Module 2 : Supply Environment. Ch.4 Internal Relationship. 2/Ch.4 Internal Relationship... · Effective communication across group is a major prerequisite for effective interactions

Module 2 : Supply Environment.

Ch.4 Internal Relationship.

Edited by Dr. Seung Hyun Lee (Ph.D., CPM)IEMS Research Center, E-mail : [email protected]

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■ Developing Internal Relationship. [Task 208]

Relationships with Other Internal Departments. ￭ Long-term Relationships with Internal Customers. ․ The purchasing and supply management function is a subset of an integrative, cohesive whole with considerable interdependencies.

․ Supply management effectiveness is, in part, a function of the quality of its exchanges and relationships with internal partners.

․ Because internal partners share similar opportunities and risks, purchasing and supply management should maximize its involvement with relevant subgroups within the organization.

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Relationships with Other Internal Departments. ￭ Relationships with Other Internal Departments.

․ Top Management →Senior management acknowledges contributions of purchasing activities.

․ Engineering/Design →

Purchasing plays a pivotal role in facilitating the conception, design and development of new products/services.

Relationships with the design function are particularly critical in organization that practice the EPI and ESI concepts.

․ Quality Control/ Quality Assurance

→

Purchasing is expected to work collaboratively with quality assurance to develop, implement, and assess the necessary systems and processes required to add the greatest value to the enterprise.

․ Operations/ Manufacturing/ Production

→

Purchasing and operations are partners in balancing the conflicting materials challenges posed by various function.

In manufacturing environment, the absence of material presents major challenges and tremendous opportunity costs, including layoffs and down time. One of purchasing's primary responsibilities is to prevent such occurrence.

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Relationships with Other Internal Departments. ￭ Relationships with Other Internal Departments.

․ Accounting/Finance →

Supply managers depend on accounting and finance to pay the bills and to provide the cost data required to access the supply system's performance

Interactive relationships with accounting and finance are able to analyze negotiation of long-term contracts, purchase of capital equipment, various leasing and pricing arrangements, and development of total-cost-of-ownership models.

․ Marketing/Sales →

Marketers reflect the voice of the marketplace. Thus, forecast data is provided to purchasing in order to adjust materials purchases and to plan for special contingencies.

․ Logistics /Supply Chain

→

Purchasing communicates to the transportation department specific plans that affect such things as transportation mode, timing, and special requirements.

Additionally, purchasing functions in a similar capacity by providing information useful in buying transportation services for finished goods.

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Interdepartmental Communication. ￭ Some Considerations. ․ Supply management has to be an interdependent function, achieving its goals through others in the organization. More than ever before, purchasing professionals are required to interface with a wider array of organizational members.

․ Effective communication across group is a major prerequisite for effective interactions. In fact, some have suggested a marketing approach to viewing internal partners. Each function should be viewed as a "market segment" with distinct needs and preference.

․ By designing a specific interaction mode for key categories of partners, supply management can more adroitly address the concerns of each segment.

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Interdepartmental Communication. ￭ Mechanisms. ․ Approaching each partner in a non-adversarial, non-accusatory manner is a fundamental prerequisite for maintaining mutually beneficial relationships over a sustained period.

․ Each interaction should be viewed from the perspective of the "macro" view rather than the "micro" view.

․ Additional mechanisms for facilitating interdepartmental communication include use of newsletters, regular meetings with internal customers to discuss sourcing strategies, early purchasing involvement, and customer surveys.

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Interdepartmental Communication. ￭ Role/Perception of Purchasing within the Organization. ․ The overall perception of the supply management function in the organization is critical in crafting solutions to a myriad of problems.

․ If the purchasing group is viewed as weak, traditional-bound, rules-enforcing, procedurally-driven, and hopelessly mired in minutia, it will diminish purchasing's overall effectiveness and stature within the organization.

․ Conversely, If purchasing is viewed as progressive, innovative, entrepreneurial, and carefully focused on broader, organizational goals, then others will perceive the purchasing function differently and will be more likely to work with purchasing from a posture of respect and appreciation.

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Interdepartmental Communication. ￭ Establishment of Trust and Credibility. ․ It is important for purchasing to purchasing must establish rapport and productive dialogue with internal customers.

․ Once internal customers believe that purchasing can contribute to their success and profitability, support and cooperation should be more forthcoming. There must be a sharing of common values, motivations and goals.

․ Every aspect of the purchasing function should exude trust, genuineness, and a spirit of teamwork and helpfulness. This includes personnel, processes, policies, and procedures.

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Interdepartmental Communication. ￭ Early Purchasing Involvement (EPI). ․ To ensure maximum effectiveness of purchasing acumen, the function has to be involved in most key decision area early enough to make a difference. This is especially true in engineering, design, and new product development.

․ If given the appropriate skills and resources, purchasing can better understand the needs, plans, and behaviors of clients. These talents can be used to identify problems, alternative solutions, and various plans of implementation.

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Interdepartmental Communication. ￭ Internal Customer Surveys. ․ Information about each internal partner facilitates a stronger marketing orientation because the needs are understood better. Information may be collected by internal surveys, personal interviews, focus groups, e-mail interviews, video-conferencing, and telephone conversations. Secondary data may be gleaned form internal records and various databases.

․ Regardless of the types of information exchange, purchasers realize that without consistent, reliable data, decisions may be haphazard and may not truly reflect the dynamic circumstances affecting relationships at all levels in the organization.

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■ Cross-Functional Teams. [Task 209]

Cross-Functional Teams. ￭ Definitions. ․ Cross-functional teams are groups of people from various organization functions brought together to achieve clear, worthwhile, and compelling goals that cannot be reached without a team.

․ Teaming leverages organizational resources, while using the expertise of team members.

․ Purchasers typically participate on teams dealing with sourcing, commodities, quality, and/or product/service development.

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Cross-Functional Teams. ￭ Purpose of Cross-Functional Teams. ․ Cross-functional teams are dynamic mechanisms to achieve clear, worthwhile, and compelling goals that demand joint and diverse input for success. Teaming leverages an organization's resources and takes advantage of internal expertise.

￭ Types of Teams Related to Purchasing : Examples.

․ Cost Reduction. ․ Value Analysis. ․ Capital Equipment.

․ Sourcing. ․ Product Development. ․ Budgeting.

․ Supply Development. ․ Information System. ․ Finance.

․ Cycle-time Reduction. ․ Quality Improvement. ․ Inventory Control.

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Cross-Functional Teams. ￭ Role of Purchasing in Teams. ․ Support/Service/Information. In teams involved with area such as cost reduction, value analysis, capital investment, product development, budgeting, and inventory control, purchasing's primary responsibility will be to provide information about sources of supply, product availability, and supply market conditions.

․ Project Management. Purchasing may have responsibility for managing the entire project in area such as supplier development, sourcing, and cost reduction/value analysis.

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Cross-Functional Teams. ￭ Role of Purchasing in Teams. ․ Leadership. As purchasing is recognized as being strategic, it will be expected to take more of a leadership role in finding ways to make the organization more competitive through cycle time reduction, supply chain management, and quality improvement.

․ Facilitation. At all times purchasing professionals should work to facilitate and improve the performance of any teams with which they are involved.

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Advantages of Teams. ￭ Advantages of Teams. ․ Teamwork has the advantages of bringing together the major functions of an organization that have a vested interest in the team's goals. Talents and expertise are combined - resulting in increased quality, reduced costs, and optimized organizational objectives.

․ The team mechanism ensures some degree of input equity regarding the challenge confronting the group. By products of input equity are reduced interfunctional friction, shared ownership, and a stronger sense of unity of purpose.

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Advantages of Teams. ￭ Some Considerations for Team Management. ․ Consensus Building. Clear thinking must be directed toward achieving consensus, and methods of determining consensus must be addressed and agreed upon by participants.

․ Time Considerations. Time factors influence the fervor with which some team efforts are embraced. Understanding time matters influences the team management process.

․ Ownership Issues. The group should determine how it will function and should decide if identification of ideas or approaches will be presented as individual team member contributions or as group contribution. It is important to consider the risks and benefits associated with alternative approaches to ownership.

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Advantages of Teams. ￭ Some Considerations for Team Management. ․ Managing or Introducing Change. Cross-functional teams can provide communication and education throughout the organization about the need for change, the process of change, and the effects of change.

․ Groupthink. Teams functioning over an extended time period begin to think in similar ways and have a tendency to make the same assumptions about problems and situations. It is especially important for members to maintain some degree of conceptual autonomy, but still function in a way that will deliver the real benefits of a team focus.

․ Synergy. Achieving synergy within the team is important. There is a much higher probability of synergy when participants share the same vision, goals, and process expectations.

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Phase of Team Building. ￭ The Introductory Phase. ․ Teams work to understand their charter, set governance policies, timelines, assess skills and personalities of participants, and generally work to ensure a smooth-flowing work environment.

￭ The Growth Phase. ․ Efforts are devoted to channeling group resources toward the main goals and to increasing the momentum of the team. ․ At this point there is general agreement on what should be done and how it should be approached.

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Phase of Team Building. ￭ The Maturity Phase. ․ A work group clearly focus and move toward the completion of the project. ․ There is concern about crafting the final project and targeting alternative means of presenting the group's work.

￭ The Decline Phase. ․ The decline phase represents somewhat of a wrap-up period, in which team members come to some tough conclusions about the essence of their work and about whether or not they have done what they were charted to do. ․ This phase also allows for planning specific means of follow-up and possibly allows for implementation of the recommendations.

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Problem Solving Models.

Scientific Method Deming Scholtes Tague

Definitions of problem.

Plan

Collect Meaningful data.

What do we want to accomplish ?

Analysis of problem.

Who cares and what do they care about ?

Ware are we doing now and how well are we

doing it ?

What can we do better ?

Identification of causes. Identify root cause of problems.

What are the underlying problems ?

Planning countermeasures.

Develop appropriate solutions.

What changes can we make to do better ?

Implementation. Do

Plan and make changes.

Do it.

Confirmation of Result. CheckHow did we do ?

if it worked, how can we do it every time ?

Standardization. Act What did we learn ?

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Effectiveness Measures. ￭ Individual. ․ Performance measures focus on the individual's contribution, such as carrying out assigned responsibilities. ․ Evaluations can be performed by the member's immediate manager, but are frequently more effective if performed by the other team members.

￭ Team. ․ The team's performance should be evaluated against the team's goals. ․ Performance measurement allows the sponsor to determine a team's progress toward its stated objectives. The sponsor should give the team accurate, specific, prompt, direct, reliable, and appropriate feedback to ensure its success.

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■ Implementing Changes. [Task 210]

The Procurement Process. ￭ Roles of Purchasing/Procurement.

․ Providing and managing purchasing process.․ Checking requisitions.․ Selecting suppliers. ․ Placing orders. ․ Scheduling purchase and deliveries. ․ Analyzing bids and conducting negotiations. ․ Following up and expediting orders. ․ Interviewing sales personnel. ․ Handling claims with suppliers. ․ Providing information for capital acquisitions. ․ Seeking engineering and product improvement assistance. ․ Developing and training other purchasers. ․ Maintaining product and supplier source files.․ Developing new sources of supply and establishing standardization programs.

․ Conduct make-or-buy decisions. ․ Conduct materials and components analysis. ․ Conducting market trend analysis and forecasts for management. ․ Training users on the purchasing /requisition process, as appropriate.․ Providing input to product design and product improvement. ․ Handling contract administration and supplier management. ․ Developing partnerships and strategic alliance with suppliers. ․ Developing cost reduction programs. ․ Identifying ways to use technology more effectively. ․ Maintaining files on supplier performance.

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The Role of Purchasing in Organization Strategies. ￭ Public Sector. ․ Governments buy services and goods to fulfill the requirements of the various authorized programs; to maintain, repair, and operate facilities; and to accomplish necessary research and development.

․ Pressed by shortages of funds and rising costs, governments try to operate maximum efficiency and at minimum cost.

․ Typical areas for purchasing by governmental entities include support for various services such as police and fire protection; the maintenance of streets, parks, and public buildings; garbage collection and disposal; and other services.

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The Role of Purchasing in Organization Strategies. ￭ Private Sector. ․ Manufacturing and service organizations buy raw materials, component parts, and subassemblies to convert or assemble into finished product or to provide some service. They also buy goods and services to maintain, repair, and operate facilities, and to perform research and development for new product lines.

․ An effective purchasing department plays an important role in determine an organization's material cost and, hence, its profit. Many organizations spend between 40% and 65% of their sales dollar for materials and services used in their operations.

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The Role of Purchasing in Organization Strategies. ￭ Not-for-Profit. ․ There is no legal difference between a not-for-profit and a Non-profit.

￭ Non-Profit/Institutional Sector. ․ As in the private and government sectors, non-profit organizations buy goods and services to accomplish objectives, to maintain, repair and operate facilities, and to perform research and development.

․ An example of non-profit purchasing includes buying for a hospital or a university.

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Change Management. ￭ The Steps for Managing Changes. 1. Collect Data. Data collection involves searching for opportunities for improvement. Information is gathered from customers, suppliers, and employees.

2. Evaluating the Opportunities for Change. Using the information collected in the first stage, compare the advantages and disadvantages of proposed changes, including implications such changes might have on cash flow, working practices, supply and distribution networks, and customer loyalty.

3. Design Strategy. Developing a detailed plan that covers rationale for change, objectives of change, implementation process, individual involvement, resource requirements, time frame, and evaluation measures.

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Change Management. ￭ The Steps for Managing Changes. 4. Implement Change Strategy. Implementation begins with education of all those involved and affected. Present the plan, encourage clarification, monitor the changes, and modify the plan as necessary.

5. Review. Using the evaluation measures defines in the plan, periodically review program.

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■ Training For Changes. [Task 211]

Roles of Training. ￭ The Importance of Training. ․ While it is standard to provide training within the purchasing and supply department, the reduction or elimination of departmental boundaries and the use of cross-functional teams have resulted in the need to more effectively and conscientiously educate others within the organization about purchasing and supplier policies and process.

․ The greater the understanding of how effective purchasing techniques and processes support the mission and goals of the organization, the more likely that purchasing will be successful and that internal customers will be satisfied.

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The Development of Training Manuals. ￭ Responsibility. ․ The development of a comprehensive training manual is the responsibility of every purchasing department.

￭ Relationship to General Training Manuals. ․ Purchasing training manuals and policies and procedures manuals are developed and used to train personnel inside and outside of the department.

․ They can refer to those manuals when they have questions on policy or procedure during and after orientation and initial training. Procedure manuals are especially useful when extensive details in routine operations are needed.

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The Development of Training Manuals. ￭ Use as On-Going Reference. ․ Policy and procedure manuals encourages standard practices, improve procedures, aid in training customers, and clearly delineate authority and responsibilities.

․ For example, Texas maintains a procurement manual on its Web site (www.gsc.state.tx.us). It is available to state employees, suppliers, and the general public.

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Performance Measures of Training. ￭ Training Cost, Effectiveness, and Outcomes Measurement. ․ When training has been extensive and formal it is important to measure training outcomes in behavioral and operational terms, to determine the effectiveness of the training effort and to determine the relevance of the trainee's behavior to the organization's objectives.

․ Questions usually addressed when evaluating training programs. - Was there a change in knowledge, skills, and/or abilities related to purchasing - effectiveness in the various participants ? - Were these changes due to the training ? - Are the new skills positively related to the organization's goals ? - Will similar changes occur for new participants in the training program ? - Was the training cost effective ? Was it worth the expense to the organization ? - Could the same effect have been achieved with a less expensive training - mode ?

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The Learning Organization Concept. ￭ Learning Organization. ․ True learning organizations do not simply adapt to changes in their environments. They teach from the changes they make, challenging their mental models, their core beliefs about how the world works, and their processes of thinking and solving problems.

․ Learning-oriented purchasing organizations focus on combining adaptability, continuous improvement, and a strong sense of purpose. They adapt to the nuances of both the internal and external environments that shape the essence of purchasing and its related functions.

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The Learning Organization Concept. ￭ Some Traits of Learning-Dominated Supply Management. ․ Shared Vision. Learning-dominated teams in procurement have a collective vision that is like a beam of light guiding a ship.

․ Using Conflict Constructively. Learning-dominated groups consider types of friction constructive and valuable. In fact, it is encouraged and promoted because it forces constant reassessment of both the internal and external landscape.

․ Spirit of Creativity and Innovation. Learning organizations accept and use the multitude of creative problem-solving methods available to improve the ability of people to do their jobs.

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The Learning Organization Concept. ￭ Some Traits of Learning-Dominated Supply Management. ․ Commitment to Education. A commitment to education in its very broadest sense is the hallmark of moving individuals and organizations to the highest levels of performance.

․ Perceptive Risk-Taking. Learning-dominant supply organizations are more comfortable with risk-taking. They pursue calculated and intuitive risks. The learning environment of supply management must reinforce the importance of risk-taking behavior, and supply management must be willing to absorb some of the consequences of mistakes.

․ Development of Entrepreneurial Talents Internally. Learning organizations harness entrepreneurial skills internally. Intrapreneurs do what entrepreneurs do-just inside the organization. They take new ideas, concepts, and practices, and convert them into profitable realities.

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■ Performance Check.

1. An engineer is trying to locate a piece of central office equipment that was due to arrive at her location four days earlier. The order was shipped FOB origin, freight collect. Which of the following departments should perform the function of locating the shipment ? A. Purchasing. B. Traffic/Transportation. C. Engineering. D. Receiving.

2. Responsibility for physical distribution is sometimes delegated by the marketing manager to the supply manager for all the following reasons EXCEPT : A. Supply management is able to apply almost identical skills to both finished goods and purchased goods. B. Marketing prefers to concentrate its efforts as much as possible on sales rather than on technical problems involved in physical distribution. C. The expertise of marketing personnel is generally confined to the art of selling the company's product. D. Physical-distribution policy decisions, such as whether to stock a product or require customers to wait for delivery, are best made by supply management.

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3. Effective internal communication methodologies are MOST likely to affect employee A. Compensation. B. Morale. C. Attendance. D. Wellness.

4. The local community is very concerned about a shipment of hazardous waste that was erroneously dumped into a landfill by your organization's waste disposal contractor. Which organizational function is LEAST likely to assist you in solving this dilemma ? A. Traffic. B. Finance. C. Legal. D. Public Relations.

5. Which of the following are typical reasons for the accounting department to receive either paper or electronic invoices ? Ⅰ. The accounting department usually approves delivery, quantity, and conditions. Ⅱ. The accounting department checks prices against purchase orders, terms and extensions. Ⅲ. The procedure provides a safeguard against dishonesty in the purchase and receipt of goods.

A. l and ll. B. l and lll. C. ll and lll. D. All of the above.

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6. Of the following, the MOST effective way for purchasing to promote Early Purchasing Involvement (EPI) is to A. Inform other departments about purchasing's role. B. Issue a policy statement. C. Control supplier interfaces. D. Understand the needs for other functions.

7. Cross-functional teams are formed when A. An organization empowers its people. B. Expertise and vested interests exist in several functions. C. The organization seeks to create additional value-added activities in several functions. D. The customer requests it.

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8. In which of the following teams would purchasing be LEAST effective when the team's goal is to reduce costs ? A. Commodity team. B. Incoming quality team. C. Supplier certification team. D. Value analysis team.

9. The role of purchasing in cross functional teams is to do all of the following EXCEPT A. Provide procurement advice on products and services. B. Obtain product availability information from prospective suppliers. C. Make the final selection of capital equipment to be purchased. D. Obtain product cost information from prospective suppliers.

10. Which of the following would be the LEAST appropriate evaluation criteria for a cross-functional team ? A. The team's goals. B. The leader's goals. C. The stated objectives. D. Team participation.

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11. Which of the following items should be evaluated by team members, rather than by managers ? Ⅰ. Individual team member performance. Ⅱ. Overall team performance.

A. l only B. ll only C. Both l and ll D. Neither l and ll

12. Which of the following is MOST important in establishing cross-functional sourcing team ? A. Top management support. B. Team players. C. Support from suppliers. D. Clearly defined goals.

13. A supply management organization is generally formed to do all of the following EXCEPT. A. Reduce costs. B. Improve customer service. C. Improve quality. D. Increase sales.

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14. Which of the following are normally included within materials management ? Ⅰ. Purchasing. Ⅱ. Stores. Ⅲ. MIS. Ⅳ. Accounts Payable. A. l and ll B. l and lV C. ll and lll D. lll and lV

15. In most organizations the review of specifications and the choice of a responsible supplier to comply with such specifications is the responsibility of A. The chief financial officer. B. The purchasing department. C. Top management. D. The production department.

16. Which of the following is NOT usually included among the functions of the manager of materials ? A. Stores and receiving. B. Inventory Control. C. Traffic. D. Account Payable.

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17. Which of the following functions would LEAST likely be part of a logistics organization ? A. Supplier interface. B. Purchasing planning. C. Inbound transportation. D. Physical distribution.

18. Which of the following is TRUE with regard to the responsibility for developing an organization-wide training manual on purchasing policies and procedures, to be used for training persons outside the purchasing department ? A. It should be a joint effort of human resources, public relations and accounting. B. It should be developed by top management. C. It should be developed by the purchasing department. D. It should be developed by the human resources department.

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19. Which of the following is LEAST likely to be a means for training employees in departments outside of purchasing on organizational procurement policies and procedures ? A. Seminars. B. Training Manuals. C. Job Rotation. D. Certification.

20. Which of the following topics is LEAST appropriate to include in an organizational training program for persons and departments outside the purchasing department ? A. Uniform Commercial Code. B. Locating sources of supply. C. Developing product specifications. D. Evaluating the purchasing department.

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21. In which of the following circumstances are purchasing procedures manuals particularly useful ? A. When there are extensive details in routine operations. B. When the organization is faced with an unexpected downturn in business. C. When the organization encounters major quality problems with a large supplier. D. When a particular user department frequently defies the authority of the purchasing department.

22. Of the following, the PRIMARY objective of a purchasing training program for individuals outside the purchasing department is to provide them with A. Technical knowledge of supplier's products. B. An understanding of the organization's purchasing policies and procedures. C. Enough legal understanding to interpret purchasing contracts. D. An understanding of the theoretical, as well as the practical, aspects of purchasing.

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Solutions.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

B D B B C D B B C B A A D A B D B C D D A B

Documents

Module 2 : Supply Environment. Ch.4 Internal Relationship. 2/Ch.4 Internal Relationship... · Effective communication across group is a major prerequisite for effective interactions