cips l5 01 management in the purchasing function
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Management in the Purchasing Function
Management in the Purchasing Function
Level 5
Management in the Purchasing Function
Session 1
Introduction to Management andManagers’ Key Roles and Functions
Management in the Purchasing Function
Learning OutcomesAt the end of this session candidates will be able to: Define the terms ‘organisation’ and ‘management’ and
explain why each is important Distinguish between ‘management’ and ‘organisational
behaviour’. Demonstrate understanding of the nature of organisational
behaviour and the importance of the ‘people-organisation relationship’.
Explain how and why management is regarded as an 'integrating activity'
Explain key differences between 'management' and 'leadership'
Describe the process, roles and tasks of management. Compare the diverse purchasing management practices of
the private and public sectors Explain the importance of stakeholder groups who directly
impact upon the purchasing function. Explain how stakeholder expectations can effectively be
managed.
Management in the Purchasing Function
Organisational Behaviour
‘The study of structure, functioning and performance of organisations, and the behaviour of groups and individuals within them.’
Management in the Purchasing Function
Organisational Behaviour
Focuses on three distinct levels of analysis:
individuals groups organisations
Management in the Purchasing Function
Psychological Contract
It is not a written document, but implies a series of mutual expectations and satisfaction of needs arising from the people-organisation relationship.
It involves a process of giving and receiving by the individual and by the organisation.
It covers a range of expectations of rights and privileges, duties and obligations, which do not form part of a formal agreement but still have an important influence on people’s behaviour.
Management in the Purchasing Function
Leadership is….
the process of directing and influencing the task-related activities of group members. Leadership involves other people and an unequal distribution of power between leaders and group members, and it is the ability to use different forms of power to influence followers’ behaviour in a number of ways.
Management in the Purchasing Function
Action Centred Leadership
Task - the need to accomplish something
Team - the need to develop relationships within the group
Individual - the needs which individuals bring with them to the group
Individual
Team Task
Management in the Purchasing Function
Management Process
Planning Organising Leading Controlling
Management in the Purchasing Function
The Management Task
The management task of organisation relates to the level of authority over
an organisation’s activities, which
determines the degrees of efficiency and
inefficiency. Structure or form thus provide for the achievement of organisational
objectives.
Management in the Purchasing Function
Management Roles
Managers are usually classified by: the range of organisational
activities for which they are responsible (so-called functional and general managers); and
their level in the organisation (so-called first-line, middle and top managers).
Management in the Purchasing Function
Purchasing Manager – Private vs Public Sector
Private sector: Public sector:
Providing value through specialised utilisation of resources and capabilities
Providing value via a more diversified approach to utilising resources and capabilities
Purchasing managers are likely to have a narrower group of stakeholders
Purchasing managers have to provide value for a more complex cast of ‘actors’ in their environment, that is, a wider range of different stakeholder groups
Use organisational capabilities to provide goods and services demanded by customer groups
Outsource or purchase direct from suppliers of products and/or services. Do not purchase for manufacture
Maintain lowest cost/best (competitive) price for value to customers. If customers do not get value for money they find another supplier
Provide efficient and effective services and/or utilities to the public.
Private sector procurement policies tend to be organisation specific and are not subject to specific directives
Public sector procurement tends to follow legislative directives
Management in the Purchasing Function
Sources of Stakeholder PowerWithin organisations:
the hierarchy (formal power), for example autocratic decision making
influence (informal power), for example charismatic leadership
control of strategic resources, for example strategic products
possession of knowledge and skills, for example computer specialists
control of the environment, for example negotiating skills involvement in strategy implementation, for example by
exercising discretion.For external stakeholders:
control of strategic resources, for example materials, labour, money
involvement in strategy implementation, for example distribution outlets, agents
possession of knowledge (skills), for example subcontractors
through internal links, for example informal influence
Management in the Purchasing Function
Stakeholders
Employees Customers Intermediaries Suppliers Partners Investors Government Regulators Pressure groups Community Media
Management in the Purchasing Function
StrategicDirection
SolutionsDevelopment
StakeholderDemand
SatisfactionDelivery
StakeholderSatisfaction
Processes
Strategies CapabilitiesS
takeholder Contribution
Delivering Stakeholder Value
Management in the Purchasing Function
StakeholdersStakeholder Satisfaction
(Stakeholder Wants & Needs SWANs)
Stakeholder Contribution(Organisation Wants & Needs OWANs)
•Fast, right, cheap & easy
•Purpose, care, skills & pay
•Trust, unity, profit & growth
•Legal, fair, safe & true
•Return, reward, figures & faith
Customers &Intermediaries
Employees
Suppliers
Regulators &Communities
Investors
•Trust, unity, profit & growth
Hands, hearts, minds & voices
•Fast, right, cheap & easy
•Rules, reason, clarity & advice
•Capital, credit, risk & support
Stakeholder Needs = Organisation Needs
Management in the Purchasing Function
Key Stakeholders
Management in the Purchasing Function
Power-Interest Matrix
Management in the Purchasing Function
Session 2
Ethics and Social Responsibility and Management Reporting
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Assess the importance of organisational goals and strategy for the operations and management of organisations.
Explain the concept of 'social responsibility and business ethics' and how these link directly (or otherwise) to an organisation’s strategies and goals.
Create a set of rules for ethical behaviour Determine ways of reporting effectively to
senior management. Explain the ways in which the Purchasing
Manager might secure top level support and sponsorship for initiatives and implementation of plans in the Purchasing and Supply function.
Management in the Purchasing Function
Organisational Goals
Goals give the company direction and promote good organisation
Goals help co-ordinate the company’s activities
Goals make the best use of available resources
Goals help breakdown big tasks into small chunks
Goals can act as motivators Goals help measure success/progress
and monitor change
Management in the Purchasing Function
Ethical Behaviour
Deontological ethics (from the Greek deont, meaning obligation)
Utilitarianism (from the Latin utilis, useful)
Teleology Ethical egoism
Management in the Purchasing Function
Code of Ethics
“…a set of moral principles or values, used
by organisations to steer the conduct both
of the organisation itself and its employees, in all their business
activities, both internal and in relation to the
outside world.”
Management in the Purchasing Function
Skill Distribution at Management Levels
conceptual
human
technical
Top Management
Middle Management
Supervision
SKILLS
LEVELS
Skill Distribution at Various Management Levels
Management in the Purchasing Function
Communication Flows
TopLevel
Dept.A
Dept.B
Dept.C
Lower Level
Lower Level
Lower Level
Lower Level
Lower Level
Lower Level
Management in the Purchasing Function
Verbal Communication
Written Oral
Management in the Purchasing Function
Non-verbal Communication Kinesic behaviour – includes body movements
such as gestures, facial expressions and so on
Proxemics – the influence of proximity and space on communication, eg the influence of a large desk between manager and employee
Paralanguage – includes vocal aspects of communication that relate to how something is said rather than to what is said
An object language – communication through the use of material things, including clothing, cosmetics, furniture, and architecture.
Management in the Purchasing Function
Barriers to Individual Communication Stereotyping – the tendency to attribute
characteristics to an individual on the basis of an assessment of the group to which the individual belongs
The halo effect – the tendency to use a general impression based on one or a few characteristics of an individual to judge other characteristics of that same individual
Projection – the tendency of an individual to assume that others share his or her thoughts, feelings and characteristics
Perceptual defense – the tendency to block out or distort information that one finds threatening or that challenges one’s beliefs
Self-serving – the tendency to perceive oneself as responsible for successes and others as responsible for failures
Management in the Purchasing Function
Most Common Barriers
Lack of planning – communicating without thinking first or stating purpose
Unclarified assumptions – that underlie messages Semantic distortion – deliberate or accidental Poorly expressed messages – lack of care and precision in
encoding Communication in the international environment – different
meanings in different cultures Loss by transmission and poor retention – less accurate if
repeated by person to person, not remembered Poor listening and premature evaluation – internal focus by
receiver instead of on sender or message, judging instead of understanding
Impersonal communication – instead of willingness by superiors to be open in communicating
Distrust, threat and fear, which undermine communication Insufficient period for adjustment to change – forcing before
people can adjust Information overload – causing receiver to disregard
information, make errors, delay, filter, or escaping form the task of communication.
Management in the Purchasing Function
Active Listening
Listening patiently and signal simple acceptance of what is being said
Trying to understand feelings as well as cognitive content
Encouraging other people to keep talking Allowing time for discussion and avoiding
confrontational questions or assertions Encourage exposition of topics that are of
interest Listening for omissions Offering honest opinion only if it is elicited Listening: not planning what they will say
next Not making judgements until all
information is conveyed.
Management in the Purchasing Function
Report Structure
Title, Name of author(s) and Date Terms of Reference Introduction Findings Implications for the Organisation Conclusions Recommendations Appendices Bibliography and References
(usually academic reports)
Management in the Purchasing Function
Other Management Communications
Presentations Meetings Briefings Committees Influencing Negotiations
Management in the Purchasing Function
Session 3
Organisational Structure and theImplications for Purchasing and
Supply
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Evaluate the importance of organisational structure
Evaluate common forms of organisational structures
Explain the nature and importance of structure for effective management and organisational performance
Describe the relationship between organisational structure and people
Evaluate the nature and scope of federal and network structures and the implications of such structures for the purchasing function
Management in the Purchasing Function
Symptoms of an Ineffective Structure
growth of many levels of management, hence work creation;
frictional or unprofitable overheads, for example coordinators, assistants-to and so on;
need for special coordinating measures – appointment of liaison officers or coordinating committees;
tendency to go through channels rather than to person(s) directly;
a lopsided management age structure.
Management in the Purchasing Function
Organisational Forms
Entrepreneurial
Bureaucratic Matrix Independence Professional
Management in the Purchasing Function
The Boundaryless Organisation
A boundaryless organisation eliminates barriersthat separate functions (for example marketing versusmanufacturing), domestic and foreign operations,different levels of work (managerial vshourly) and between the organisation and itscustomers and suppliers. Boundarylessorganisations ensure that the specifications andrequirements of the suppliers, producers andconsumers are all well integrated to achieveobjectives. (Milkovich & Boudreau 1994)
Management in the Purchasing Function
Organisation Structure
‘Organisations are as different and varied asnations and societies of the world. Theyhave differing cultures - sets of values,norms and beliefs - reflected in differentstructures and systems. And the culturesare affected by events of the past and theclimate of the present, by the technology ofthe type of work, by their aims and the typeof people who work in them.’ (Charles Handy 1993)
Management in the Purchasing Function
Centralised Purchasing
Buying in large quantities usually means it is possible to obtain more attractive prices from suppliers.
Purchasing in large quantities often means the supplier is more attentive to the order
Permits a standardisation of purchased products and thus guarantees a constant quality throughout the organisation
Larger purchasing departments, as a result of ordering for many manufacturing sites, means that the company can afford more staff specialisation, leading to greater purchasing competence and lower material cost.
Combining small orders reduces administrative costs, time taken to negotiate orders, billing time, customs procedures where appropriate, and thus overall cost.
Relation with suppliers is simplified Reduction in transport costs since orders are shipped
in larger quantities.
Management in the Purchasing Function
De-centralised Purchasing Less bureaucracy means a quicker
response Lower transportation costs if the
supplier is located close to the division making the purchase
Possible better responsiveness to operational needs by local purchasing
Reduction in inventory costs – divisions only purchase quantities required
Risk is reduced by buying in smaller quantities
Management in the Purchasing Function
Example Purchasing Structure
Purchasing
Director
Purchasing Manager
(Raw Materials)
Purchasing Manager(Capital
Equipment)
Purchasing Manager
(Technical Services)
Buyer BuyerBuyer Buyer Buyer Buyer
Management in the Purchasing Function
Porter’s Value Chain
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INB
OU
ND
LOG
ISTIC
S
OPER
ATIO
NS
OU
TB
OU
ND
LOG
ISTIC
S
MA
RK
ETIN
G&
SA
LES
SER
VIC
E
MARG
INM
ARGIN
SU
PPO
RT
AC
TIV
ITIE
S
PRIMARY ACTIVITIES
Management in the Purchasing Function
Inter-organisational Relationships
Backward (vertical) integration: increased ownership or control of suppliers or supply chain activities;
Forward (vertical) integration: increased ownership or control of distribution channels; and
Lateral (horizontal) integration: increased ownership or control of competitors – usually through mergers or acquisitions.
Management in the Purchasing Function
Session 4
Span of Control and Job Design & Culture and Organisations
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Define 'span of control' and explain the role and importance of 'span of control' in organisations.
Determine the different spans of control within organisational structures
Compare and analyse 'older' methods of job design - job rotation, job enlargement, job enrichment and so on with broader approaches (for example, the quality of working life, work-life balance, employee involvement and empowerment, self-managed work groups and so on) and explain the implications for the purchasing function
Explain the meaning, nature and main features of ‘organisational development’.
Define the term 'culture' and describe the different 'types' of culture which may exist within organisations.
Explain the importance of understanding culture and climate in organisations (the cultural 'web')
Appraise methods and approaches for managing effectively in international or cross-cultural organisations
Management in the Purchasing Function
Factors Impacting on Span of Control
the nature and context of organisation; the capabilities of managers and employees; the complexity of work tasks; the training available to all employees; the time available to managers when dealing
with subordinates; the levels of employee morale and
motivation; the physical and/or geographical spread of
subordinates; the length of the chain of command, that is,
the number of different levels in the structure of the organisation.
Management in the Purchasing Function
Advantages of Wide Span of Control
Advantages of wide span of control: Communication can be more
effective as there are fewer layers of management through which to pass a message, so it is less likely to be misinterpreted. The message will also reach the employee faster.
It costs less money to run a wider span of control because a business does not need too many managers.
It promotes empowerment.
Management in the Purchasing Function
Disadvantages of Wide Span of Control
It can be difficult for a manager to supervise effectively.
Managers may lose control and sub-groups may develop which may operate contrary to management policies.
Management in the Purchasing Function
Advantages of Narrow Span of Control
Promotional opportunities Managers may feel in total control
Management in the Purchasing Function
Disadvantages of Narrow Span of Control
Management layers are costly Decisions can take a long time to
reach the bottom of the hierarchy Employees may feel restricted
which can stifle creativity and use of their initiative
Management in the Purchasing Function
Job Design
Job rotation Job enlargement Job enrichment
Empowerment Self-managed groups
Work-life balance
Management in the Purchasing Function
Barriers to Empowerment
Employees may say they want more responsibility but are reluctant to accept it in reality
Employees are not capable of undertaking the development needed
Managers are only willing to ‘let go’ in trivial areas
Lack of appropriate recognition and/or reward
Management hierarchy is the only form of career structure for many employees
Management in the Purchasing Function
Motivation
How can we give our people more opportunity to achieve?
What different ways can we recognise them when they do achieve?
How can we make the job more interesting? What can we do to give our people more responsibility? What can we do to help our people advance and grow?
Management in the Purchasing Function
Culture
Culture is the accumulation of beliefs, attitudes of mind, values, customs and symbols that individuals learn within a society.
Management in the Purchasing Function
Organisational Culture
‘Culture is how things are done around here. It is what is typical of the organisation, the habits, the prevailing attitudes, the grown-up pattern of accepted and expected behaviour.’ Drennan (1992)
‘Culture is shaped by several factors. An organisation’s artefacts such as its physical structure, for example the shape of the building, by its norms such as dress codes and how employees address their superiors. Ethical codes, symbols and slogans all contribute to a company’s culture.’ Brown (1995)
‘It is recognised that organisations have ‘something’ (a personality, philosophy, ideology or climate) which goes beyond economic rationality, and which gives each of them a unique identity.’
‘Culture is the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture in this sense is a system of collectively held values’. (Hofstede, in Senior, 2002).
Management in the Purchasing Function
Cultural Differences
Languages Communication styles Expression of emotions Social customs Eating habits Body language
Other factors to consider are: Time differences Virtual teams may take longer to develop.
Management in the Purchasing Function
Hofstede’s Cultural Dimensions
Power-distance Uncertainty avoidance Individualism-collectivism Masculine-feminine High context-low context
Management in the Purchasing Function
Cultural Web
THE PARADIGM
Stories and myths Symbols
Rituals and
routines
Control systems
Organisational structures
Power structures
The Cultural Web
Management in the Purchasing Function
Classification of Culture
A Power Culture which concentrates power in a few pairs of hands. Control radiates from the center like a web. Power Cultures have few rules and little bureaucracy; swift decisions can ensue. This type of culture is often found in small entrepreneurial firms.
In a Role Culture, people have clearly delegated authorities within a highly defined structure. Typically, these organisations are large and form hierarchical bureaucracies. Power derives from a person's position and little scope exists for expert power.
By contrast, in a Task Culture, teams are formed to solve particular problems. Power derives from expertise so long as a team requires expertise. These cultures often feature the multiple reporting lines of a matrix structure.
A Person Culture exists where all individuals believe themselves superior to the organisation. Survival can become difficult for such organisations, since the concept of an organisation suggests that a group of like-minded individuals pursues the organisational goals. Some professional partnerships can operate as person cultures, because each partner brings a peculiar expertise and clientele to the firm. (Handy, 1985)
Management in the Purchasing Function
Session 5
Management Decision Making &Operations Planning and
Purchasing
Management in the Purchasing Function
Learning OutcomesAt the end of this session candidates will be able to: Evaluate and apply a range of tools to make effective
management choices and decisions Use appropriate tools and techniques to 'position' the
organisation as the basis for setting objectives (e.g. SWOT, PEST, Balanced Scorecard, and so on)
Describe the key objectives of the purchasing function and how this links to operations management and planning
State the principal benefits gained from the effective management of the purchasing process
Analyse the resource requirements for the implementation of operational plans for the purchasing function: People as a resource Financial resources Physical resources
Management in the Purchasing Function
PEST(LE)
Political / Legal1. Environment laws2. Union laws3. Taxation policy4. Middle East instability5. Post-Iraq War world
Social / Ecological1. Population demographics
(household size, number of cars)
2. Income distribution3. Level of environmental
concern4. Attitudes to work and leisure5. Education levels:
availability of skilled labour
Economic 1. Business cycle2. Interest
rates/inflation3. Unemployment level4. Raw materials
availability5. Disposable income
Technological1. Level of spending on
research/patents2. Battery technology3. Take-up of
broadband internet4. Links with
universities
Note: EXAMPLES ONLY!
Management in the Purchasing Function
IndustryCompetitors
Intensity ofRivalry
BuyersSuppliers
NewEntrants
Substitutes
Threat ofNew Entrants
Threat ofSubstitutes
BargainingPower ofSuppliers
BargainingPower ofBuyers
Porter’s 5 Forces
M.E.Porter: Competitive Strategy: 1980
Management in the Purchasing Function
How the External Audit fits together
Company
Micro-environment
Macro-environment
Legal
Political
Technological
Social
Economic
Suppliers Customers
Distributors
Competitors
VMV
S W
O T
Management in the Purchasing Function
Principle Benefits of Effective Management of Purchasing Lower prices for materials and items
used Faster inventory turnover Continuity of supply Reduced replenishment lead times Reduced transport cost Reduced materials obsolescence Improved vendor relationships Better control of quality Effective administration and
minimisation of organisational effort Maintenance of adequate records and
provision of information for the operations managers
Management in the Purchasing Function
Session 6
Authority, Delegation and Accountability &
Conflict and the Purchasing and Supply Function
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Evaluate the concept of authority, delegation and accountability when managing the purchasing function
Describe the nature of the people-organisation relationship.
Compare different types of managerial authority and management and leadership 'style'
Describe the importance of understanding the nature of working in groups and teams
Analyse the sources of conflict which may arise within the purchasing function
Demonstrate an understanding of the main sources of organisational conflict
Management in the Purchasing Function
Benefits of Teams
Spread of talents and experiences making up for individual weaknesses.
Mutual encouragement and support.
Opportunities for learning and development.
Sense of 'belonging’. Synergy.
Management in the Purchasing Function
Team Decision-making
Groups tend to make riskier decisions
Individual feelings of responsibility may be diffused within a group
Decisions may be made by authority, consensus or majority
Decision-making may be a negative process – by minority or abdication
Management in the Purchasing Function
Team Cohesiveness
Clarity of individual and team objectives
Effective leadership Members listen to each other and pass
on ideas Easier for small teams to be more
cohesive Cohesion enhances individual
satisfaction?
Management in the Purchasing Function
Team Communication
Is information sharing the norm? Does everyone participate at meetings? How easily does the junior member communicate
with the senior member? Is criticism frank but not personal? Are disagreements brought out into the open? Open or closed?
Management in the Purchasing Function
Session 7
Managing Conflict &Recruitment and Development
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Apply techniques to deal with conflict within teams and between individuals in the purchasing and supply functions.
Explain and/or describe some of the strategies/approaches management can adopt/take to deal with conflict
Analyse the advantages of a systematic approach to recruitment, appraisal, training and development
Define, and explain the value of, human resource planning
Explain the process of recruitment and selection of staff Explain the importance of training as a major influence
on the success of an organisation. Compare and contrast different types and methods of
employee appraisal.
Management in the Purchasing Function
Conflict Resolution Styles(Pedler et al)
Assertive
Competing Collaborating
Compromising
Avoiding Co-operative
Accommodating
Management in the Purchasing Function
Giving Feedback
Gather information and check facts Explain the purpose of feedback Choose appropriate time and place
to give feedback When giving negative feedback
stick to the facts Ensure it is a developmental
process
Management in the Purchasing Function
Training Needs Analysis
What are the needs of the business/project?
What are the short, medium and long-tern strategies?
What are the performance gaps? Which are best met by training? What type of training? How can the effectiveness of training be
evaluated?
Management in the Purchasing Function
Training Plan
Consider: Training required Number of people who need to be trained Time-scale Resources available Budget Assessment of learning
Management in the Purchasing Function
Training Methods
On-the-job Off-the-job Formal Informal
Management in the Purchasing Function
Organisational Learning Experiences
• Planned experiences outside department
• Additional responsibilities• Problem-solving groups• Quality circles• Special projects• Developing new activities • Coaching• Mentoring
Management in the Purchasing Function
Inter-group Dynamics
Groups that are strongly linked dueto the nature of their work are morelikely to develop a power-based relationship
Uncertainty over other groups’ purpose or motives leads to mistrust and distorted power bases due to increased political behaviour
Management in the Purchasing Function
Inter-group Dynamics
Overlap causes conflict,for example, trade union membership
Underlying attitudes can taintinter-group relationships
The opportunity for one group to bypass another provides a means of control for the first group – substitutability
Management in the Purchasing Function
Session 8
Managing Performance &Drivers of Change
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Develop procedures and measurements of control for monitoring team performance, designed to ensure good performance
Explain the nature and importance of control as an integral part of the process of management
Monitor and control individual and team performance Analyse reasons for poor team performance Analyse the causes of organisational change
Globalisation Competition Growth Diversification Performance
Explain different types of ‘change strategies’ Describe the managerial skills required for successful
change
Management in the Purchasing Function
Size of Team
Optimum size for effectiveness is 5-7 The larger the group, the more complex
the communication process Small groups limit the range of skills and
experience available Do larger groups need more rules and
procedures?
Management in the Purchasing Function
Team Development (TUCKMAN AND JENSEN)
STAGE 1 - Forming STAGE 2 - Storming STAGE 3 - Norming STAGE 4 - Performing Tuckman (1965)
STAGE 5 - Adjourning Tuckman and Jensen (1977)
Management in the Purchasing Function
Belbin Team Roles
The Chairman The Shaper The Innovator The Monitor/Evaluator The Plant The Company Worker The Team Worker The Resource Investigator The Completer/Finisher
Management in the Purchasing Function
Reasons for Poor Team Performance Team members have conflicting interests, are
unwilling to cooperate and compromise Lack of support from top management Management reluctant to relinquish control Team members dislike each other and are reluctant
to communicate and/or create conflict within the team
Goal/objective is not ‘SMART’ (specific, measurable, attainable, realistic and time related)
Team is too big, causing communication problems Team members lack the necessary interpersonal
skills, for example, leadership skills and therefore the team does not really make any progress
Team members may prefer to work alone, as opposed to in a team
A team member may be reluctant to share their ideas, in fear of someone else getting the credit for it
The team/certain members lack interest in their work Pressure from within the group
Management in the Purchasing Function
Drivers of Change
New legislation and government policies Competition/globalisation Advances in technology Changes in consumer tastes Changing labour demographics Cultural diversity Shift in economy, for example, in the UK,
there was an emphasis on agriculture and manufacturing which shifted to a more service-based economy.
Japanisation Trading conditions Availability of resources
Management in the Purchasing Function
Drivers for Globalisation
A reduction in trade barriers and removal of restrictions to foreign direct investment
Technological change – increased use of microprocessors and telecommunications, the internet and world wide web and so on
Improved transportation technology resulting in a ‘shrinking’ globe
Changing demographics of the world economy in terms of world output and world trade
Changing foreign direct investment patterns: the changing nature of multinationals, the increase of ‘mini’ multinationals, more non-US multinationals and the national origin of largest multinational corporations
Management in the Purchasing Function
Managerial Skills to Manage Change
Interpersonal skills – to communicate the need for change
Persuasive/influencing skills – to communicate the benefits of the changes
Be able to delegate responsibility – a manager cannot achieve results alone
Coaching and counselling skills – to help employees cope with change
Have the ability to motivate staff – so plans turn into action
Negotiation skills – to resolve any problems or conflicts
The ability to remain stable throughout the transitional period
Management in the Purchasing Function
Session 9
Types of Change in Organisations &Managing the Change Process
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Distinguish between the need for fundamental and incremental change in organisations
Describe the importance of the successful management of change
Formulate plans to overcome human resistance to change and to implement change successfully within the purchasing and supply function
Management in the Purchasing Function
Revolutionary & Evolutionary Change
Revolutionary and Evolutionary Change
Time
Cha
nge
Time
Cha
nge
Large Scale Revolutionary Change or Transformation
Organisations Position
New Position
Organisation makes small Evolutionary changes over time
Management in the Purchasing Function
Revolutionary & Evolutionary Change
Evolutionary Revolutionary
Also called continuous, incremental change.
Also called fundamental, ground/frame breaking and disruptive change.
Tends to be a proactive approach. Tends to be a reactive approach.
Builds on the status quo. Overthrows the status quo, starts with a clean sheet and innovates.
Occurs over a long period of time. Occurs over a relatively short space of time.
Is bottom-up Is top-down (Management lead)
Is slow to produce a considerable change
Requires heavy investment and carries a high element of risk.
Relates to Kaizen and Total Quality Management (TQM) philosophy.
Relates to Business Process Re-engineering (BPR).
Improvements are small, but over a long period can amount to a considerable change.
Can offer a vast improvement.
Allows the company to build and develop its core competencies, knowledge and expertise. In other words, continuous improvement is suitable for learning. For example, if the company decides it needs to alter its culture, this must be learnt, which is a gradual process.
Is particularly suitable for re-aligning processes throughout the organisation that would remove non-value adding activities and speed up process times. For example implementing a new IT system requires a radical approach. It must be implemented throughout the organisation for it to be effective.
Management in the Purchasing Function
Employee Resistance Employees will resist change if they do not comprehend the
reasoning behind it. Employees may not be in agreement with the proposed changes.
They may be happy with their current situation and therefore not perceive the need for change.
Employees may feel that they are ‘losing out’, for example, the new change may undermine their role, removing the power they once had.
Employees tend to rebel against what is imposed upon them, making them feel like a child – irresponsible and having to be told what to do.
Employees may resist change because they are afraid to make mistakes in their new job role.
Employees, if faced with a substantial amount of change, may be overwhelmed and feel unable to cope and adapt.
Employees may feel that the changes are yet another management fad.
Employees may be tired of change and therefore lack enthusiasm and commitment to the project.
Employees may feel that if they make too many improvements too quickly, management will continually force them to be more efficient.
When changes are made within the company to become more efficient and productive, employees may fear that the company is going downhill and therefore worry regarding their job security.
Management in the Purchasing Function
Emergent vs Planned ChangeThe emergent approach to
changeThe planned approach to change
Is where change is allowed to evolve naturally, can be unpredictable and is an ongoing process
Involves consciously taking steps to form a strategy for implementing change using a systematic, goal orientated approach
Is up to date (current) Plans are usually for a minimum of 3 months and can become obsolete and therefore may render useless
Is described as ‘fluid’ Is described as ‘frozen’
Is Bottom-up Management-led (top down)
Reacts to external environment Prepares for the forthcoming period
Is particularly relevant in today’s organisations as it takes into consideration the uncertain nature of the external environment such as competition.
Is particularly suitable for innovation and research and development. You have to plan to bring a product to market.
Management in the Purchasing Function
Kubler-Ross Change Curve
Management in the Purchasing Function
Coping Cycle
The Denial Stage: Reluctance to confront reality, ie there is still a chance things will return to normal.
The Anger Stage: Frustrated feelings especially towards scapegoats. ‘Why me’ reaction.
The Bargaining Stage: Exert effort to negotiate and to mitigate loss.
The Depression Stage: Final realisation of what is happening. ‘There’s nothing that can be done, I’m stuck like this’.
The Testing Stage: Seeks solutions. The Acceptance Stage: Comes to terms
with situation and moves forward.
Management in the Purchasing Function
Session 10
Employment Legislation &Impact of E-commerce and
Technology
Management in the Purchasing Function
Learning Outcomes
At the end of this session candidates will be able to:
Assess the importance of changes in employment and equal opportunities legislation on organisations
Evaluate the impact of e-commerce and technology on the management of organisations and people.
Evaluate the impact of intranets and electronic business
Explain the specific benefits of using e-commerce and technology in the purchasing and supply function
Management in the Purchasing Function
Factors Driving Change
External issues – Sociological Legal Economic Political Technological Competitive
Internal issues – Retention or gain of
competitive advantage Cost-savings New senior management
Management in the Purchasing Function
Creating an Environment for Change
Encourage the right attitude Develop a culture that is based on creativity
and innovation Provide appropriate recognition and rewards Encourage flexibility Foster employee involvement
Management in the Purchasing Function
Creating Major Change(Kotter 1996)
1. Establish sense of urgency
2. Create the guiding coalition3. Develop a vision and strategy4. Communicate the change vision5. Empower broad-based action6. Generate short-term wins7. Consolidate gains and produce more change8. Anchor new approaches in the culture
Management in the Purchasing Function
Implementing Change
Pilot scheme Incremental changes ‘Overnight’ – out with the old and in with the new Variations on the above
Monitor and review
Management in the Purchasing Function
Sample Measures for ManagersFinancialTotal costs
Cost per customerLabour costs
Processing costsTotal revenue
Revenue per customerOperating profit
Profit per customer
External Market share
Customer satisfactionCustomer loyalty
Repurchase intentionsRetention ratesNew customers
Number of complaintsTypes of complaint
OperationalEquipment or staff availability
Number of staff by processOn-time deliveryFacility utilisationNumber of faults
DevelopmentNumber of suggestions
Number of improvementsEmployees involved in
improvement teamsStaff satisfaction
Staff turnoverNumber of service
innovationsService Operations Mgt:
Robert Johnson, 2001