The Challenge of

Purchasing
and Supply Management
Instructor: Mr. Rizwan tanveer malik
Purchasing & Supply Chain
Management
A supply chain consists of three types of entities:
Customers
A producer
The producer's suppliers.


Supply chain management oversees and
optimizes the processes of acquiring inputs
from suppliers (purchasing), converting those
inputs into a finished product (production), and
delivering those products or outputs - to
customers (fulfillment).
Corporate Supply Challenges
Need to control unit costs
Need to reduce the total cost of acquisition
The increasing influence of suppliers on the
purchasers ability to respond to end-customers needs
Increased reliance on fewer suppliers
Trend towards reliance on suppliers for design and
build responsibilities for complete subassemblies
and subsystem.
The Buyer/Planner Concept
Combines planning and purchasing functions into one
position
Planners: Determine what materials are needed and when
Buyers: Handle sourcing and buying
Charged with responsibility for a specific line of inventory
Duties may include: establishing schedules, issues and
analyzes quotations, places orders, monitors
supplier performance, and keeps abreast of
market trends, supplier capacities and technologies.
Major Logistics Activities
customer service
demand
forecasting/planning
inventory management
logistics communications
material handling
order processing
packaging
parts and service support
plant and warehouse site
selection
purchasing
return goods handling
reverse logistics
traffic and transportation
warehouse storage
Supply Chain Management
The design and management of seamless,
value-added processes across
organizational boundaries to meet the real
needs of the end customer. The
development and integration of people and
technological resources are critical to
successful supply chain
integration.

Simplified One-Stage Decision Tree
Purchasings Operational and
Strategic Contributions
Supply Contribution
Operational
Trouble Prevention
Strategic
Opportunity
Maximization
Cont.
Supply Contribution
Direct
Bottom-Line Impact
Indirect
Enhancing Performance
of others
Purchasings Operational and
Strategic Contributions
Supply Contribution
Negative
Operationally deficient
Strategically deficient
Directly deficient
Indirectly deficient
Neutral
Operationally
acceptable
Strategically deficient
Directly acceptable
Indirectly deficient
Positive
Operationally
acceptable
Strategically acceptable
Directly acceptable
Indirectly acceptable
Return on Assets Factors
The Opportunities for Contribution of
the Purchasing/Supply Function
Profit-leverage effect
Return-on-assets effect
Information source
Effect on efficiency
Effect on competitive position and customer satisfaction
Effect on image
Training ground
Management strategy and social policy

Characteristics of an Integrated Strategic
Procurement and Sourcing Function
Executive Leadership
Executive committee support
for integration across company
and strategic business unit
corporate plans

Strategic Positioning
External/internal customer focus
Matrix management
High-level positioning - second,
third or fourth levels

Functional Leadership
Company-wide customer-
focused leadership
Establish integrated visions
workers at results and processes
Drives supply base/supplier
management strategies
company-wide
Integration
Cross-functional, cross-location
teaming
Part of the technology,
manufacturing and SBU planning
process
Cont.
Supply Base Strategy

Quality driven
Design standardization
Concurrent engineering
Supply base optimization
Commercial strategy emerging
Supplier Management

Focused on supplier development
Joint performance improvement efforts
Value focused
Total cost improvement
Supplier benchmarking

Measurement
Customer orientation
Total value/cost focused
Benchmarking with best in class
Systems
Global databases
Historical performance data
Strategic
EDI, Internet, EFT, CAD, CAM
Professionalism in Purchasing
New assignments
Education
College recruitment
Training programs
Salary levels
Professional associations

Challenges Facing Purchasing
B2B e-commerce
Supply chain management
Measurement
Purchase of non-traditional goods and services
Contribution to corporate strategy
Recognition by senior management