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Introduction To Procurement

This document provides an introduction to procurement and supply chain management. It discusses the new competitive environment organizations face and key factors driving supply chain management. It defines purchasing and supply management and outlines important purchasing activities. It also describes supply chains and value chains as well as four pillars of purchasing and supply chain excellence: human resources, organizational design, information technologies, and measurement.

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ghazia
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915 views

Introduction To Procurement

This document provides an introduction to procurement and supply chain management. It discusses the new competitive environment organizations face and key factors driving supply chain management. It defines purchasing and supply management and outlines important purchasing activities. It also describes supply chains and value chains as well as four pillars of purchasing and supply chain excellence: human resources, organizational design, information technologies, and measurement.

Uploaded by

ghazia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 29

Introduction To Procurement

And Sourcing

1 Prepared By: Muhammad Imran Taseer


2

Synopsis
A New Competitive Environment
 Factors Driving SCM
 Why Purchasing Is Important
 What is Purchasing
 Activities of Purchasing
 Supply Management
 Supply Chains and Value Chains
 Four Pillars of Purchasing and Supply
Chain Excellence
Prepared By: Muhammad Imran Taseer
3

A New Competitive
Environment
 Increasing numbers of world-class
competitors
 Sophisticated customer base
 More performance at a lower cost
 Widely availableinformation sources
 Balance of power between buyers and
suppliers
 Greater outsourcing

Prepared By: Muhammad Imran Taseer


4

Factors Driving SCM


 Low cost and wide availability of
information more closely links the
members of a supply chain
 Competition in domestic and
international markets requires quickness,
agility and flexibility

Prepared By: Muhammad Imran Taseer


5

Factors Driving SCM


 Customer expectations and requirements
are more demanding
 Major distractions require the ability of a
supply chain to react rapidly
 Competition between supply chains, not
just companies

Prepared By: Muhammad Imran Taseer


6

Why Purchasing Is Important


 Purchased content is a significant part of
the cost of goods sold (≥ 55%)
 Major area of cost saving
 Move from traditional supplier relations to
improve supply chain performance
 Purchased content’s impact on product
and service quality

Prepared By: Muhammad Imran Taseer


7

Why Purchasing Is Important


 Participation in product and process
design
 Use of cross-functional teams
 Early supplier involvement
 The supply chain’s impact on competitive
advantage

Prepared By: Muhammad Imran Taseer


8

Food For Thought


 Aresupply chains and value chains the
same?
 What is supply chain management?
 What is an extended enterprise?

Prepared By: Muhammad Imran Taseer


9

What is Purchasing
A functional group (i.e., a formal entity on
the organization chart) as well as a
functional activity (i.e., buying goods and
services)

 The terms “purchasing” and “procurement.”

Prepared By: Muhammad Imran Taseer


10

Activities of Purchasing
 Supplier identification and
selection
 Negotiation and contracting
 Buying
 Supply market research
 Supplier measurement and improvement
 Purchasing systems development

Prepared By: Muhammad Imran Taseer


11

“The 5 Rights "of Purchasing

1. Getting the right quality,


2. In the right quantity,
3. At the right time,
4. For the right price,
5. From the right source.

Prepared By: Muhammad Imran Taseer


12

Supply Management
A strategic approach to planning for and
acquiring the organization’s current and
future needs through effectively
managing the supply base, utilizing a
process orientation in aggregation with
cross-functional teams to achieve the
organizational mission

Prepared By: Muhammad Imran Taseer


13

ISM’s Definition
 Theidentification, acquisition, access,
positioning, and management of
resources and related capabilities an
organization needs or potentially needs in
the attainment of its strategic objectives

Prepared By: Muhammad Imran Taseer


14

Strategic Sourcing
 The process of identifying, evaluating,
selecting, managing, and developing
suppliers to realize supply chain
performance that is better than that of
competitors.

 “Supply management” and “strategic sourcing”

Prepared By: Muhammad Imran Taseer


15

Supply Chains and Value


Chains
 Value chain – primary and secondary support
activities that can lead to competitive advantage

 Supply chain – a set of 3 or more organizations


linked directly by 1 or more of the upstream or
downstream flows of products, services, finances,
and information from a source to a customer

Prepared By: Muhammad Imran Taseer


16

• Firm infrastructure
The Extended Value Chain
Support Activities
•
•
Human resource management
Technology development
• Purchasing

Customers
Materials/Services Information/Funds/Knowledge
Suppliers

Inbound Outbound Marketing Customer


Operations
Logistics Logistics & Sales Service

Primary Activities

Materials / Supply
Physical Distribution / Channel Management
Management

Total Supply Chain / Total Logistics Management


Prepared By: Muhammad Imran Taseer
17

Critical SCM Processes


 New product development
 Customer-order fulfillment
 Supplier evaluation and selection
 Demand and supply planning

Prepared By: Muhammad Imran Taseer


18

The Supply Chain Umbrella


 Purchasing
 Inbound transportation
 Quality control
 Demand and supply planning
 Receiving, materials handling, and
storage
 Material or inventory control

Prepared By: Muhammad Imran Taseer


19

The Supply Chain Umbrella


 Order processing
 Production planning, scheduling, and
control
 Warehousing/distribution
 Shipping
 Outbound transportation
 Customer service

Prepared By: Muhammad Imran Taseer


20

Four Pillars of Purchasing and


Supply Chain Excellence

1. Human Resources
2. Organizational Design
3. Information Technologies
4. Measurement

Prepared By: Muhammad Imran Taseer


21

Capable Human Resources


 Supplier relationship management
 Totalcost analysis
 Purchasing strategies
 Supplier analysis
 Competitive market analysis

Prepared By: Muhammad Imran Taseer


22

Proper Organizational Design


 Assessing and selecting the structure and
formal system of communication
 Division of labor
 Coordination
 Control
 Authority
 Responsibility

Prepared By: Muhammad Imran Taseer


23

Real-Time and Shared IT


Capabilities
 Supply chain planning
 Forecast accuracy
 Optimized production scheduling
 Reduced working capital costs
 Shortened life cycles
 Reduced transportation costs
 Improved customer service

Prepared By: Muhammad Imran Taseer


24

Real-Time and Shared IT


Capabilities
 Supply chain execution
 Obtaining materials
 Managing physical flows

Prepared By: Muhammad Imran Taseer


25

Emerging SCM Technologies


 Global positioning systems
 Internet-based systems
 Bar codes
 Radio frequency identification devices
 Wireless devices

Prepared By: Muhammad Imran Taseer


26

Roadblocks to Measurement
Systems
 Too many metrics
 Debate over the correct metrics
 Constantly changing metrics
 Old data

Prepared By: Muhammad Imran Taseer


27

Why Is Measurement
Important?
 Supports fact-based decision making
 Improves future supplier performance
 Recognizes outstanding performance
 Links critical measures to desired
outcomes
 Determines if initiatives are working

Prepared By: Muhammad Imran Taseer


28

Evolution of Purchasing and


SCM
 The early years: 1850 – 1900
 Growth of purchasing fundamentals: 1900
– 1939
 The war years: 1940 – 1946
 The quiet years: 1947 – mid-1960s

Prepared By: Muhammad Imran Taseer


29

Evolution of Purchasing and


SCM
 Materials management comes of age:
mid-1960s – Late 1970s
 The global era: Late 1970s – 1999
 Integrated supply chain management:
beyond 2000

Prepared By: Muhammad Imran Taseer

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