Transcript McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
Chapter 3
The Purchasing
Function
THE PURCHASING DEPARTMENT’S
FUNCTION IS TO:
1. PROVIDE APPROPRIATE LEVELS OF
SUPPLY
2. AT THE APPROPRIATE LEVEL OF
QUALITY
3. FOR THE LOWEST TOTAL COST
3-3
PURCHASE PRICE Vs. TOTAL COST
• PURCHASE PRICE = THE DOLLAR VALUE
PAID
• TOTAL COST = PURCHASE PRICE +
DELIVERY + STORAGE + SERVICE
3-4
METHODS TO EXAMINE
AND COMPARE COSTS
1. TOTAL COST OF OWNERSHIP
2. ECONOMIC ORDER QUANTITY
(EOQ)
3. VALUE ANALYSIS
3-5
TOTAL COST OF OWNERSHIP OF A TANGIBLE
PRODUCT
•
TOTAL COST OF
OWNERSHIP = PRODUCT PRICE
+ DELIVERY
+ INSTALLATION
+ MAINTENANCE / REPAIR
+ POWER COSTS
+ SUPPLY COSTS
+ OPERATING COSTS
+ FINANCING
3-6
ECONOMIC ORDER QUANTITY
THE QUANTITY THAT MINIMIZES
ORDERING COSTS
AND
STORING COSTS
3-7
USING VALUE ANALYSIS
THE OBJECTIVES OF VALUE ANALYSIS:
• REDUCE COSTS AND/OR
• IMPROVE DESIGN
COMPARE
What is
Currently
Being Done
BENEFITS RECEIVED
FUNCTIONS OF
PRODUCT
COST OF MATERIALS
New
Alternatives
Being
Considered
WORK PROCESS
INVOLVED
OUTCOME: GREATER VALUE FOR LESS COST
3-8
STEPS IN THE BUYING PROCESS
Step 8
Evaluation of product performance
Step 7
Selection of an order procedure
Step 6
Evaluation of proposals and
selection of a supplier
Step 5
Acquisition and analysis of proposals
Step 4
Search for qualified suppliers
Step 3
Development of detailed specifications
Step 2
Definition of the product-type needed
Step 1
Recognition of a need
EXHIBIT 3-3
3-9
BUY-PHASES
1. NEW TASK
COMPLETE BUYING PROCESS REQUIRED EMPHASIZES
PRODUCT DEFINITION AND SPECIFICAIONS
2. MODIFIED REBUY
EMPHASIZES SUPPLIER SEARCH AND EVALUATION
3. STRAIGHT REBUY
EMPHASIZES NEED RECOGNITION AND PURCHASE
3-10
VENDOR ANALYSIS RATINGS
A RATING FORM SHOULD LIST
 The most important product attributes
 The most important service support attributes
 Pricing variables
 Delivery variables
 Quality variables
 Supplier capabilities
3-11
PURCHASING PARTNERSHIPS ARE MADE
WITH VENDORS WHO PROVIDE:
HIGH-PURCHASE-VOLUME MATERIALS,
COMPONENTS OR STRATEGIC PRODUCTS
•
•
•
INFORMATION AND TRAINING FOR EFFECTIVE
PRODUCT USE
SERVICES REQUIRING SPECIALIZED KNOWLEDGE
FOR COST REDUCTIONS AND/OR PERFORMANCE
MATERIALS UNAVAILABLE ELSEWHERE
3-12
IMPROVE PERFORMANCE:
STAYING AHEAD OF PURCHASING TRENDS
1.
REDUCE PURCHASING COSTS
•
•
CUTBACK ON EMPLOYEES
REDUCE NUMBER OF VENDORS/
TRANSACTIONS
•
BUILD RELATIONSHIPS
•
CENTRALIZE PURCHASING ACTIVITIES
•
USE THE INTERNET
3-13
IMPROVE PERFORMANCE:
STAYING AHEAD OF PURCHASING TRENDS
(continued)
2.
OUTSOURCE IN-HOUSE ACTIVITIES
•
TRAINING
•
MANUFACTURING
•
PROCESSING ACTIVITIES
•
INVOLVE SUPPLIERS (ESI)
3-14
IMPROVE PERFORMANCE:
STAYING AHEAD OF PURCHASING TRENDS
(continued)
3.
CROSS-FUNCTIONAL TEAMS – MADE UP OF
COMPANY DEPARTMENTS, SUPPLIERS,
CUSTOMERS
4.
INCREASE PROFESSIONALISM THROUGH
CERTIFICATION PROGRAMS AND
ESTABLISH A CODE OF ETHICS
3-15
SALES SURVIVAL QUESTIONS:
CAN YOUR SALESPEOPLE ANSWER
THE FOLLOWING QUESTIONS?
1.
WHAT IS A CROSS-FUNCTIONAL TEAM?
2.
CAN YOU RECOGNIZE ONE AT YOUR CLIENT’S
ORGANIZATION?
3.
DO YOU KNOW HOW TO GET YOUR COMPANY
INCLUDED IN YOUR CLIENT’S CROSSFUNCTIONAL TEAM?
4.
WILL YOUR COMPANY GIVE YOU THE PEOPLE
RESOURCES TO SUPPORT YOUR CLIENT’S
NEEDS?
3-16
SUCCESSFUL CROSS-FUNCTIONAL
PURCHASING TEAMS DEPEND ON:
•
APPROPRIATE LEADERSHIP
•
FACE-TO-FACE COMMUNICATION
•
CONTINUITY– IN IT FOR THE LONG TERM
•
•
TOP-LEVEL COMMITMENT to provide for key
individuals’ full participation
EMBRACING DIVERSITY of experience, backgrounds,
outlooks, and corporate philosophy
EXHIBIT 3-9
3-17
Changing company focus: MAKE-OR-BUY?
Purchasing Determines Who Provides Best Value for Lowest Cost
Best-Value Provider
Action
In-House
Partner
•Training
•Transaction Processing
•Paper Processing
•Product Design
•Product Manufacturing
•Component Part Manufacturing
•R&D
•Marketing
•Sales
•Advertising
•Research
•Support
•Human Resources Administration
3-18
MAKE-OR-BUY DECISION ANALYSIS
RISK ASSESSMENT
FINANCIAL RISKS
Resource Allocation
Investment of Resources
Accurate Cost Analysis
Legal Issues
MARKETING RISKS
Customer Impact
Supplier Impact
MANUFACTURING RISKS
Reliability
Expertise
Equipment
Patent Protection
POLITICAL RISKS
Management commitment/
willingness to partner
Turf Battles
Internal Strife
ACCEPTABLE RISK
Buy the Products,
Components or Services
UNACCEPTABLE RISK
Retain Production and
Provide Services
3-19
ETHICAL ISSUES FOR BUYERS
KEY REQUIREMENT: EVERY COMPETITOR
HAS AN EQUAL OPPORTUNITY TO SELL TO
THE BUYER AND HAS EQUAL ACCESS TO
INFORMATION
AS A BUYER, YOU MUST
 PROVIDE EQUAL ACCESS TO THE
BUYING OPPORTUNITY
 BE TOTALLY RESPONSIBLE TO
YOUR EMPLOYER
3-20