7/11/2020
Purchasing & Procurement
Management
Lecture 1
PGD in Supply Chain Management
Bangladesh Institute of Human Resource
Management (BIHRM)
1
1
7/11/2020
Purchasing Mgt.
• It include supplier identification and
selection, buying, negotiation and
contracting, supply market research,
supplier measurement and improvement,
and purchasing systems development.
• Purchasing has been referred to as doing
"the five rights": getting the right quality,
in the right quantity, at the right time, for
the right price, from the right source.
Purchasing Mgt.(Cont..)
Supply management is not just a new name
for purchasing but a more inclusive concept
• We feel supply management is 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 conjunction with cross-functional
teams (CFTs) to achieve the organizational mission.
• , the Institute for Supply Management defines supply management as the
identification, acquisition, access, positioning, and management of
resources and related capabilities an organization
needs or potentially needs in the attainment of its
strategic objectives 4
2
7/11/2020
Importance
• Average 55% revenue is spent on purchasing.
• Among the supplier Japanese companies like
Toyota, Honda scored median with 399 of 500.
where American giants like General Motors
was scored below median with 164 of 500
Importance
• Cost Reduction.
• Maximize profit.
• Effective time & material management.
• Use of exact needed resources.
• Ensure success of business mission.
• Cost leadership in the market.
• Source of competitive advantage.
• Good Relationship with Supplier.
3
7/11/2020
4
7/11/2020
Four Enablers of Purchasing and Supply
1.Capable Human Resources
(1) supplier relationship management,
(2) total cost analysis, (3) purchasing
strategies, (4) supplier analysis, and (5)
competitive market analysis.
2.Proper Organizational Design
formal system of communication,
division of labor, coordination,
control, authority, and responsibility
10
5
7/11/2020
3.Real-Time and Shared Information Technology
Capabilities
4.Right Measures and Measurement Systems:
Roadblocks :(1) too many metrics, (2) debate
over the correct metrics, (3) constantly
changing metrics, and (4) old data.
Overcoming these roadblocks requires(1) know what it
wants to measure,(2)has a process in place to
measure it, and has accessibility to the right data. (3)
taking action on the measurement data. (4)Finally, as
with any planning system, the targets are revised to
reflect the realities of the marketplace, competition,
and changing goals of the organization.
11
Purchasing Objectives
• Objective 1: Supply Continuity
• Objective 2: Manage the Purchasing Process Efficiently and Effectively
• Determining staffing levels
• • Developing and adhering to administrative budgets
• • Providing professional training and growth opportunities for
employees
• • Introducing procure to pay systems that lead to
improved spending visibility, efficient invoicing
and payment, and user satisfaction
• Objective 3: Develop Supply Base Management
• (1) selects suppliers that are competitive, (2) identifies new suppliers
that have the potential for excellent performance and develops closer
relationships with these suppliers, (3) improves existing suppliers, and
(4) develops new suppliers that are not competitive.
12
6
7/11/2020
• Objective 4: Develop Aligned Goals with Internal
Functional Stakeholders
• Objective 5: Support Organizational Goals and Objectives For
example, let's assume an organization has an objective of
reducing the amount of inventory across its supply chain.
Purchasing can work with suppliers to deliver smaller
quantities more frequently, leading to inventory reductions.
13
• Objective 6: Develop Integrated Purchasing
Strategies That Support Organizational Strategies
• Monitoring supply markets and trends (e.g., material price
increases, shortages, changes in suppliers) and interpreting
the impact of these trends on company strategies
• • Identifying the critical materials and services required
to support company strategies in key performance
areas, particularly during new-product development
• • Developing supply options and contingency
plans that support company plans
• • Supporting the organization's need for a
diverse and globally competitive supply base
14
7
7/11/2020
15
16
8
7/11/2020
17
18
9
7/11/2020
19
20
10
7/11/2020
21
22
11
7/11/2020
23
Service Specification for Procurement Management of the
Prepared by: Sharfuddin Lisan, fb:Lisan Ahmed,lisanbd@ymail.com Performance measures contract
Output -
Statement of
-measurable;
Requirements –
-achievable within a specified timeframe Reporting
-performance requirements
measures and targets; Reliability,
-contract management
availability and Standards
requirements;
maintainability Service history Documentation
-sale of assets and
transfer of personnel; -
Transition between
-the handover process
Security service providers &
the transition process
- Hand Over Process
to a replacement
-
service provide
-outputs delivered;
Transport Implementation
Training
Timetable -
Advertising
Compatibility and
Payroll administration standardization
Performance Spec:
-Specific level of Security Services
output Banking
-Using Sample. Catering Specify delivery Requirements:
-Time & Schedule
-Safety & Environment Technical
Design service -Delivery point
-Maintenance & characteristics
Mgt Consultancy -Method of Transport & Packing
Operational
-
Requirements
12
7/11/2020
25
Purchasing Responsibilities
• Evaluate and Select Suppliers
• Review Specifications
• Act as the Primary Contact with Suppliers
• Determine the Method of Awarding
Purchase Contracts
• E-Procurement and the Procure
to Pay Process
26
13
7/11/2020
Improving the Purchasing Process
• Online Requisitioning Systems from
Users to Purchasing
• Procurement Cards Issued to Users
• Electronic Purchasing Commerce through the Internet
• • Transmitting purchase orders to suppliers
• • Following up on the status of orders
• • Submitting requests for quotes to suppliers
• • Placing orders with suppliers
• • Making electronic funds transfer payments
• • Establishing electronic data interchange capability
27
• Longer-Term Purchase Agreements
• Online Ordering Systems to Suppliers
• • Immediate visibility to back-ordered items
• • Faster order input time, which contributes to
reduced order cycle times
• • Reduced ordering errors
• • Order tracking capabilities
• • Order acknowledgment from the supplier,
often with shipping commitment dates
• • Ability to batch multiple items from multiple
users on a single online order
• • Faster order cycle time from input to delivery
28
14
7/11/2020
• Purchasing Process Redesign
• Online Ordering through Electronic Catalogs
29
End of Season 1
30
15
