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Introduction to Purchasing and Supply Chain Management. Chapter 1. Current business trend. Co… vs. Co…. A New Competitive Environment. Increasing numbers of world class global competitors Sophisticated customer base More performance at lower cost Widely available information sources - PowerPoint PPT Presentation
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Introduction to Introduction to Purchasing and Supply Purchasing and Supply
Chain ManagementChain Management
Chapter 1Chapter 1
Current business trend
Co… vs. Co…
2
A New Competitive Environment
Increasing numbers of world class global competitors
Sophisticated customer base More performance at lower cost
Widely available information sources Balance of power between buyers and
suppliers Greater levels of outsourcing
3
Factors Driving SCM
Low cost and wide availability of information more closely links members of a supply chain
Competition in domestic and international markets requires greater quickness, agility, and flexibility
4
Factors Driving SCM
Customer expectations and requirements are constantly changing and more demanding
Major supply disruptions require the ability of a supply chain to react rapidly
Competition is now between supply chains, not just between companies
55
Why Purchasing Is Important
Increasing value and savings by supply management or marketing?
Building relationships and driving innovation
Improving quality and reputation Reducing time-to-market Generating economic impact Contributing to competitive advantage
6
Increasing Value and Savings
Suppliers have substantial impact on a firm’s total cost
Many product features originate from suppliers
In manufacturing, purchased content is more than 55% of revenues
Avoiding costs through early involvement in product design stage
77
Building Relationships andDriving Innovation
Traditional approach is to bargain hard for price reductions
New approach is to conduct joint cost reduction with suppliers
Both buyer and supplier must benefit Suppliers can contribute innovative
ideas
88
Improving Quality and Reputation
Buyer focuses on core competencies and outsources non-core activities and materials
Need for ability to track materials back up through supplier’s supply chain
Supplier quality product quality
(Example of Heparin)
99
Reducing Time-to-Market
Include suppliers early in product design process to take advantage of their expertise
Early supplier involvement can lead to an average of 20% improvement on material costs, material quality, and product development times
1010
Generating Economic Impact
The monthly ISM Report on Business is a closely followed national economic indicator A change index Manufacturing and non-manufacturing
components
> 50 means economy is expanding < 50 means economy is contracting
1111
Contributing to Competitive Advantage
Growing recognition of supply management’s contribution to firm’s profitability
More supply managers have earned college degrees
Increased number of supply managers with certifications such as CPSM
1212
Language of Purchasing and SCM
Is purchasing different from supply management?
Are supply chains and value chains the same?
What is supply chain management?
1313
Purchasing
A functional group (i.e., a formal entity on the organization chart) as well as a functional activity (i.e., buying goods and services)
a.k.a. as procurement
1414
Purchasing
Activities Supplier identification and selection Buying Negotiation and contracting Supply market research Supplier measurement and improvement Purchasing systems development
1515
Supply Management
A strategic approach to planning for and acquiring the organization’s current and future needs through effectively managing the supply base, utilizing a process orientation in conjunction with cross-functional teams to achieve the organizational mission
1616
ISM’s Definition
The identification, acquisition, access, positioning, and management of resources and related capabilities an organization needs or potentially needs in the attainment of its strategic objectives
1717
Defining Supply Management
1818
Strategic Orientation
Cross Functional
Groups
Process-Driven
Approach
Supply Base Management
Supply Management
Strategic responsibilities Activities which have a major long-term
impact on firm performance
Managing the supply base Work directly with suppliers to provide
world-class performance
1919
Supply Management
Process approach Collaborating with and coordinating other
functional areas as they pertain to suppliers
Move across functional area boundaries
Cross-functional Sharing information Suppliers as an extension of the buying
company2020
The Supply Chain Umbrella
Purchasing Inbound transportation Quality control Demand and supply planning Receiving, materials handling, and
storage Material or inventory control
2121
The Supply Chain Umbrella
Order processing Production planning, scheduling, and
control Warehousing/distribution Shipping Outbound transportation Customer service
2222
Enablers of Purchasing and SCM
Capable Human Resources
Supplier relationship management Total cost analysis Purchasing strategies Supplier analysis Competitive market analysis Need for close collaboration with
suppliers Need for close internal coordination
2424
Proper Organizational Design
Assessing and selecting structure and formal system of communication
Division of labor Coordination Control Authority Responsibility
2525
Real-Time Collaborative Technology Capabilities
Supply chain planning Improve forecast accuracy Optimize production scheduling Reduce working capital costs Shorten life cycles Reduce transportation costs Improve customer service
2626
Real-Time Collaborative Technology Capabilities
Supply chain execution Obtaining materials Managing physical flows Lean supply
2727
Emerging SCM Technologies
Global positioning systems (GPS) Internet-based systems Bar codes Radio frequency identification devices
(RFID) Hand-held, wireless devices Voice recognition
2828
Right Measures andMeasurement Systems
Roadblocks Too many metrics Debate over the correct metrics Constantly changing metrics Old data
2929
Right Measures andMeasurement Systems
Overcoming roadblocks Know what to measure Have a process in place to measure it Have accessibility to the data
3030
Why Is Measurement Important?
Supports fact-based decision making Communicates requirements through
the supply chain Improves future supplier performance Recognizes outstanding performance Links critical measures to desired
business outcomes Determines if initiatives are working
3131
Evolution of Purchasing and SCM
The early years 1850 – 1900
Growth of purchasing fundamentals 1900 – 1939
The war years 1940 – 1946
The quiet years 1947 – Mid-1960s
3232
Evolution of Purchasing and SCM
Materials management comes of age Mid-1960s – Late 1970s
The global era Late 1970s – 1999
Integrated supply chain management The 21st century
3333