Purchasing system Procedures, manual or computerized, followed by an organization to achieve the following basic objectives: to determine the quality and quantity needed and the time when an item is needed; to obtain the best possible price; and to maintain information on sources of supply.
Concepts The system should utilize such concepts as Economic Order Quantity (EOQ) optimal reorder point, Quantity Discounts, and Material Requirement Planning (MRP) Detailed planning of production
Material requirement planning
Systems vs procedures A procedure (Page 182) A system of sequential steps to get a task done Strategies -> Policies -> Procedures A system A cluster of reliable procedures that provide information enabling staff to execute and control those operations
Two broad types of system Traditional purchasing system Electronic purchasing system
Traditional purchasing procedures Identify Requisition Order Request for quotation (RFQ) Quotation Purchase order Order acknowledgement Post-order Delivery, receipt, invoice etc
Useful when The order is small E-procurement system is not available Non-standard items Urgent needs
Inefficiency Non-value-adding activities Excessive documentation Excessive time Excessive cost of transactional activities
Discuss To what extent is traditional purchasing procedures are applicable to IBM? What are its weaknesses?
Electronic purchasing E-commerce Business transaction carried out electronically over telecom systems E-business Business transaction + other electronic communication, e.g. CRM, MRP E- SCM Internal purchasing system that links to industrywide electronic marketplace EDI
Exchange data Interchange(EDI) Creating and approving purchasing requisitions, placing purchase orders and receiving goods and services by using a software system based on Internet technology. e-MRO (Maintenance, Repair and Overhaul) The same as web-based ERP except that the goods and services ordered are non-product related MRO supplies. e-sourcing Identifying new suppliers for a specific category of purchasing requirements using Internet technology.
E-procurement Using the Internet to operate the buying process Requisition against contract Authorisation Order Receipt Payment
Types of e-procurement Web-based ERP (Enterprise Resource Planning) e-MRO (Maintenance, Repair and Overhaul) The same as web-based ERP except that the goods and services ordered are non-product related MRO supplies. e-sourcing Identifying new suppliers for a specific category of purchasing requirements using Internet technology.
Types of e-procurement e-tendering Sending requests for information and prices to suppliers and receiving the responses of suppliers using Internet technology. e-reverse auctioning: Using Internet technology to buy goods and services from a number of known or unknown suppliers.
Types of e-procurement e-informing Gathering and distributing purchasing information both from and to internal and external parties using Internet technology. e-marketsites Expands on Web-based ERP to open up value chains. Buying communities can access preferred suppliers' products and services, add to shopping carts, create requisition, seek approval, receipt purchase orders and process electronic invoices with integration to suppliers' supply chains and buyers' financial systems.
Discuss To what extent does e-procurement system contribute to IBM’s buying objectives? Any limitation to the use of e-procurement? http://www.sixhills-consulting.com/Documents/Understanding_the_benefits_of_e-Procurement-Gueritz_Jan01.pdf