8/7/2019 Chap 12s Purchasing & Supplier Managemnt
1/21
12s-1
McGraw-Hill/Irwin
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
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
2/21
12s-2
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Purchasingis responsible for obtainingthe materials, parts, and supplies and
services needed to produce a product
or provide a service.
Purchasing
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
3/21
12s-3
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Develop and implement purchasingplans for products and services that
support operations strategies
Goal of Purchasing
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
4/21
12s-4
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Identifying sources of supply Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing supplies
Duties of Purchasing
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
5/21
12s-5
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Purchasing Interfaces
Purchasing
Legal
AccountingOperations
Data
processing
Design
ReceivingSuppliers
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
6/21
12s-6
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Purchasing Cycle
Requisition received
Supplier selected
Order is placed
Monitor orders
Receive orders
Purchasing
Legal
AccountingOperations
Dataprocess-
ing
Design
Receiving
Suppliers
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
7/21
12s-7
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
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
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
8/21
12s-8
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Deciding Factors forOutsourcing
Cost to make vs. cost to buy
Stability of demand
Quality from suppliers
Maintaining close control
Idle capacity available
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
9/21
12s-9
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Lead times for each alternative
Who has patents, expertise, etc.
Stability of technology
Consistency/conflict with current
operations
Deciding Factors forOutsourcing
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
10/21
12s-10
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Available capacity
Expertise
Quality considerations
Nature of demand
Cost
Core elements
Strategy
Factors for Make or Buy Decisions
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
11/21
12s-11
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Predetermined or fixed prices
Competitive bidding
Negotiated purchasing
Determining Prices
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
12/21
12s-12
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Determining Prices
Published price lists
fixed or predetermined prices
Competitive bidding
e.g. government purchases of standard
goods or services
Negotiating
win-win transaction
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
13/21
12s-13
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Negotiation is a win-lose confrontation
Main goal is to obtain the lowest price
Each negotiation is an isolated
transaction
Myths ofNegotiated Purchasing
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
14/21
12s-14
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
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
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
15/21
12s-15
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Choosing suppliers
Evaluating sources of supply
Supplier audits
Supplier certification
Supplier relationships
Suppliers
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
16/21
12s-16
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Quality and quality assurance
Flexibility
Location
Price
Factors in Choosing a Supplier
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
17/21
12s-17
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. Stevenson
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Product or service changes
Reputation and financial stability
Lead times and on-time delivery
Other accounts
Factors in Choosing a Supplier
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
18/21
12s-18
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. StevensonCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Evaluating Sources of Supply
Vendor analysis: Evaluating the sources
of supply in terms of price, quality,
reputation, and service
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
19/21
12s-19
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. StevensonCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
Vendor analysis - evaluating thesources of supply in terms of
Price
Quality Services
Location
Inventory policy
Flexibility
Evaluating Sources of Supply
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
20/21
12s-20
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. StevensonCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
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
8/7/2019 Chap 12s Purchasing & Supplier Managemnt
21/21
12s-21
McGraw-Hill/Irwin
Operations Management, Seventh Edition, by William J. StevensonCopyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchasing and Supplier Management
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