...The importance of supply and purchasing management to a business organization Supply and purchasing management has become increasingly prominent in a world where supply is a major determinant of corporate survival and success. Supply chain performance influences not only operational and financial risks but also reputational risk. Interest in supply and purchasing management is growing at an increasing rate. There are a lot of factors why supply and purchasing management are important to a business organization. Companies are becoming more profitable by increasing the quantity of raw materials processed within a given time. They have been used for lowering inventories and especially minimizing operational expenses. Supply chain data and information is becoming the primary driver throughout the supply chain management system. Every organization needs a supply of materials. Purchasing is responsible for organizing this supply so purchasing is an essential and crucial operation within every organization. If purchasing is done poorly and materials do not arrive, or the wrong materials are delivered in wrong quantities at the wrong time with poor quality and at a high price with a low customer service and so on, the business organization will be a disaster. If it is done well, it can give a major significant competitive advantage. To become a strategic competitive contraption, supply and purchasing management must abandon disintegrated approaches. The purchasing function is rapidly...
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...pag.: 1 van 13 code: LEV-PORT-art-013-bl Purchasing must become Supply management Bron: Auteur(s): Harvard Business Review, september-oktober 1983 Peter Kraljic Purchasing Must Become Supply Management Peter Kraljic Harvard Business Review No. 83509 SEPTEMBER–OCTOBER 1983 HBR Peter Kraljic Purchasing Must Become Supply Management The stable way of business life many corporate purchasing departments enjoy has been increasingly imperiled. Threats of resource depletion and raw materials scarcity, political turbulence and government intervention in supply markets, intensified competition, and accelerating technological change have ended the days of no surprises. As dozens of companies have already learned, supply and demand patterns can be upset virtually overnight. How can a company guard against disastrous sup- ply interruptions and cope with the changing economics and new opportunities brought on by new technologies? What capabilities will a profitable international business need to sustain itself in the face of strong protectionist pressures? Almost every kind of manufacturer will have to answer these questions. Some companies have already responded to the growing pressures. For example: o Finding that purchasing outlays had increased in less than one year from 40% to 70% of the cost of goods sold, one European office-equipment manufacturer began to rely more heavily on American and Japanese suppliers, revise its materials planning system...
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...Materials Management / 1 CHAPTER I Materials Management Introduction Materials Management is simply the process by which an organization is supplied with the goods and services that it needs to achieve its objectives of buying, storage and movement of materials. Materials Management is related to planning, procuring, storing and providing the appropriate material of right quality, right quantity at right place in right time so as to co-ordinate and schedule the production activity in an integrative way for an industrial undertaking. Most industries buy materials, transport them in to the plant, change the materials in to parts, assemble parts in to finished products, sell and transport the product to the customer. All these activities of purchase of materials, flow of materials, manufacture them in to the product, supply and sell the product at the market requires various types of materials to manage and control their storage, flow and supply at various places. It is only possible by efficient materials management. The materials requirements planning, purchasing, inventory planning, storage, inventory control, materials supply, transportation and materials handling are the activities of materials management. They will be discussed in details in various chapters to follow. About 20-25 years ago, there was no cut-throat competition in the market to sell the various consumer items manufactured by different industrial undertakings and the availability of materials to manufacture...
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...HOW SUPPLY CHAIN MANAGEMENT HAS CHANGED THEY WAY WE DO BUSINESS Marlie A. Selke Embry Riddle Aeronautical University WW LGMT 536 – Purchasing for Logistics & Supply Chain Management Professor Dr. Mohammed Arif September 30, 2013 TABLE OF CONTENTS Abstract 3 History of Supply Chain Management 4 Why is Supply Chain Management Important to Business 5 Innovation 7 How to Maintain a Competitive Advantage 8 Skill Set Requirements 11 Future of Supply Chain Management 13 Conclusion 16 References 17 TABLE OF FIGURES Figure 1.1 Creating Additional Value by Thinking Differently About Categories 14 Abstract This research paper addresses the effects that supply chain management has on businesses. Supply chain management is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. Supply chain activities include everything from product development, sourcing, production, information systems, as well as logistics. An effective supply chain management works with cross-functional teams (e.g. requirements form marketing or engineering) to achieve organizational goals through effective planning and management. This paper will take a look at the history of supply chain management, discuss why it is important to business, explore the latest innovations, discuss how to maintain a competitive advantage in a changing environment, address the required supply chain management skill set requirements...
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...virtual integration to strive for excellence in supply chain management. As Director of Supply Chain Systems, I am convinced that Ford can implement portions of Dell’s Virtual Integration strategy even though the Ford Company differs in many respects from Dell. A modification of the virtual integration system that Dell uses should be applied to Ford’s supplier base, distribution system, dealerships, and divisions. Issue Identification Ford must find ways to improve their supply chain management to compete in a global market and continue to retain its market share in an increasingly competitive, saturated and over capacitated US market. Ford must act now or risk losing market share. The main issue Ford must deal with is decreasing the volume and complexity of its supplier base as it is plagued with costly inefficiencies. Secondly, Ford must get closer to its customers to better understand their needs and wants and to create better forecasting of demand. Teri Takai must decide within a week if Ford should model its supply chain strategy close to Dell’s Virtual Integration. Environment and Root Cause Analysis The Ford Motor Company is the 2nd largest industrial corporation in the world with revenues of $144 billion. Ford employs over 370,000 employees and has operations in 200 countries. What Ford does best is design and manufacture automobiles for sale on the consumer market. However past practice particularly in supply chain management has created costly inefficiencies. Ford can...
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...Supply Management Outsourcing Purchasing is common to all organizations with any kind of supply function. It is one of the basic processes of supply management. As time has gone by, the term ‘purchasing’ has taken on a broader definition. As companies become more independent, more competitive, and start growing towards the future in technology, specifically e-commerce, purchasing becomes a strategy. Purchasing became “strategic sourcing.” Strategic sourcing has become a huge responsibility for the supply manager. There are a few activities that strategic sourcing accomplishes for the manager. It allows the manager to strategize the spending habits of the company, it forces the manager to strategically look in to the supply market for any changes, trends, and what other firms are offering, and it provides a method to develop a sourcing strategy that fits the company’s strategy to lower costs and risk, while bringing in a profit. Profit is produced through mastering or at least competently managing the five M’s; machines, manpower, materials, money, and management. Part of that strategy is where and how to source these 5 M’s that will meet the cost strategy of the company. This brings up the most strategic question a firm can ask of a supply manager; to make or buy? To meet the company’s needs that will consequently meet the current demand, should the company in-source or outsource? What should the company outsource? What are the functional areas of supply management...
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...examines purchasing and supply chain management in an organization. Over the years, the role of purchasing and supply chain in an organization has continued to evolved, changed, and developed in response to changes witnessed in business environment. The increasing numbers or world-class competitors in local and international trades are a direct driver of increase in purchasing and supply chain roles and demands. Many management scholars have defined the notion and significance of supply chain management in detail across the globe. Many times, theoretical definitions of what purchasing and supply is are provided. But This term paper will firstly, suggest that purchasing and supply chain management is a developing field that constantly changed based on happenings in business environment. And secondly, suggest that individual firms’ purchasing and supply chain is base on such firms’ type of business, size, and mission. Evolution of supply chain management. Supply chain management involves the management of all activities in order to satisfy the ultimate consumer. It covers almost all business activities, including marketing, manufacturing (or service provision) purchasing, logistics and arguably is an all-inclusive concept that create a world-class culture and continue economic development. (Quayle, Michael 2006) In a nutshell, purchasing and supply chain management is a series of interwoven activities that cut across every departments of on organization. Purchasing and supply...
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...considerations of purchasing outside stores services. Advantages of purchasing outside stores services: * A purchase price saving of approximately 6 percent can be realized on approximately 90 percent of the items purchased. Assuming that this 90 percent includes a proportionate number of high-value items, minimum purchase savings should approximate $48,000 to $50,000 per year ($900,000 x .90 x .06 = $48,600). * If the stores operation is discontinued, personnel and facilities operating costs can be reduced approximately $200,000 per year. (This assumes that the four individuals can be absorbed on an attrition basis elsewhere in the organization, and that the freed-up space can be used for other productive purposes.) * If Futronics is able to enter into a systems contracting type of agreement for three years with one of the supply houses, the incremental supply ordering costs in purchasing will decline markedly. This is a very significant operating efficiency which will free a buyer up to engage in additional analytical purchasing work. * Discontinuance of the stores operation will virtually eliminate the time requirements for supervision of the operation. Similar to item number 4 above , this additional time can be used by purchasing personnel to do a more productive and professional job of purchasing. * Futronics now has 42 operating sites. As the organization continues to grow, delivery of materials to these sites will become more costly and more...
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...| The Future Role of Procurement in the Global Supply Chain | | Strategic Sourcing and Procurement | | Quiqueena Cintadita | Presented to: Tim Parker Msc. Logistics and Supply Chain Management December 10 2015 | Role of purchasing has changed from year to year. Years ago, it was considered as a job to buy materials. Now, purchasing is an essential function, which is used as a strategy by companies (Monczka et al. 2010). There are many reasons leading to the changes, such as increase in competition between companies, rise in technology, and growth in customers request (Lysons and Farrington 2012). These changes make the relationship with suppliers more important and therefore transparency is needed. Nevertheless, new concepts are needed which involves technology to keep a track to organize a global supply chain (Monczka et al. 2011). Supply chains are mergers from all activities, processes, and functions, which involve all the suppliers to support organizations or companies to deliver the products and services that customers or consumers needed (Business Dictionary). As a function, purchasing took part in the process of supply chain and all the internal organizations that related with supply chain, such as engineering, manufacturing, marketing, finance, information technology, logistics, and legal. Firstly, engineering, purchasing can help the engineering to reduce the defect. For example, in one global electronic manufacturing company, the purchaser...
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...And financial institutions are being held responsible. In certain industries, Asian manufacturers dominate the United States’ consumer market. Third-world nations in Central and South America, Southeast Asia, and China continue to attract U.S. manufacturers seeking low wages for laborious tasks. And, in the midst of everything, the United States is a giant consumer base with an enormous command of technology but steadily losing the infrastructure needed to create jobs. In addition to significant events that have impacted the world’s business environment, individual firms have had to change radically in response to burgeoning technologies. Historically, the management of materials and component parts was the most neglected element in the production process. Only when the cost of materials and subassemblies increased did management attempt to investigate alternative methods to the planning and control of the acquisition and transformation functions in the organization. Instead, most firms emphasized minimizing the cost of capital and labor. The focus on labor was logical because the industrial revolution had generated many labor-intensive manufacturers. Producing large standardized batches represented the norm for some manufacturers. Some firms have embraced new technologies and invested in technology driven manufacturing systems. Although these new systems are up and running, too frequently they are being operated just like the old...
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...CHapter 15 supply chain management Teaching Notes It is important to emphasize that Supply Chain Management involves the entire range of production and distribution processes. Students need to understand the trade offs involved in supply chain function related to JIT, inventory management purchasing and delivery lead times and quality. Supply Chain Management requires a broad view of the entire flow from purchasing to final delivery to the customer. Supply Chain Management is becoming increasingly more important due to the following factors: 1. Implementation of JIT systems. 2. Emphasis in reduction in inventories. 3. Emphasis in reduced order cycles and reduced lead times. 4. Continuous and rapid change in products and product designs (shorter product life cycles). 5. Shorter product introduction and product development times. The importance of Supply Chain Management can not be underestimated because it ensures that the right materials are at the right place at the right time at a minimal cost and maximum quantity. In addition, supply chain management requires very careful coordination of activities between various business organizations on the chain. Integration of databases and sharing key pieces of information among the different business organizations on the supply chain not only provides timely and valuable information to companies on the supply chain, but also assists in improving the trust and the overall relationship between suppliers and their customers...
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...Purchasing & Supply Management Jargon Buster from The Chartered Institute of Purchasing & Supply P&SM Jargon Buster V1 Introduction As with many other professions in the business world the Purchasing & Supply Management (P&SM) profession is no different. It suffers from the use of jargon and acronyms that may be difficult to interpret and understand. The objective of this document is to define some of the acronyms commonly used and clarify the Jargon. Clearly this product cannot take account of all jargon used but will attempt to achieve clarity where possible; this document does not replace ‘The Official Dictionary of Purchasing & Supply (Terminology for Buyers and Suppliers) by Professor Jessop and H.K Compton. Jargon affects all procurement professionals and non-professionals and this product is formulated for use by the whole of the P&SM profession and everyone who interacts with it. P&SM Jargon Buster V1 A ABC – Activity Based Costing An approach to the costing and monitoring of activities that involves tracing resource consumption and costing final outputs. (Source: Accounting for Non Accounting Students 4th Edition J.R Dyson, Pitman Publishing) ABC Management Application of Pareto’s Law of the 80/20 rule: ABC classifications are determined in ascending rank order of all products according to the product classification as a percentage of the total purchasing spend. Ranking can also be by volume, value, weight etc. ACH – Automatic Clearing House ...
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...and suppliers nowadays. The sourcing model of global apparel brands within its ethical purchasing and supply chain management functions have been critically analysed to evaluate their effectiveness and value they add throughout their supply chain and in overall organisational operation. This report has emphasised on three key areas such as general sourcing model and its components in the context of global buyer’s perspective i.e. Transnational Corporations, a clear scenario about current ethical situation of Bangladesh’s apparel sector, and relevant supply chain theories and its implications related to ethical purchasing in apparel industries. At the end, a proper conclusion has been given by evaluating all the three sections critically based on the theoretical lens of purchasing and supply chain management. Table of Contents Executive Summary 1 Introduction 3 Section-1: General Discussion on Sourcing and its Components 4 Sourcing and its Role in Supply Chain 4 Sourcing Needs of the Companies and its Impact on Supply Chain 4 Steps of Making Sourcing Decisions by Transnational Corporations 5 Ethical Sourcing 6 Ethical Sourcing by TNCs in Apparel Sector 6 Importance of being Ethical in Sourcing 8 Section-2: Current Situation of Bangladeshi Apparel Sector and its Ethical Perspectives 9 Section-3: Supply Chain Theories and its Implications Related to Ethical Purchasing in Apparel Industries 11 Theory of Value Chain and Global Value Chain 11 Corporate...
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...The Strategy of Supply Sheila K. Blohm INF 336 Project Procurement Management Brian Kraus July 22, 2013 The Strategy of Supply Purchasing and supply management substantially impacts the performance and results of every enterprise and organization that conducts business today. The most efficient and effective purchasing and supply management process allows an organization to achieve enhanced revenues, lower costs, rapid and more informed decision-making, and provides for higher quality products and services. The following discussion of the acquisition process explains how a supply professional understands strategic requirements, describes the differences between needs identification and commercial equivalents, explains the value of early supplier involvement, and examines the advantages and disadvantages of performance specification. Supply management focuses on the entire acquisition process, and a supply professional must understand an organization’s strategic requirements to provide value and best buy opportunities for an organization. Part of the acquisition process includes “need identification.” An organization’s needs are what is required by either internal or external purchasers of the organization. Need criteria can be strategic in nature such as the financial implications or impact of the requirement and the amount of risk reduction the acquisition provides (Johnson, Leenders, & Flynn, 2011). For example, purchasing from a known supplier at a higher...
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...'Procurement is essentially delivering value through relationships' Procurement and Contract Management This article is a literature review on the topic ' Procurement is essentially delivering value through relationships' . Procurement has been always considered to be the least among functions like Marketing, Finance, Human Resource Management etc...even though about 60% of the operating cost is for procurement and in cases like a manufacturing company it is even more. The recent Economic crisis has forced the top management to focus on this aspect of the business more carefully. This review explores the various aspects of procurement, in order to understand the concept of procurement some of the basic concepts like buyer and supplier, business relationships and customer value have been defined. Further I have tried to establish how procurement can add value to a business and to do this I have quoted examples from various business websites and journals. The review is also able to describe how a long term business relationship between the Buyer and Supplier can benefit each other both in terms of growth and financially. Every positive side has a negative side to it, I have been able to show some aspects of the negative side of it. Overall it can be concluded that procurement does deliver value through relationships. Introduction Procurement process is one of the most essential part of a business or a project. Through this process you are exposed to the potential market...
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