Chap 12s Purchasing & Supplier Managemnt

8/7/2019 Chap 12s Purchasing & Supplier Managemnt

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Operations Management, Seventh Edition, by William J. Stevenson

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Purchasing and Supplier Management

Chapter 12 Supplement

Purchasing andSupplier Management


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Purchasingis responsible for obtainingthe materials, parts, and supplies and

services needed to produce a product

or provide a service.

Purchasing


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Develop and implement purchasingplans for products and services that

support operations strategies

Goal of Purchasing


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Identifying sources of supply Negotiating contracts

Maintaining a database of suppliers

Obtaining goods and services

Managing supplies

Duties of Purchasing


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Purchasing Interfaces

Purchasing

Legal

AccountingOperations

Data

processing

Design

ReceivingSuppliers


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Purchasing Cycle

Requisition received

Supplier selected

Order is placed

Monitor orders

Receive orders

Purchasing

Legal

AccountingOperations

Dataprocess-

ing

Design

Receiving

Suppliers


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Value analysis Examination of the function of purchased

parts and materials in an effort to reduce

cost and/or improve performance Outsourcing

Buying goods or services from outside

sources rather than making or providing

them in-house

Value Analysis vs Outsourcing


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Deciding Factors forOutsourcing

Cost to make vs. cost to buy

Stability of demand

Quality from suppliers

Maintaining close control

Idle capacity available


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Lead times for each alternative

Who has patents, expertise, etc.

Stability of technology

Consistency/conflict with current

operations

Deciding Factors forOutsourcing


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Available capacity

Expertise

Quality considerations

Nature of demand

Cost

Core elements

Strategy

Factors for Make or Buy Decisions


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Predetermined or fixed prices

Competitive bidding

Negotiated purchasing

Determining Prices


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Determining Prices

Published price lists

fixed or predetermined prices

Competitive bidding

e.g. government purchases of standard

goods or services

Negotiating

win-win transaction


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Negotiation is a win-lose confrontation

Main goal is to obtain the lowest price

Each negotiation is an isolated

transaction

Myths ofNegotiated Purchasing


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Centralized purchasing Purchasing is handled by one special

department

Decentralized purchasing Individual departments or separate

locations handle their own purchasing

requirements

Centralized vs Decentralized Purchasing


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Choosing suppliers

Evaluating sources of supply

Supplier audits

Supplier certification

Supplier relationships

Suppliers


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Quality and quality assurance

Flexibility

Location

Price

Factors in Choosing a Supplier


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Product or service changes

Reputation and financial stability

Lead times and on-time delivery

Other accounts

Factors in Choosing a Supplier


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Operations Management, Seventh Edition, by William J. StevensonCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.


Evaluating Sources of Supply

Vendor analysis: Evaluating the sources

of supply in terms of price, quality,

reputation, and service


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Vendor analysis - evaluating thesources of supply in terms of

Price

Quality Services

Location

Inventory policy

Flexibility

Evaluating Sources of Supply


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Supplier as a Partner

Aspect Partner AdversaryNumber of suppliers

Length of

relationship

Low price

Reliability

Openness

Quality

Volume of business

Location

Flexibility

One or a few

Long-term

Moderately important

High

High

Insured at the source

High

Proximity may be

stressed for short leadtimes

Relatively high

Many; play one off

others

May be brief

Major consideration

May not be high

Low

Buyer inspects

Ma be - man su liers

Widely dispersed

Relatively low


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Ideas from suppliers could lead toimproved competitiveness

Reduce cost of making the purchase

Reduce transportation costs

Reduce production costs Improve product quality

Improve product design

Reduce time to market

Improve customer satisfaction

Reduce inventory costs

Introduce new products or services

Supplier Partnerships

Chap 12s Purchasing & Supplier Managemnt

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