suppliers, as well as internal
coordination with engineering, procurement, logistics, customers, and marketing, to coordinate activities and material
flows across the supply chain.
• Proper organisational design Proper organisational design refers to the process of assessing, selecting or developing
the structure and formal system of communication, a division of labour, coordination, control, authority and responsibility
required to achieving organisational goals and objectives, including supply chain objectives.
• Real-time and shared information technology capabilities The development of information technology (IT) software
and platforms that support an end- to-end supply chain.
• Right measures and measurement systems System should be in place to measure and improve performance
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PART 2 PURCHASING OPERATIONS AND STRUCTURE
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