Purchasing a link to sc - sc next
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A presentation about Purchasing as a major Supply Chain Activity presented in SC Next first event in Alexandria University
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Purchasing a link to sc - sc next
- 1. Purchasing: A link in a Supply Chain Hisham M. El-Tawil EZZ Steel Corporate Procurement Planning S. Manager B.Sc. Production Engineering (1997) MBA (Operations Management) (2013) 5 December 2015
- 2. Content • Introduction & Definitions • Purchasing Hierarchy • Purchasing Methods • General Purchasing Cycle & Total Cost of Ownership • Global Sourcing • INCOTERMS Purchasing:AlinkintheSC 2
- 3. Purchasing:AlinkintheSC 3 What am I doing related to FIVE Years Engineering?
- 5. Purchasing Definitions • “The act of buying something” (Cambridge Dictionary) • “The activity of acquiring goods or services to accomplish the goals of an organization” (BusinessDictionary.com) Purchasing:AlinkintheSC 5
- 6. Purchasing vs. Procurement Procurement •Vendors Selections •Vendors Evaluation •Market Research •Contract Negotiation Purchasing •Request for Quotation •Approvals •Purchase order issuance •Receipt of Goods Purchasing:AlinkintheSC 6
- 7. Procurement in Supply Chain Supply Chain Management Procurement Purchasing Purchasing:AlinkintheSC 7
- 8. Purchasing MUSTs • Right Solution • Right Price • Right Quality • Right Quantity • Right Time • Right Place • Right Source Purchasing:AlinkintheSC 8
- 10. Centralized vs. Decentralized Purchasing Centralized Purchasing Head Office / Board Plant A Plant B Production Marketing / Sales Plant C Corporate Purchasing Corporate Staff De-Centralized Purchasing Head Office Plant A Purchasing Dept. Plant B Purchasing Dept. Plant C Purchasing Dept. Purchasing:AlinkintheSC 10
- 11. Centralization vs. Decentralization Centralized Purchasing • Economy of Scale • Uniform deal with suppliers. • Easy Supply market research • Unique materials / spares specifications • Unique commercial conditions among different business units Decentralized Purchasing • Strong Orientation & Communication with internal user / demander • Less Bureaucracy. • Shorter Lead time Purchasing:AlinkintheSC 11
- 12. Purchasing Internal Network Purchasing Warehouse / Inventory Control Planning • Production • Materials Demander • Production • Maintenance • Others Accounting Logistics Purchasing:AlinkintheSC 12
- 13. PURCHASING CYCLE & TCO Purchasing:AlinkintheSC 13
- 14. General Purchasing Cycle Determine Needs / Receiving Purchase requisition Suppliers Selection Request For Quotations Price Determinati on Purchase Order / Contracting Follow-up delivery Receiving & Accepting Goods Payment Approval Purchasing:AlinkintheSC 14
- 15. The Best Offer • The lowest bid price is not always the best offer. • The best offer is the offer who represents the best value Best Total Cost of Ownership Purchasing:AlinkintheSC 15
- 16. Total Cost of Ownership TCO TCO Purchase Price Acquisition Cost • Logistics / Handling • Insurance • Fees / Customs Usage Cost • Lifetime / Unit Consumption • Maintenance • Repairs End of Life Cost Purchasing:AlinkintheSC 16
- 18. Purchasing Methods Purchasing Methods Informal Oral Electronic / Credit card Petty Cash Fund Formal Direct Order Bidding Long-Term Contract Purchasing:AlinkintheSC 18
- 19. GLOBAL SOURCING Why Shall I (Sometimes) buy from a foreign Country? Purchasing:AlinkintheSC 19
- 20. Definition It is the process of sourcing (procuring) goods and/or services from the international market Purchasing:AlinkintheSC 20
- 21. CONs & PROs of Global sourcing PROs • Access to unavailable materials in Local market • Cost reduction / Better Prices • Broad list of alternative Suppliers • New Ideas/solutions and Experience Exchange • Better Quality CONs • Higher Risk (Financial, Political and Legal) • More complicated process & Logistics • Longer Lead time • Higher hidden and non- value added cost (Tariffs, Insurance, payment terms, etc.) • Communications barriers Purchasing:AlinkintheSC 21
- 22. Methods of Payment in International trade • Advanced Payment • Open Account • Documentary Collection • Documentary Credit (Letter of Credit) Purchasing:AlinkintheSC 22
- 23. Each Method has its risk & cost Purchasing:AlinkintheSC 24 Buyer (Importer) RiskSeller (Exporter) Risk Open Account Advance Payment Payment Cost Documentary Collection Documentary Credit
- 25. Who Will pay Which Amount? Purchasing:AlinkintheSC 26
- 26. Introduction to INCOTERMS • Published by International Chamber of Commerce (ICC) • Set of rules to explain trade terms (abbreviated in 3 letters) reflecting Business-to-Business (B2B) practice in contracts of Sales of Goods • INCOTERM arranges the Transfer of Risk and the Cost of Transfer. Purchasing:AlinkintheSC 27 Incoterms Any type of Transport Sea Waterway Transport
- 27. INCOTERMS: Ex-Work (Anywayoftransport) Purchasing:AlinkintheSC 28 Cost Risk Seller Buyer Seller Warehouse Buyer: • Loads goods • Pays transport • MIN Seller’s obligation
- 28. INCOTERMS: FOB Port of Shipment (Seawater/wayoftransport) Purchasing:AlinkintheSC 29 Cost Risk Seller Buyer Seller: • Delivers goods till the Vessel Rail. Buyer: • Pays transportation & Insurance from board of vessels
- 29. In Summary • Purchasing is a process of buying the needs at right time, quantity and quality. • Purchasing Hierarchy can be centralized, de-centralized or a mix based on company size and business model. • Within a Purchasing cycle, the best deal is the deal that ensure a best TCO (Total Cost of Ownership). • Global sourcing increase the company opportunity for better purchase in an international competitive market. • A good Buyer has to select the best Purchasing Method and best payment method. • International Community unified the terms of delivery and shipping showing cost and risk for easy international trade. Purchasing:AlinkintheSC 30
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