Transcript Chapter 05 - FreeQuality

The Purchasing Process
Training Presentation
Joseph Roundy
Materials Covered
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Purchasing Process Defined
Purchasing and Your Organization
The Nuts and Bolts of Purchasing
How the Purchasing Process Works
An Example
An Exercise
Purchasing Process Defined
• Purchasing- the
process of acquiring
goods, services, and
equipment from
another organization
in a legal and ethical
manner.
Purchasing Process Defined Cont.
• The 5 “Rights” of Purchasing
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5.
Purchasing the right item or service
In the right quantity
At the right quality level
At the right price
At the right time
Purchasing and Your Organization
• Brainstorming Activity
– Think of all items purchased within the
organization
– List them (3 minutes)
– Get into small teams and categorize (3 minutes)
Nuts and Bolts
• The nuts and bolts of the purchasing process
include the following
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Requirements
Supplier Selection
Purchase orders
Performance measures
Requirements
• Requirements are the attributes and
specifications a product or service needs to
posses in order to fulfill its specific purpose.
Supplier Selection
• Supplier selection is the process of
identifying potential sources of supply for
the product or service that is to be
purchased.
The Purchase Order (PO)
• The purchase order is
the means by which
products and services
are procured.
– Pictured at the right is
a generic copy of a
purchase order
Performance Measures
• Performance measures are used to track and
evaluate suppliers.
How It Works
• The purchasing process consists of six main stages
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2.
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5.
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Identify user requirements
Evaluate potential suppliers
Bid, negotiate and select supplier
Purchase approval
Release and receive purchase requirements
Measure supplier performance
Identifying Requirements
• Identify a need (product or service to be
purchased)
• Identify needed requirements
– For example: size, color, length, thickness etc.
Evaluating Potential Suppliers
• Find Qualified Suppliers
• Request Bids/ Quotes
• Gather External Data
Selecting a Supplier
• Identify the pro’s and con’s of each suppler
– Location, cost, relationship, financial stability
etc.
• Rank the suppliers according to their
strengths
• Choose the best supplier
• Negotiate agreements where possible
Purchase Approval
• Purchase Order
• Department/ Company Approval
• Legal contract
Release and Receive Requirements
• All Requirements need to be accurate and
clearly communicated
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Quantity
Quality
Price
Delivery and Shipping
Product or Service Specifications
Measure Supplier Performance
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Supplier Scorecard
Relationship Status
Is the supplier meeting our needs?
Is our product or service meeting customer
needs?
Process Flow Chart
A Real World Example
• Buying A Car ( what is the process?)
Other Things to Consider
• Total Cost of Ownership
– Sometimes the cheapest initial option isn’t
always the cheapest long term option.
Scenario
• You are a purchaser for your organization. You
were asked to buy a fence. The fence is to be
installed on the west side of your office building;
periodically the wind can blow hard from that
direction. You have a choice between a wood
fence that costs $1,200, a vinyl fence that costs
$3,200, and cinder block fence that costs $5,000.
Which fence would you choose and why?
Exercise
• Pair off into groups of two
• Assign each pair to be either a buyer or
supplier
• Buyers go through the purchasing process
Exercise
• Switch roles and repeat the exercise (10
minutes)
• Report
– What went well?
– Which parts were difficult?
Summary
• The purchasing process is important to
every organization
• Through the purchasing process you can
create value for your organization
Reading List
• Straight to the bottom line- Robert Buzki
• Supply Chain Gains- Dan Barnes
• Managing Purchasing: Making the Supply Team WorkKenneth Killen
• The Relationship Driven Supply Chain- Emmett Stuart
• Business-to-Business Procurement-Richard Pinkerton