chapter three purchasing and materials management
TRANSCRIPT
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Copyright 2006 The McGraw-Hill Companies, Inc. All rights reservedMcGraw-Hill/Irwin
Chapter Three
Purchasing and
Materials Management
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THE OBJECTIVES OF PURCHASING
1. PROVIDE APPROPRIATE LEVELS OF SUPPLY
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1. THE APPROPRIATE LEVEL OF QUALITY
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1. THE LOWEST TOTAL COST
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MISSING THE POINT:PURCHASE PRICE Vs. TOTAL COST
Determining the price a company pays goes
beyond the dollar cost.
TOTAL COST = PURCHASE PRICE +
DELIVERY + STORAGE + SERVICE
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WHAT COMPANIES REALLY PAYFOR OWNERSHIP
Cost of ownership goes beyond the price paid for aproduct
TOTAL COST OFOWNERSHIP = PRODUCT PRICE
+ DELIVERY
+ INSTALLATION
+ MAINTENANCE / REPAIR
+ POWER COSTS
+ SUPPLY COSTS + OPERATING COSTS
+ FINANCING
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USING VALUE ANALYSIS
THE OBJECTIVES OF VALUE ANALYSIS: REDUCE COSTS AND/OR
IMPROVE DESIGN
What is New
Currently AlternativesBeing Done Being
Considered
COMPARE
BENEFITSRECEIVED
FUNCTIONS OF
PRODUCT
COST OFMATERIALS
WORK PROCESS
INVOLVED
OUTCOME: GREATER VALUE FOR LESS COST
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Step 8
Evaluation of product performance
Step 7Selection of an order procedure
Step 6
Evaluation of proposals and
selection of a supplier
Step 5Acquisition and analysis of proposals
Step 4
Search for qualified suppliers
Step 3
Development of detailed specificationsStep 2
Definition of the product-type needed
Step 1
Recognition of a need
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PURCHASING PARTNERSHIPS AREMADE WITH VENDORS WHO PROVIDE:
High-purchase-volume materials, components orstrategic products
Information and training for effective product use
Services requiring specialized knowledge for costreductions and/or performance
Materials unavailable elsewhere
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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
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IMPROVE PERFORMANCE:STAYING AHEAD OF PURCHASING TRENDS(continued)
2. OUTSOURCE IN-HOUSE ACTIVITIES
TRAINING
MANUFACTURING
PROCESSING ACTIVITIES
INVOLVE SUPPLIERS (ESI)
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IMPROVE PERFORMANCE:STAYING AHEAD OF PURCHASING TRENDS (continued)
3. CROSS-FUNCTIONAL TEAMS MADE UPOF COMPANY DEPARTMENTS,SUPPLIERS, CUSTOMERS
4. INCREASE PROFESSIONALISM THROUGHCERTIFICATION PROGRAMS ANDESTABLISH A CODE OF ETHICS
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SALES SURVIVAL QUESTIONS:
CAN YOUR SALESPEOPLE ANSWERTHE FOLLOWING QUESTIONS?
1. WHAT IS A CROSS-FUNCTIONAL TEAM?
2. CAN YOU RECOGNIZE ONE AT YOUR CLIENTSORGANIZATION?
3. DO YOU KNOW HOW TO GET YOUR COMPANY INCLUDEDIN YOUR CLIENTS CROSS-FUNCTIONAL TEAM?
4. WILL YOUR COMPANY GIVE YOU THE PEOPLE RESOURCESTO SUPPORT YOUR CLIENTS NEEDS?
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SUCCESSFUL CROSS-FUNCTIONALPURCHASING TEAMS DEPEND ON:
APPROPRIATE LEADERSHIP
FACE-TO-FACE COMMUNICATION
CONTINUITY IN IT FOR THE LONG TERM
TOP-LEVEL COMMITMENT to provide for keyindividuals full participation
EMBRACING DIVERSITY of experience, backgrounds,outlooks, and corporate philosophy
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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
AdvertisingResearch
Support
Human Resources Administration
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MAKE-OR-BUY DECISION ANALYSIS
ACCEPTABLE RISK
Buy the Products,
Components or Services
UNACCEPTABLE RISK
Retain Production and
Provide Services
RISK ASSESSMENT
FINANCIAL RISKSResource Allocation
Investment of Resources
Accurate Cost Analysis
Legal Issues
MARKETING RISKSCustomer Impact
Supplier Impact
MANUFACTURING RISKSReliability
Expertise
Equipment
Patent Protection
POLITICAL RISKSManagement commitment/
willingness to partner
Turf Battles
Internal Strife