Introduction To Purchase

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Introduction To Purchase

  1. 1. <ul><ul><li>WELCOME </li></ul></ul><ul><ul><li>TO </li></ul></ul><ul><ul><li>TRAINING SESSION </li></ul></ul><ul><ul><li>By : ISMT- PURCHASE </li></ul></ul>
  2. 2. TOPICS <ul><ul><li>1. Concept of ERP & MRP. </li></ul></ul><ul><ul><li>2. Supply Chain Management (SCM) </li></ul></ul><ul><ul><li>3. Purchasing. </li></ul></ul><ul><ul><li>4. Overview of JIT (Just-In-Time). </li></ul></ul><ul><ul><li>. </li></ul></ul>
  3. 3. <ul><ul><li>CONCEPT OF ERP & MRP . </li></ul></ul>
  4. 4. CONCEPTS OF ERP (ENTERPRISE RESOURCE PLANNING) <ul><li>Definition of ERP : </li></ul><ul><li>Software solution that address all the needs of an enterprise with the process view of an organization to meet the organizational goals and intergrate all the functions of the enterprise. </li></ul>
  5. 5. CONCEPTS OF ERP <ul><li>What is ERP : </li></ul><ul><li>Facilitates Company – wide integrated Informaion Systems Covering all functional Areas. </li></ul><ul><li>Performs core Corporate activities and increases customer service augmenting Corporate Image. </li></ul><ul><li>Organizes & Optimizes the data input methodologies systematically. </li></ul>
  6. 6. CONCEPTS OF ERP <ul><li>Evolution of Planning Systems </li></ul><ul><li>Materials Requirement Planning (MRP) </li></ul><ul><li>Manufacturing Resource Planning (MRP II) </li></ul><ul><li>Enterprise Resource Planning (ERP) </li></ul><ul><li>Other Terminologies are : </li></ul><ul><li>Money Resource Planning (MRP III) </li></ul><ul><li>Supply Chain Management </li></ul><ul><li>Value Chain Management </li></ul>
  7. 7. CONCEPTS OF ERP <ul><li>Is It Only Jargaon ? </li></ul><ul><li>No. MRP and MRP II were there for a long time. </li></ul><ul><li>ERP is an enhancement over these </li></ul><ul><li>It is true that Year 2000 problem accelerated the sales and acceptance of ERP. </li></ul><ul><li>Introduction of ERP provides you a chance to have a new look at your working. </li></ul>
  8. 8. CONCEPTS OF ERP <ul><li>Is It Going to be there long? </li></ul><ul><li>Yes and No. </li></ul><ul><li>ERP will be there for a long time, if you are willing to upgrade to new versions with new features as and when they are released in the market </li></ul><ul><li>Your ERP may still work after a long time without enhancements, if your company is not growing! </li></ul><ul><li>Moral : Upgrading the systems are a must! </li></ul>
  9. 9. CONCEPTS OF ERP <ul><li>Do not wait if you have : </li></ul><ul><li>Tough competition in the market </li></ul><ul><li>Multiple location Operations </li></ul><ul><li>Plans to grow Globally </li></ul>
  10. 10. CONCEPTS OF ERP <ul><li>Why ERP ? </li></ul><ul><li>Profitability : You have Two Choices : </li></ul><ul><li>Increase in Sales </li></ul><ul><li>OR </li></ul><ul><li>Reduce Procurement Cost </li></ul>
  11. 11. CONCEPTS OF MRP (Material Requirements Planning) <ul><li>Definition of MRP ? </li></ul><ul><li>MRP is a software based production planning and inventory control system used to manage manufacturing processes. </li></ul>
  12. 12. CONCEPTS OF MRP <ul><li>An MRP system is intended to simultaneously meet three objectives : </li></ul><ul><li>Ensure materials & products are available for production & delivery to customers </li></ul><ul><li>Maintain the lowest possible level of inventory </li></ul><ul><li>Plan manufacturing activities, delivery schedules and purchasing activities. </li></ul>
  13. 13. <ul><ul><li>SUPPLY CHAIN MANAGEMENT (SCM) . </li></ul></ul>
  14. 14. SUPPLY CHAIN MANAGEMENT <ul><li>Supply Chain Management Strategem is : </li></ul><ul><li>Where business Partners mutually commit to work closely together, with in the supply chain, </li></ul><ul><li>To bring greater value to the consumer and/or their customers </li></ul><ul><li>For the least possible overall supply cost. </li></ul><ul><li>SCM is a Philosophy Where as Logistics is the enabler. </li></ul>
  15. 15. A SIMPLE SUPPLY CHAIN LOGISTICS TRANSPORT STORAGE PACKING and HANDLING + DISTRIBUTION RAW MATERIALS SUPPLIER COMPONENT MANUFACTURER ASSEMBLER RETAILER TO FINAL CUSTOMER / CONSUMER
  16. 16. THE GOAL IN SCM <ul><li>Is to link </li></ul><ul><li>The Market place, </li></ul><ul><li>The Distribution Network, </li></ul><ul><li>The Manufacturing Process and </li></ul><ul><li>The Procurement activity in such a way that </li></ul><ul><li>C ustomers are serviced, at higher levels and yet, at lower costs! </li></ul>
  17. 17. OBJECTIVES OF SCM <ul><li>To weave each of the trading partners into Seamless fabric of : </li></ul><ul><li>Information flow, </li></ul><ul><li>Physical distribution flow and </li></ul><ul><li>Cash flow for the benefit of the end customer. </li></ul><ul><li>The trading partners achieve their profit or loss, through their ability to work together. </li></ul>
  18. 18. Better Supply Chain Management helps a firm to... <ul><li>Reduce total costs </li></ul><ul><li>Ensure continuity of production </li></ul><ul><li>Improve quality </li></ul><ul><li>Innovate </li></ul><ul><li>Respond quickly to market changes </li></ul>
  19. 19. <ul><ul><li>PURCHASING . </li></ul></ul>
  20. 20. PURCHASING <ul><li>Now What Is In Store 4 U?! </li></ul><ul><li>An Outcome Based Learning...... </li></ul><ul><li>Delivered by Renouned Institutions </li></ul><ul><li>Through various structured Training Modules designed specially for you, we will walk you through the Art & Science of Procurement ! </li></ul><ul><li>Aiming surely, to update U with the latest and proven Tools & Techniques of Procurement. </li></ul>
  21. 21. DEFINING PURCHASING <ul><li>Purchasing is the acquisition of needed goods and services at optimum cost from competent reliable sources to maintain a smooth flow of Goods & Services for Manufacturing and or any Business activity. </li></ul>
  22. 22. DEFINITION EXPANDED <ul><li>Needs : Examine need, Timing, Quantity, source, specifications </li></ul><ul><li>Goods & Services: Make or Buy or Lease </li></ul><ul><li>Optimum Cost: Best Total cost, not only lowest acquisition cost: consider also Quality and Service </li></ul><ul><li>Competent sources: Select carefully </li></ul><ul><li>Reliable Sources: Monitor Performance </li></ul>
  23. 23. SCOPE OF PURCHASING <ul><li>Involves all of those management processes and operations needed to ensure that an organisation is able to obtain, all of the products and services that it requires as and when & where required, cost-effectively, from outside sources. </li></ul>
  24. 24. PURCHASING TASKS <ul><li>Needs Assessment </li></ul><ul><li>Source identification </li></ul><ul><li>Contract Negotiation </li></ul><ul><li>Supplier Selection </li></ul><ul><li>Purchase Order Issuance </li></ul><ul><li>Expediting / follow up </li></ul><ul><li>Performance Evaluation </li></ul>
  25. 25. PURCHASING AS A PROFIT CENTER <ul><li>Enlightened companies view Purchasing as : </li></ul><ul><li>A vital meaningful function and not clerical. </li></ul><ul><li>A proactive, Strategic player, not a reactive hurdle </li></ul><ul><li>A powerful bottom-line contributor and no more a cost-center </li></ul><ul><li>A Team member and not a necessary evil. </li></ul>
  26. 26. SAVINGS CAN BE EFFECTED BY PURCHASING IN FOLLOWING WAYS! <ul><li>Moving to lower-cost Sources from traditional sources </li></ul><ul><li>Using less expensive substitute materials </li></ul><ul><li>Initiating Design Changes that affect cost but not performance </li></ul><ul><li>Suggesting the use of standard, off-the-shelf components instead of expensive Custom –tooled items. </li></ul>
  27. 27. MORE SAVINGS BY PURCHASING ! <ul><li>Obtaining quantity discounts for larger, consolidated purchases and shipments </li></ul><ul><li>Reducing administrative expenses by issuing and tracking fewer purchase orders </li></ul><ul><li>Pooling purchasing power and effort with other organisations in the form of co-operative buying </li></ul><ul><li>Concentrating all purchases of a particular item with a single source. </li></ul>
  28. 28. STILL MORE SAVINGS BY PURCHASING!! <ul><li>Investigating international sources for quality and prices. </li></ul><ul><li>Getting suppliers (manufacturers or distributors) to assume the storage function for materials purchased from them </li></ul><ul><li>Negotiating for better price and/or more favourable terms from established sources. </li></ul>
  29. 29. RELATIONSHIPS OF PURCHASE IN THE ORGANISATION <ul><li>Sources Company </li></ul>Customers Suppliers Purchasing Marketing Quality Production Engg. Legal Transport Stores Finance Accounting Maintenance HR
  30. 30. RESPONSIBILITIES PURCHASE SHARES WITH OTHER DEPARTMENTS <ul><li>Obtaining technical information and advice on the quality, specifications of materials or equipment (Design) </li></ul><ul><li>Establishing and developing specifications for materials (R&D) </li></ul><ul><li>Inspection of materials for quality. (Quality Control) </li></ul><ul><li>Accounting including payment of bills. (Finance and Accounts ) </li></ul><ul><li>Inventory control. (Materials planning) </li></ul><ul><li>Receiving, Store keeping and W/Housing, (Stores) </li></ul><ul><li>Construction contracts or service contracts and agreements. (Projects/Maintenance Office Administration) </li></ul><ul><li>Sale of scrap and surplus and salvaging. (stores) </li></ul><ul><li>Clearing and Forwarding. (Stores) </li></ul><ul><li>Deciding whether to Make or Buy or Lease (Production/Process planning). </li></ul>
  31. 31. ORGANISATION FOR PURCHASE <ul><li>As a crucial function in any business, Purchasing has to be well organised to perform its many and varied tasks efficiently and effectively. </li></ul><ul><li>Organisation refers to logical structuring of people and activities that allows them to interact smoothly for optimum performance. </li></ul>
  32. 32. AIM OF ANY ORGANISATION <ul><li>To deliver the Functional Responsibility for which it was primarily created – </li></ul><ul><li>In Purchasing, it is providing Materials and services efficiently and Cost effectively. </li></ul>
  33. 33. <ul><li>OVERVIEW OF J.I.T. </li></ul><ul><li>(JUST-IN-TIME ) </li></ul>
  34. 34. OVERVIEW <ul><li>Definition of Just-in-time </li></ul><ul><li>Purchasing </li></ul><ul><li>Different uses </li></ul><ul><li>How it will help </li></ul><ul><li>Examples of Just-in-time </li></ul><ul><li>Purchasing </li></ul>
  35. 35. BRAINSTORMING <ul><li>How can just-in-time purchasing be used in an organization </li></ul>
  36. 36. ADVANTAGES TO JIT <ul><li>Reduces the need for central warehousing and storage </li></ul><ul><li>Long-term relationships that help to certify suppliers </li></ul><ul><li>Receiving inspection is reduced and in some cases eliminated. </li></ul><ul><li>Lowered variety in suppliers </li></ul><ul><li>Reliable delivery schedules </li></ul><ul><li>High quality materials used </li></ul><ul><li>Reduced waste. </li></ul>
  37. 37. DEMANDS ON PURCHASING OF JIT <ul><li>Reduced number of suppliers </li></ul><ul><li>Stable and good communication throughout a firm </li></ul><ul><li>Locating suppliers nearby </li></ul><ul><li>Long-term relationships </li></ul><ul><li>Helping suppliers to increase quality </li></ul><ul><li>Not to get hung up by single sourcing </li></ul><ul><li>Buying from small firms. </li></ul>
  38. 38. LIMITATIONS OF JIT <ul><li>Difficulty to change old ways </li></ul><ul><li>Employee commitment </li></ul><ul><li>Production levels </li></ul><ul><li>Employee skills. </li></ul>
  39. 39. PRESENTATION OVERVIEW <ul><li>JIT Purchasing Traditional </li></ul><ul><li>* Smaller lot sizes * Relatively large lot sizes </li></ul><ul><li>* More frequent deliveries * Less deliveries at higher </li></ul><ul><li>* No rejection from the quantities </li></ul><ul><li>Suppliers * Rejection from supplier </li></ul><ul><li>* Long-term contracts * Lowest price is main </li></ul><ul><li>* Buyer decides delivery objective </li></ul><ul><li>Schedule * Time consuming, formal </li></ul><ul><li>* Innovation encouraged paperwork </li></ul><ul><li>* Minimal paper work * Formal communication </li></ul><ul><li>* Less formal </li></ul><ul><li>communication </li></ul>
  40. 40. WHY ORGANIZATIONS USE JIT PURCHASING <ul><li>Reduce waste </li></ul><ul><li>Higher quality in products </li></ul><ul><li>Fewer suppliers </li></ul><ul><li>Reduction in warehouses </li></ul><ul><li>Dependable delivery </li></ul>
  41. 41. EXAMPLE - FAXBAN <ul><li>What is Faxban ? </li></ul><ul><li>It combines production floor fax machines and kanban re-supply signals to lower transaction processing and save money. </li></ul>
  42. 42. EXAMPLE - FAXBAN <ul><li>Honeywell started using this with their suppliers. </li></ul><ul><li>Re-supply orders are faxed from the production floor by the workers to suppliers. </li></ul>
  43. 43. EXAMPLE - FAXBAN <ul><li>What techniques are used in Faxban? </li></ul><ul><li>EDI </li></ul><ul><li>Kanban </li></ul><ul><li>Blanket Order </li></ul>
  44. 44. EXAMPLE - FAXBAN <ul><li>What were the outcomes? </li></ul><ul><li>Transaction processing reduced </li></ul><ul><li>Reduction in accounts payable function </li></ul><ul><li>Money saved </li></ul><ul><li>Reduced waste </li></ul><ul><li>Direct communication resulted in less ambiguity between supplier and customer </li></ul><ul><li>Time reduced. </li></ul>
  45. 45. SUMMARY OF JIT PURCHASING <ul><li>Many advantages that lead to reduction in waste , storage and other aspects that lead to saving money and time. </li></ul><ul><li>Long-term relationships with suppliers. </li></ul><ul><li>Many different techniques are used depending on the demand of the company. </li></ul><ul><li>Higher quality material used. </li></ul>
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