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Introduction toIntroduction to
Purchasing and SupplyPurchasing and Supply
Chain ManagementChain Management
Chapter Overview
 A new competitive environmentA new competitive environment
 Why purchasing is importantWhy purchasing ...
Chapter Overview
 Four enablers of purchasing andFour enablers of purchasing and
supply chain managementsupply chain mana...
A New Competitive Environment
 Increasing numbers of world-classIncreasing numbers of world-class
competitorscompetitors
...
Factors Driving SCM
 Low cost and wide availability ofLow cost and wide availability of
information more closely links th...
Factors Driving SCM
 Customer expectations andCustomer expectations and
requirements are more demandingrequirements are m...
Why Purchasing Is Important
 Purchased content is a significant partPurchased content is a significant part
of the cost o...
Why Purchasing Is Important
 Participation in product and processParticipation in product and process
designdesign
 Use ...
Language of Purchasing and SCM
 Are supply chains and value chains theAre supply chains and value chains the
same?same?
...
Purchasing
 A functional group (i.e., a formal entityA functional group (i.e., a formal entity
on the organization chart)...
Supply Management
 A strategic approach to planning forA strategic approach to planning for
and acquiring the organizatio...
Supply Management
 The identification, acquisition, access,The identification, acquisition, access,
positioning, and mana...
Defining Supply Management
1313
Strategic
Orientation
Cross
Functional
Groups
Process-
Driven
Approach
Supply Base
Managem...
Supply Chains and Value Chains
 Supply chain orientation – a higherSupply chain orientation – a higher
level recognition ...
Supply Chains and Value Chains
 Value chain – primary and secondaryValue chain – primary and secondary
support activities...
The Extended Value Chain
Support Activities
• Firm infrastructure
• Human resource management
• Technology development
• P...
Supply Chain vs. Value Chain
 Supply chain management – endorsesSupply chain management – endorses
a supply chain orienta...
Cereal Value Chain Example
Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e
1818
Farmer Pr...
Critical SCM Processes
 New product developmentNew product development
 Customer-order fulfillmentCustomer-order fulfill...
The Supply Chain Umbrella
 PurchasingPurchasing
 Inbound transportationInbound transportation
 Quality controlQuality c...
The Supply Chain Umbrella
 Order processingOrder processing
 Production planning, scheduling, andProduction planning, sc...
Enablers of Purchasing and SCM
Capable Human Resources
 Supplier relationship managementSupplier relationship management
 Total cost analysisTotal cost...
Proper Organizational Design
 Assessing and selecting the structureAssessing and selecting the structure
and formal syste...
Real-Time and Shared IT Capabilities
 Supply chain planningSupply chain planning
 Forecast accuracyForecast accuracy
 O...
Real-Time and Shared IT Capabilities
 Supply chain executionSupply chain execution
 Obtaining materialsObtaining materia...
Emerging SCM Technologies
 Global positioning systemsGlobal positioning systems
 Internet-based systemsInternet-based sy...
Roadblocks to Measurement Systems
 Too many metricsToo many metrics
 Debate over the correct metricsDebate over the corr...
Why Is Measurement Important?
 Supports fact-based decision makingSupports fact-based decision making
 Communicates requ...
Evolution of Purchasing and SCM
 The early years: 1850 – 1900The early years: 1850 – 1900
 Growth of purchasing fundamen...
Evolution of Purchasing and SCM
 Materials management comes of age:Materials management comes of age:
mid-1960s – Late 19...
Remainder of the Book
 Section 2 – Purchasing Operations andSection 2 – Purchasing Operations and
StructureStructure
 Se...
Prochain SlideShare
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Introduction to purchasing and supply chain management | Factors Driving SCM | Why Purchasing Is Important |

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Introduction to purchasing and supply chain management | Factors Driving SCM | Why Purchasing Is Important | Language of Purchasing and SCM |

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Introduction to purchasing and supply chain management | Factors Driving SCM | Why Purchasing Is Important |

  1. 1. Introduction toIntroduction to Purchasing and SupplyPurchasing and Supply Chain ManagementChain Management
  2. 2. Chapter Overview  A new competitive environmentA new competitive environment  Why purchasing is importantWhy purchasing is important  Understanding the language ofUnderstanding the language of purchasing and supply chainpurchasing and supply chain managementmanagement  The supply chain umbrellaThe supply chain umbrella Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 22
  3. 3. Chapter Overview  Four enablers of purchasing andFour enablers of purchasing and supply chain managementsupply chain management  The evolution of purchasing andThe evolution of purchasing and supply chain managementsupply chain management  Looking aheadLooking ahead Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 33
  4. 4. A New Competitive Environment  Increasing numbers of world-classIncreasing numbers of world-class competitorscompetitors  Sophisticated customer baseSophisticated customer base  More performance at a lower costMore performance at a lower cost  Widely available information sourcesWidely available information sources  Balance of power between buyers andBalance of power between buyers and supplierssuppliers  Greater outsourcingGreater outsourcing Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 44
  5. 5. Factors Driving SCM  Low cost and wide availability ofLow cost and wide availability of information more closely links theinformation more closely links the members of a supply chainmembers of a supply chain  Competition in domestic andCompetition in domestic and international markets requiresinternational markets requires quickness, agility, and flexibilityquickness, agility, and flexibility Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 55
  6. 6. Factors Driving SCM  Customer expectations andCustomer expectations and requirements are more demandingrequirements are more demanding  Major disruptions require the ability ofMajor disruptions require the ability of a supply chain to react rapidlya supply chain to react rapidly  Competition between supply chains,Competition between supply chains, not just companiesnot just companies Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 66
  7. 7. Why Purchasing Is Important  Purchased content is a significant partPurchased content is a significant part of the cost of goods sold (≥ 55%)of the cost of goods sold (≥ 55%)  Move from traditional, adversarialMove from traditional, adversarial buyer-supplier relations to improvebuyer-supplier relations to improve supply chain performancesupply chain performance  Purchased content’s impact on productPurchased content’s impact on product and service qualityand service quality Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 77
  8. 8. Why Purchasing Is Important  Participation in product and processParticipation in product and process designdesign  Use of cross-functional teamsUse of cross-functional teams  Early supplier involvementEarly supplier involvement  The supply chain’s impact onThe supply chain’s impact on competitive advantagecompetitive advantage Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 88
  9. 9. Language of Purchasing and SCM  Are supply chains and value chains theAre supply chains and value chains the same?same?  What is supply chain management?What is supply chain management?  What is an extended enterprise?What is an extended enterprise? Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 99
  10. 10. Purchasing  A functional group (i.e., a formal entityA functional group (i.e., a formal entity on the organization chart) as well as aon the organization chart) as well as a functional activity (i.e., buying goodsfunctional activity (i.e., buying goods and services)and services)  Aka as procurementAka as procurement Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1010
  11. 11. Supply Management  A strategic approach to planning forA strategic approach to planning for and acquiring the organization’sand acquiring the organization’s current and future needs throughcurrent and future needs through effectively managing the supply base,effectively managing the supply base, utilizing a process orientation inutilizing a process orientation in conjunction with cross-functionalconjunction with cross-functional teams to achieve the organizationalteams to achieve the organizational missionmission Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1111
  12. 12. Supply Management  The identification, acquisition, access,The identification, acquisition, access, positioning, and management ofpositioning, and management of resources and related capabilities anresources and related capabilities an organization needs or potentially needsorganization needs or potentially needs in the attainment of its strategicin the attainment of its strategic objectivesobjectives Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1212
  13. 13. Defining Supply Management 1313 Strategic Orientation Cross Functional Groups Process- Driven Approach Supply Base Management
  14. 14. Supply Chains and Value Chains  Supply chain orientation – a higherSupply chain orientation – a higher level recognition of the strategic valuelevel recognition of the strategic value of managing operational activities andof managing operational activities and flows within and across a supply chainflows within and across a supply chain Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1414
  15. 15. Supply Chains and Value Chains  Value chain – primary and secondaryValue chain – primary and secondary support activities that can lead tosupport activities that can lead to competitive advantagecompetitive advantage  Supply chain – a set of 3 or moreSupply chain – a set of 3 or more organizations linked directly by 1 ororganizations linked directly by 1 or more of the upstream or downstreammore of the upstream or downstream flows of products, services, finances,flows of products, services, finances, and information from a source to aand information from a source to a customer (subset of a value chain)customer (subset of a value chain) Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1515
  16. 16. The Extended Value Chain Support Activities • Firm infrastructure • Human resource management • Technology development • Purchasing Inbound Logistics Operations Outbound Logistics Marketing & Sales Customer Service Total Supply Chain / Total Logistics Management SuppliersSuppliers CustomersCustomers Materials / Supply Management Physical Distribution / Channel Management Primary Activities Materials/ServicesMaterials/Services Information/Funds/KnowledgeInformation/Funds/Knowledge
  17. 17. Supply Chain vs. Value Chain  Supply chain management – endorsesSupply chain management – endorses a supply chain orientation and involvesa supply chain orientation and involves proactive management of the 2-wayproactive management of the 2-way movement and coordination of goods ,movement and coordination of goods , services, information, and funds fromservices, information, and funds from raw material through end userraw material through end user Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1717
  18. 18. Cereal Value Chain Example Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1818 Farmer Processor Packaging Distributor Grocer Consumer Corrugated Box Mfr Lumber Company Label Mfr GrainGrain CerealCereal PackagedPackaged CerealCereal LabelsLabels MaterialMaterial InformationInformation WoodWood PaperboardPaperboard
  19. 19. Critical SCM Processes  New product developmentNew product development  Customer-order fulfillmentCustomer-order fulfillment  Supplier evaluation and selectionSupplier evaluation and selection  Demand and supply planningDemand and supply planning Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 1919
  20. 20. The Supply Chain Umbrella  PurchasingPurchasing  Inbound transportationInbound transportation  Quality controlQuality control  Demand and supply planningDemand and supply planning  Receiving, materials handling, andReceiving, materials handling, and storagestorage  Material or inventory controlMaterial or inventory control Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2020
  21. 21. The Supply Chain Umbrella  Order processingOrder processing  Production planning, scheduling, andProduction planning, scheduling, and controlcontrol  Warehousing/distributionWarehousing/distribution  ShippingShipping  Outbound transportationOutbound transportation  Customer serviceCustomer service Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2121
  22. 22. Enablers of Purchasing and SCM
  23. 23. Capable Human Resources  Supplier relationship managementSupplier relationship management  Total cost analysisTotal cost analysis  Purchasing strategiesPurchasing strategies  Supplier analysisSupplier analysis  Competitive market analysisCompetitive market analysis Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2323
  24. 24. Proper Organizational Design  Assessing and selecting the structureAssessing and selecting the structure and formal system of communicationand formal system of communication  Division of laborDivision of labor  CoordinationCoordination  ControlControl  AuthorityAuthority  ResponsibilityResponsibility Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2424
  25. 25. Real-Time and Shared IT Capabilities  Supply chain planningSupply chain planning  Forecast accuracyForecast accuracy  Optimized production schedulingOptimized production scheduling  Reduced working capital costsReduced working capital costs  Shortened life cyclesShortened life cycles  Reduced transportation costsReduced transportation costs  Improved customer serviceImproved customer service Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2525
  26. 26. Real-Time and Shared IT Capabilities  Supply chain executionSupply chain execution  Obtaining materialsObtaining materials  Managing physical flowsManaging physical flows Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2626
  27. 27. Emerging SCM Technologies  Global positioning systemsGlobal positioning systems  Internet-based systemsInternet-based systems  Bar codesBar codes  Radio frequency identification devicesRadio frequency identification devices  Wireless devicesWireless devices Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2727
  28. 28. Roadblocks to Measurement Systems  Too many metricsToo many metrics  Debate over the correct metricsDebate over the correct metrics  Constantly changing metricsConstantly changing metrics  Old dataOld data Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2828
  29. 29. Why Is Measurement Important?  Supports fact-based decision makingSupports fact-based decision making  Communicates requirements throughCommunicates requirements through the supply chainthe supply chain  Improves future supplier performanceImproves future supplier performance  Recognizes outstanding performanceRecognizes outstanding performance  Links critical measures to desiredLinks critical measures to desired outcomesoutcomes  Determines if initiatives are workingDetermines if initiatives are working Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 2929
  30. 30. Evolution of Purchasing and SCM  The early years: 1850 – 1900The early years: 1850 – 1900  Growth of purchasing fundamentals:Growth of purchasing fundamentals: 1900 – 19391900 – 1939  The war years: 1940 – 1946The war years: 1940 – 1946  The quiet years: 1947 – mid-1960sThe quiet years: 1947 – mid-1960s Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 3030
  31. 31. Evolution of Purchasing and SCM  Materials management comes of age:Materials management comes of age: mid-1960s – Late 1970smid-1960s – Late 1970s  The global era: Late 1970s – 1999The global era: Late 1970s – 1999  Integrated supply chain management:Integrated supply chain management: beyond 2000beyond 2000 Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 3131
  32. 32. Remainder of the Book  Section 2 – Purchasing Operations andSection 2 – Purchasing Operations and StructureStructure  Section 3 – Strategic SourcingSection 3 – Strategic Sourcing  Section 4 – Strategic SourcingSection 4 – Strategic Sourcing ProcessesProcesses  Section 5 – Critical Supply ChainSection 5 – Critical Supply Chain ElementsElements  Section 6 – Future DirectionsSection 6 – Future Directions Purchasing & Supply Chain Management, 4ePurchasing & Supply Chain Management, 4e 3232

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