purchasing and supply chain organization
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Purchasing and Supply Chain Organization. Chapter 5. Chapter Overview. Purchasing’s position within the organizational structure Factors affecting purchasing’s position Organizing the purchasing function Placement of purchasing authority Organizing for supply chain management - PowerPoint PPT PresentationTRANSCRIPT
PURCHASING & SUPPLY CHAIN MANAGEMENT, 4ePURCHASING & SUPPLY CHAIN MANAGEMENT, 4e
CENGAGE LEARNINGCENGAGE LEARNINGMonczka – Handfield – Giunipero – PattersonMonczka – Handfield – Giunipero – Patterson
Purchasing and Supply Purchasing and Supply Chain OrganizationChain Organization
Chapter 5Chapter 5
Chapter Overview
Purchasing’s position within the Purchasing’s position within the organizational structureorganizational structure
Factors affecting purchasing’s positionFactors affecting purchasing’s position Organizing the purchasing functionOrganizing the purchasing function Placement of purchasing authorityPlacement of purchasing authority Organizing for supply chain managementOrganizing for supply chain management Using teamsUsing teams Creating the organization of the futureCreating the organization of the future
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Formal Organization Structure
Shows the assignment of work along Shows the assignment of work along with its accompanying authoritywith its accompanying authority
Helps define how a firm communicates Helps define how a firm communicates and integrates decision makingand integrates decision making
Why is purchasing’s position in the Why is purchasing’s position in the organizational structure important?organizational structure important?
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Factors: Purchasing’s Position
HistoryHistory Type of industryType of industry Total value of goods and servicesTotal value of goods and services OtherOther
Founding philosophyFounding philosophy Type of purchased materialsType of purchased materials Ability to influence company performanceAbility to influence company performance
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To Whom Does Purchasing Report?
Upper-level function reporting to an Upper-level function reporting to an executive vice presidentexecutive vice president
Mid-level function reporting to an Mid-level function reporting to an executive one level below an executive executive one level below an executive vice presidentvice president
Lower-level function reporting at least Lower-level function reporting at least two levels below an executive vice two levels below an executive vice presidentpresident
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Organizing the Purchasing Function
Specialization within purchasingSpecialization within purchasing Sourcing and negotiatingSourcing and negotiating Purchasing researchPurchasing research Operational support and order follow-upOperational support and order follow-up Administration and supportAdministration and support
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Sourcing and Negotiating
Identifies potential suppliersIdentifies potential suppliers Negotiates with selected suppliersNegotiates with selected suppliers Performs the buying of goods and Performs the buying of goods and
servicesservices By specific itemsBy specific items By commodity familyBy commodity family By service categoriesBy service categories
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Purchasing Research
Developing long-term material Developing long-term material forecastsforecasts
Conducting value analysis programsConducting value analysis programs Assessing supplier capabilitiesAssessing supplier capabilities Analyzing supplier cost structuresAnalyzing supplier cost structures
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Operational Support and Follow-up
Supporting day-to-day operations Supporting day-to-day operations including expeditingincluding expediting
Preparation and transfer of material Preparation and transfer of material releasesreleases
Strategic vs. tactical purchasingStrategic vs. tactical purchasing
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Administration and Support
Developing policies and proceduresDeveloping policies and procedures Administering and maintaining the Administering and maintaining the
purchasing information system and purchasing information system and databasedatabase
Determining required staffing levelsDetermining required staffing levels Developing departmental plansDeveloping departmental plans Organizing training and developmentOrganizing training and development Developing measurement systemsDeveloping measurement systems
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Purchasing Department Activities
BuyingBuying ExpeditingExpediting Inventory controlInventory control TransportationTransportation Managing Managing
countertrade countertrade arrangementsarrangements
Insourcing -Insourcing -outsourcingoutsourcing
Value analysisValue analysis Purchasing Purchasing
researchresearch Material forecastingMaterial forecasting Supply managementSupply management OtherOther
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Other Department Activities
Receiving and warehousingReceiving and warehousing Managing travel expensesManaging travel expenses Production planning and controlProduction planning and control Commodity futures tradingCommodity futures trading Global transportation and materials Global transportation and materials
managementmanagement Economic forecastingEconomic forecasting SubcontractingSubcontracting
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Strategic Activities
Manage relationships with critical Manage relationships with critical supplierssuppliers
Develop electronic purchasing systemsDevelop electronic purchasing systems Implement companywide best practicesImplement companywide best practices Negotiate companywide supply Negotiate companywide supply
contractscontracts Manage critical commoditiesManage critical commodities
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Operational Activities
Manage transactions with suppliersManage transactions with suppliers Use e-systems to source standard and Use e-systems to source standard and
direct items in electronic catalogsdirect items in electronic catalogs Source unique itemsSource unique items Generate and forward material releasesGenerate and forward material releases Provide supplier performance feedbackProvide supplier performance feedback
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Placement of Purchasing Authority
CentralizedCentralized DecentralizedDecentralized Hybrid combinationHybrid combination
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Size of Purchasing Staff
Type of companyType of company Nature or complexity of products and Nature or complexity of products and
services producedservices produced Physical number of items procuredPhysical number of items procured Scope of purchasing responsibilityScope of purchasing responsibility
Strategic sourcingStrategic sourcing Market research and analysisMarket research and analysis Extent of involvement in servicesExtent of involvement in services
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Factors Influencing Authority
Organizational business strategyOrganizational business strategy Responsiveness vs. efficiencyResponsiveness vs. efficiency
Total purchase dollar expendituresTotal purchase dollar expenditures Cost savings requiredCost savings required Geographic dispersionGeographic dispersion
Overall philosophy of managementOverall philosophy of management
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Strategic vs. Operational Sourcing
StrategicSourcing Activities
• Manage relationships with critical suppliers• Develop electronic purchasing systems• Implement companywide best practices• Negotiate companywide supply contract• Manage critical commodities
Operational Activities
• Manage transactions with suppliers• Use e-systems to obtain standard or indirect
items through catalogs• Source items that are unique to the operating
unit• Generate and forward material releases• Provide supplier performance feedback
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Advantages of Centralization
Consolidate purchase volumesConsolidate purchase volumes Reduced duplication of purchasing effortReduced duplication of purchasing effort Ability to coordinate plans and strategiesAbility to coordinate plans and strategies Ability to coordinate and manage Ability to coordinate and manage
companywide purchasing systemscompanywide purchasing systems Developing expertiseDeveloping expertise Managing companywide changeManaging companywide change
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Advantages of Decentralization
Speed and responsivenessSpeed and responsiveness Understanding unique operational Understanding unique operational
requirementsrequirements Product development supportProduct development support OwnershipOwnership
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Product Development Support
Utilize early supplier involvementUtilize early supplier involvement Evaluate long-term material Evaluate long-term material
requirementsrequirements Develop strategic plansDevelop strategic plans Determine if substitute materials are Determine if substitute materials are
availableavailable Anticipate product requirementsAnticipate product requirements
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Hybrid Purchasing Structures
Lead buying divisionLead buying division Regional buying groupsRegional buying groups Global buying committeesGlobal buying committees Corporate purchasing councilsCorporate purchasing councils Corporate steering committeesCorporate steering committees
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Benefits of Organizing for SCM
Controlling material and service costsControlling material and service costs Developing an awareness of supply Developing an awareness of supply
chain total cost trade-offschain total cost trade-offs Opening channels of communicationOpening channels of communication Supporting high-potential career paths Supporting high-potential career paths
by developing well-rounded expertiseby developing well-rounded expertise Developing operational efficienciesDeveloping operational efficiencies Creating direct links in the supply chainCreating direct links in the supply chain
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Key Processes
Customer relationship managementCustomer relationship management Customer service managementCustomer service management Demand managementDemand management Order fulfillmentOrder fulfillment Manufacturing flow managementManufacturing flow management SourcingSourcing Product development/commercializationProduct development/commercialization Return channel processesReturn channel processes
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An SCM Structure Example
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Challenges of Using Teams
Waste time and energyWaste time and energy Enforce lower performance normsEnforce lower performance norms Create destructive conflictCreate destructive conflict Make notoriously bad decisionsMake notoriously bad decisions Exploit, stress, and frustrate membersExploit, stress, and frustrate members
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Work Team Planning Guide
Identify appropriate team assignmentsIdentify appropriate team assignments Form work team and select members Form work team and select members
and leaderand leader Determine member training Determine member training
requirementsrequirements Identify resource requirementsIdentify resource requirements
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Work Team Planning Guide
Determine team authority levelsDetermine team authority levels Establish team performance goalsEstablish team performance goals Determine how to measure and reward Determine how to measure and reward
participation and performanceparticipation and performance Develop team chartersDevelop team charters
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Identify Team Assignments
Do assignments justify the use of Do assignments justify the use of teams?teams?
Has the proper team model been Has the proper team model been identified (full-time vs. part-time)?identified (full-time vs. part-time)?
Does executive and functional Does executive and functional management support the use of a management support the use of a team?team?
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Form Team and Select Members
Have core vs. as-needed members Have core vs. as-needed members been identified?been identified?
Do members have proper skills, time, Do members have proper skills, time, and commitment?and commitment?
Has a qualified leader been identified?Has a qualified leader been identified? Are customers and/or suppliers Are customers and/or suppliers
needed?needed? Do members understand their roles?Do members understand their roles?
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Determine Training Requirements
Have team member training Have team member training requirements been assessed?requirements been assessed?
Is required training available on a Is required training available on a timely basis?timely basis?
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Identify Resource Requirements
Are sufficient resources provided or Are sufficient resources provided or available to support the assigned available to support the assigned tasks?tasks?
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Determine Authority Levels
Have team authority levels been Have team authority levels been determined?determined?
Have team authority levels been Have team authority levels been communicated throughout the communicated throughout the organization?organization?
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Establish Team Performance Goals
Has the team established objective and Has the team established objective and measureable performance goals?measureable performance goals?
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Measurement and Rewards
Are approaches and systems in place Are approaches and systems in place that assess team performance and that assess team performance and member contributions?member contributions?
Are there reporting linkages to team or Are there reporting linkages to team or executive sponsors?executive sponsors?
Is team performance effectively linked Is team performance effectively linked to performance reward systems?to performance reward systems?
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Develop Team Charters
Has a formal charter been developed Has a formal charter been developed that details team mission, tasks, broad that details team mission, tasks, broad objectives, etc.?objectives, etc.?
Has the charter been communicated Has the charter been communicated across the organization?across the organization?
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Hurdles to Using Teams
Extensive use of part-time membersExtensive use of part-time members Not rewarding team member effortNot rewarding team member effort Individualistic U.S. national cultureIndividualistic U.S. national culture
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Organization of the Future
Moving away from a functional silo or Moving away from a functional silo or vertical organizationvertical organization
Adopting a horizontal or process Adopting a horizontal or process approach that cuts across hierarchical approach that cuts across hierarchical or functional boundariesor functional boundaries
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Horizontal Organization
3939
MarketingMarketing EngineeringEngineering FinanceFinance Supply MgtSupply Mgt
Horizontal Organization Features
Flattened hierarchiesFlattened hierarchies Faster decision makingFaster decision making Freer flow of ideasFreer flow of ideas Joint ventures and alliancesJoint ventures and alliances
Cross-functional teamsCross-functional teams Decentralized buying activity along Decentralized buying activity along
with centralized coordinationwith centralized coordination
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Horizontal Organization Features
Open information channelsOpen information channels InternetInternet IntranetsIntranets Deployment of information technologyDeployment of information technology
Rotation of managers across business Rotation of managers across business unitsunits
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Themes for the 21st Century
Extensive use of teamsExtensive use of teams Greater participation on new product Greater participation on new product
development teamsdevelopment teams Co-location of purchasing with internal Co-location of purchasing with internal
customerscustomers Higher-level chief purchasing officersHigher-level chief purchasing officers Dedicated supplier relationship Dedicated supplier relationship
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Co-Location with Internal Customers
Operations Engineering Marketing
Gain insight to: Gain insight to: Gain insight to:
Supplier performance Material specifications Demand planning
requirements
Internal requirements Evolving product and process technology
New product ideas
Capacity, material, and service needs
New product requirements
Promotions and planned demand shifts
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