PROCUREMENT MANAGEMENT Mia Delić, MA Course: Procurement Management Summer Semester 2013 University of Zagreb Email: firstname.lastname@example.org
Mia Delić, MA • Room A 301 (south, 3rd floor) • Office hours: • Tuesday 14-16 • Wednesday 10-12 • email@example.com
Gerneral informations • 2 preliminary exams (midterms): • (1) 28th March 2013 • (2) 23rd May 2013 • Facebook group • Procurement management 2013 • Weekly forum discussions
Introduction • A well-known statement of the objectives of purchasing is: • to acquire the right quality of material, • at the right time, • in the right quantity, • from the right source, • at the right price.
The following broad statement of objectives is suggested: • To supply the organisation with a flow of materials and services to meet its needs • To ensure continuity of supply by keeping effective relationship with existing sources and by developing other sources of supply
The following broad statement of objectives is suggested: • To buy efficiently, obtaining by ethical means the best value for every pound spent • To develop staff, policies, procedures, and organisations to ensure the achievement of these objectives.
Some more specific objectives of purchasing department are: To select the best suppliers in the market To help generate the effective development of new products To protect the company΄s cost structure To maintain the correct quality/value balance To monitor supply market trends To adopt environmentally responsible supply management
To summarize.. firms need access to competitive and productive supply markets if they are to be in business at all. The trend is from tactical to strategic procurement, establishing collaborative relationships with external resources.
The purchasing cycle Themainstagesinthe purchasing processmaybesummarised as: Recognitionofneed Specification Make-or-buydecision Sourceidentification Sourceselection
The purchasing cycle • Contracting • Contract management • Receipt, possibly inspection • Payment • Fulfilment of need
The purchasing cycle • The idea of the purchasing cycle is to indicate the main activities in which purchasing might be involved; • The activities included in the cycle do not cover all of those that a purchasing staff might be involved with (negotiation, vendor rating..)
Purchasing development • 30 years ago: • Purchasing was a service function, often subordinated to production, finance.. • Purchase and supply was concerned with buying supplies at the lowest price (activity was essentially clerical) • Little involvement with suppliers • Reactive
Purchasing development • 15 years ago • Purchasing and supply was still concerned with lowest price but aware of other factors affecting price like quality and delivery • More involved with suppliers and other internal functions
Purchasing development • Today • Purchasing andsupply are becomingstrategic • Purchasing is seen as anactivityofconsiderablestrategicimportance • Most oforganisationactivityconcentrates on theestablishmentanddevelopmentofappropriaterelationshipwithsuppliers.
21 century perspectives for procurement An increase in the strategic importance of purchasing (key activities will include supplier evaluation, selection and management); Tactical purchasing activities (ordering) will increasingly be automated; The internet will be the main vehicle for electronic purchasing which will be used for purchase transactions; Organisations in the supply chain will increasingly share resources including intellectual information, people; Environmental factors will become increasingly important to purchasing considerations.
Reactive vs. Proactive buying • Proactive buying • Purchasing can add value • Purchasing contribute to specification • Purchasing is a main management function • Purchasing contributes to making markets • Problems are a shared responsibility • Total cost and value are key variables • Emphasis strategic • Negotiations win-win • Plenty of suppliers = lost opportunities • Planty of stock =waste • Information is valuable if shared • Reactive buying • Purchasing is a cost centre • Purchasing receives specifications • Purchasing reports to finance or production • Buyers respond to market conditions • Problems are supplier΄s responsibility • Price is key variable • Emphasis on today • Negotiations win/lose • Plenty of suppliers = security • Plenty of stock = security • Information is power
The scope of the purchase function • Operational level • Daily production and distribution planning; • Production scheduling for each manufacturing facility in the supply chain; • Demand planning and forecasting; • Sourcing planning in collaboration with all suppliers;
The scope of the purchase function • Operational level • Production operations, including the consumption of materials and flow of finished goods; • Managing non-moving, short-dated inventory and avoiding more products to go short-dated; • Price determination, returns...
The scope of the purchase function • Tactical/managerial level • Sourcing contracts and other purchasing decisions; • Production decisions (contracting, scheduling, planning process); • Inventory decisions (quantity, location, and quality of inventory); • Transportation strategy (frequency, routes, and contracting); • Cost reduction techniques...
The scope of the purchase function • Strategic level • Long-range planning • Strategic network optimization (number, location, and size of warehousing, distribution centers); • Strategic partnership with suppliers, distributors and customers; • Product life cycle management; • Aligning overall organizational strategy with supply strategy.
Case study BMW • What are the key objectives of the procurement department? • Which goal would you add to develop the procurement department? • What are some of the main conclusions of the study?