BA 339

1
BA 339

• Supply Management
• Sourcing
• Purchasing Process

2
History of Purchasing

• 1832 Charles Babbage
• On the Economy of Machinery and Manufactures
• 1870 Magazine Articles
• 1887 Marshall Kirkman
• The Handling of Railway Supplies - Their Purchase
  and Disposition Maybe first Purchasing book
• 1890s Railroad Gazette
• 1905 The Book on Buying
• 1915 Three Purchasing Books
• 1920s Five Purchasing Books

3
Issues From Recent Conferences

• Phoenix Conference
• Manufacturing Excellence
• North American Purchasing Research Symposium
• Michigan Purchasing Conference

4
Supply Chain Management

• Basic Raw Material to Final Consumer
• Three Flows
• Information
• Materials
• Cash
• Manage Flows in Both Directions

5
The Supply System

• Quality
• Timing
• Flexibility
• Reliability
• Simplicity
• Risk Management
• Least Total Cost
• Internal Customer Expectations
• Supplier Performance

6
Importance of Purchasing to the Firm

• As of Product Value
• Savings
• Continuity
• Competitive Advantage

7
Importance of Purchasing To the Economy

• Gross Domestic Product
• Definition
• Value Added
• Intermediate Industrial Purchasing Transactions
• An Example
• Magnitude of Purchases
• Recent Research
• Compared to GDP

8
Importance to the Economy, cont.

• Input Output Model of the U. S.. Economy
• Origin
• Uses
• Industry Interaction
• Economic Drivers

9
Strategic Planning

• Mission Statement
• Vision Statement
• Strategies
• Long-Term Action Plan
• Commits Organizational Resources
• Creates Competitive Advantage
• Performance Measures

10
Development of Supply Strategy

• How Do We Create Competitive Advantage From
  Supply Activities?
• What are Mission and Vision for Supply
  Organization?
• What are Strategies to Reach Goals?
• What are Performance Measures We Will Use to
  Track Progress and Performance?

11
Purchasing and Supply Strategies

• A Strategy for Each Commodity
• A Strategy for Each Supplier
• Current Situation
• Future Situation
• Methodology to Achieve

12
Basic Purchasing Objectives

• Maintain Continuity of Supply
• Least Total Cost of Ownership
• Develop Purchasing as Strategic Asset
• Create Competitive Advantage

13
Basic Purchasing Activities

• Sourcing
• Finding Potential Suppliers
• Qualifying Suppliers
• Selecting the Right Supplier
• Contract Development
• Contract Administration
• Managing Supplier Relationships

14
Types of Purchases

• Production Materials
• Raw Materials, Parts, Components
• Capital Equipment
• Machinery, Vehicles
• Capital Projects
• Construction
• MRO Supplies
• Operating Supplies, Spare Parts
• Services
• Repair, Maintenance, Professional Services

15
The Purchase Cycle

• Generation of Need
• Communication of Need
• Supplier Qualification
• Supplier Selection
• Order/Contract Award
• Contract Administration/Expediting

16
The Purchase Cycle

• Receiving and Inspection
• Quality Control Inspection
• Storage/Inventory Control
• Issuance and Use
• Accounts Payable
• Supplier Performance Evaluation
• Transaction Analysis

17
Supply System Objectives

• Continuity of Supply
• Minimize Administrative Costs
• Minimize Inventories
• Reduce Cycle Times
• Increase Supplier Performance
• Increase Forecast Accuracy
• Maximize Use of Technology
• Develop Strategic Focus

18
Ethics

• More than Gifts and Gratuities
• Cialdinis Influence
• Appearances

19
Legal Issues in Purchasing

• Agency
• Definition One who is legally empowered to act
  for another.
• An agent has the legal authority to bind his or
  her principal to a contract.
• Duties
• Loyalty
• Obedience
• Reasonable Care
• Accounting
• Information
• Actual and Apparent Authority

20
Contract Formation

• Oral and Written Contracts
• Battle of the Forms
• UCC 2-207
• Conflicting terms
• Different, non-conflicting terms
• Materially altering terms
• Sales Authority

21
Specifications

• Responsibility
• Purchasings Role
• Descriptive/Design Specifications
• Performance Specifications

22
Early Purchasing Involvement

• Negotiate Internally
• Examine Alternative Goods
• Determine Availability and Lead Times
• Other Market Analysis
• Early Supplier Involvement

23
Standardization

• Industry Standards
• Company Standardization
• Impacts on Inventory
• Impacts on Purchasing
• Impacts on Maintenance and Repair
• Impacts on Quality
• Implementation

24
Supplier Selection Process

• Clear Specification
• Marketplace Surveys
• Identification of Available Suppliers
• Determining Supplier Qualifications
• Make/Buy Analysis
• Selecting from Qualified Suppliers

25
Sole, Single and Multiple Sources

• Definitions
• Single Sourcing
• Sole Source
• Single vs Multiple Sources
• Merits of Single and Multiple Sources
• Type of Product
• Risk

26
Supplier Base Analysis

• Industry Average Numbers of Suppliers
• How Many Suppliers Do You Have?
• How Many Suppliers Do You NEED?
• Risk
• View Suppliers as You View Investments
• Is the Supplier Making Money For You?
• Is the Supplier a Good Return on Your Investment

27
Supply Base Reduction

• Maximize Leverage
• Increase Quality and Reduce Variability
• Utilization of Resources
• Minimization of Administrative Cost
• Create Stable Supply Base
• Develop Synergy
• Create Competitive Advantage Through Supply Base
• Manage Risk

28
Supplier Performance

• Quality
• On Time Delivery
• Flexibility
• Problem Resolution
• Productivity Improvement
• Their Supplier Management Program
• Progress Toward Certification
• Other Important Criteria

29
Buyer Performance

• Forecast Accurately
• Share Information
• Minimize Rush Orders and Schedule Changes
• Focus on Total Cost - Not Price
• Pay Bills On Time
• Manage Supplier Relationships

30
Outsourcing

• Make/Buy Definition
• Outsource Definition
• Tradeoffs
• Managing Outsourced Products or Processes

31
Prerequisites of Competitive Bidding

• Enough Dollars
• Clear Specifications
• Enough Suppliers
• Suppliers Want Business
• Sufficient Time

32
Price/Cost Analysis

• Price Analysis Definition
• Where Used
• Cost Analysis
• Where Used
• How to Get Information
• Total Cost of Ownership

33
Criticality Grid

• Criticality of Product, Internally
• Criticality of Marketplace
• Availability of Substitutes
• Pervasiveness of Product
• Future Product Requirement

34
Criticality Grid
High Patent M Prop Tech A R K E T
Ind Std Commodity Low
Low High
INTERNAL Volume, Importance
Volume, Pervasive