Purchasing IBM 206 Ch01

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Purchasing IBM 206 Ch01

  1. 1. Purchasing and Supply Chain Management Session 1Introduction to Purchasing and Supply Chain Management 1
  2. 2. Chapter OverviewThe changing world of purchasing and supply management.Purchasing’s increased role in this new world.Purchasing/supply management terms defined.Supply chain management activities.The pillars supporting supply management.The historic evolution of purchasing/supply management. 2
  3. 3. A New Competitive Environment Increased Competition changes buyer/seller balance of power Evolution of competitive environment: 60’s/70’s – Marketing strategies capturing loyalty. – Strong engineering, design, and manufacturing functions to support market requirements. – Customers needs translated into products. – Need for high level quality at a reasonable cost. – Need for flexibility and responsiveness. 3
  4. 4. A New Competitive Environment Concept of Supply Chain Management Emerges Evolution of competitive environment: 80’s – Need for flexibility and responsiveness 90’s – Organizations realized materials and service inputs from suppliers impacted ability to meet customer needs. – Resulted in increased focus on supply base and 4 purchasing.
  5. 5. Why Purchasing is ImportantAs companies struggle to increasecustomer value by improvingperformance, many companies areturning their attention to purchasingand to supply management. 5
  6. 6. Why Purchasing is Important Results of Good Supply Management: Potential for Profitability Outsourcing Improved product and service quality EPI/ESI 6
  7. 7. Understanding the Value Chain 7
  8. 8. What are Purchasing and Supply Management?• Purchasing is a functional group/activity that supplies the organization with materials. It is often referred to as procurement.• Supply Management is a progressive approach to managing supply base and the supply chain. 8
  9. 9. What is a Supply Chain?• A Supply Chain is three or more organizations linked directly by one or more upstream or downstream flows of products, services, finances, and information from a source to a customer.• The Supply Chain is a subset of the Value Chain. 9
  10. 10. Supply Chains• Simple supply chains pull materials directly from their origin, process them, package them, and ship them to consumers.Extraction Conversion OEM Distributors Consumer 10
  11. 11. What is a Value Chain?• A value chain is a sequence of business functions in which utility (usefulness) is added to products or services as they move from supplier to end customer• Value chains are often viewed like a river--upstream and downstream• NOTE: Value Chain discussion draws heavily from Michael Porter, Competitive Advantage--Creating and Sustaining Superior Performance 11
  12. 12. 12
  13. 13. Primary and Support Activities• Primary Activities Inbound logistics • Includes activities associated with receiving, storing, and disseminating inputs to support the product or service, including transportation, material handling, warehousing, inventory control, vehicle scheduling, and returns to suppliers 13
  14. 14. Primary and Support Activities• Primary Activities Operations • Activities associated with transforming inputs into final form, such as machining, packaging, assembly, equipment maintenance, testing, printing, and facility operations 14
  15. 15. Primary and Support Activities• Primary Activities Outbound logistics • Includes activities associated with physically collecting, storing, and distributing a product or service to customers, such as finished goods warehousing, material handling, delivery, order processing, and scheduling 15
  16. 16. Primary and Support Activities• Primary Activities Marketing and Sales • Includes activities associated with providing a means to which buyers can purchase the product and inducing them to do so, such as advertising, promotion, sales force efforts, job quoting, channel selection, channel relations, and pricing 16
  17. 17. Primary and Support Activities• Primary Activities Service • Includes activities associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment 17
  18. 18. Primary and Support Activities• Primary Activities • In any firm, all the categories of primary activities are present to some degree and play some role • Key primary activities often differ from industry to industry 18
  19. 19. Primary and Support Activities• Support Activities Firm infrastructure • Consists of a number of activities, including general management, planning, government affairs, finance, accounting, legal, and quality management • While firm infrastructure is sometimes viewed as overhead, it can be a powerful source of competitive advantage 19
  20. 20. Primary and Support Activities• Support Activities Human resource management • Consists of activities involved in recruiting, hiring, training, developing, and compensating all types of personnel 20
  21. 21. Primary and Support Activities• Support Activities Technology Development • Includes activities typically associated with MIS, engineering, and R&D and involve activities that seek to improve product and processes. 21
  22. 22. Primary and Support Activities• Support Activities Technology Development • New product and process development are primary concerns of technology development support activities 22
  23. 23. Primary and Support Activities• Support Activities – Procurement • Involves activities associated with identifying, evaluating, selecting, managing, and developing sources of supply 23
  24. 24. Primary and Support Activities• Support Activities – Procurement – Though purchased inputs are commonly associated with primary activities, purchased inputs are present in every value activity, including support activities. 24
  25. 25. Primary and Support Activities• Support Activities -Procurement – Examples: » Supplies » Travel services » Media 25
  26. 26. What is Value Chain Integration?• Value chain integration involves bringing together different groups, functions, or organizations, either formally or informally, physically or by information technology, to work jointly and often concurrently on a common business-related assignment purpose 26
  27. 27. Horizontal Integration Across the Value Chain • Examples of how firms integrate across the value chain-- – Committees/groups/teams – Shared and linked information systems – Integrated performance goals/objectives/measures – Strategy development process 27
  28. 28. Horizontal Integration Across the Value Chain • Examples of how firms integrate across the value chain— – Co-location of personnel within and between the organization – Through a process orientation – Informal or ad hoc exchange of information – Shared risk and reward projects 28
  29. 29. Supply Chains Illustrated 29
  30. 30. SupplyChainsIllustrated 30
  31. 31. Relationships within the Supply Chain• Organizations are forming partnership and alliances with others in the supply chain. These require a shared resource base so the entire chain can benefit as a whole. 31
  32. 32. The Supply Chain Umbrella• Encompasses activities that are part of a network supporting efficient and effective flow of goods and information across the supply chain.• Organizations recognize value of aligning, coordinating, integrating and synchronizing these activities. 32
  33. 33. The Supply Chain Umbrella• Supply Chain activities include: – Purchasing – Inbound Transportation – Quality control – Demand and Supply Planning – Receiving, Materials Handling, and Storage – Material or Inventory Control 33
  34. 34. The Supply Chain Umbrella• Supply Chain activities include: – Order Processing – Production Planning, Scheduling, and Control – Warehousing/Distribution – Shipping – Outbound Transportation – Customer Service 34
  35. 35. Four Pillars of Purchasing and Supply Chain Management Strategies 35
  36. 36. Evolution and Development of Purchasing • Period One- The early years • Period Two- Growth of Purchasing Fundamentals • Period Three-The War Years 36
  37. 37. Evolution and Development of Purchasing• Period Four – The Quiet Years• Period Five- Materials Management• Period Six – The Global Era• Period Seven – Supply Chain Management 37
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