Global Procurement

Topics: Inventory, Cost, Costs Pages: 40 (8635 words) Published: February 27, 2014
CHAPTER 1 – Purchasing and Supply Management
The Financial Significance of Supply Management
Profit-leverage effect – A decrease in purchasing expenditures directly increases profits before taxes (assuming no decrease in quality or purchasing total cost) Return-on-assets Effect – A high ROA indicates managerial prowess in generating profits with lower spending (caveat – ROA ratios vary from one industry to another) Inventory Turnover Effect – Increased inventory turnover indicates optimal utilization of space and inventory levels, increased sales, avoidance of inventory obsolescence and reduced carrying expenses Corporate Supply Management Trends

Increased outsourcing places great reliance on suppliers to respond to end-customer needs Greater dependence on suppliers for design and build responsibilities for complete sub-assemblies and sub-systems Development of new product technologies

Evolving information systems
Trend to single sourcing with fewer key supplier and strategic supplier relationships Corporate Supply Management Opportunities
Identify opportunities to reduce unit costs for products and services Identify opportunities to increase revenue
Implement supply initiatives to improve customer satisfaction Reduce total cost of ownership
Improve efficiency and effectiveness of the supply process
Maximize value from suppliers
Work with key supplier to provide product and service innovations How is Value Measured?
Customer/Consumer – price, quality, availability, service
Shareholder – earnings per share, return on equity, return on investment, return on assets, profit The Value Chain
The collection of activities within the firm to design, produce, market deliver, and support its products and services The Supply Chain – encompasses all activities associated with the movement and transformation of goods from raw materials through to the ultimate customer Example: Value Chain 1 – company digs up gold from ground

Value Chain 2 – Cleans up and purifies
Value Chain 3 – Jeweler makes necklace
4 Critical Dimensions for Competitive Success
Information and relationships must flow both ways
Money flows backwards
Materials/services flow services
Operational Procurement/Purchasing – Acquisition of materials and services required to meet the day-to-day needs of an organization Supply Management/Strategic Sourcing – A More Complete Definition Identify need – design (70% can be saved in the procurement process if the firm can influence the designer) Product and material requirements definitions

Technical specifications
Unique requirements
Target cost
Statements of Work
Purchase Requisitions
Create Specifications and standards – same bullet points as above Acquire material or service
Evaluate supply sources
Select source
Negotiate agreement
Purchase Order
Non-disclosure agreement
Manage materials and logistics
Receive and release material
Authorize payment
Manage warehouse and inventory
Manage in/outbound logistics
Measure/manage supplier performance
Material Purchase Release
Bill of Lading
Material Packing Slip
Manage waste and excess
Hazardous/solid waste mgt.
Dispose excess/obsolete material
Manage assets
Pay suppliers
Process invoices
Disburse payments
Provide reports
Planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customer requirements at the lowest total cost Six major categories – transportation, warehousing, material handling, packaging, inventory mgt., logistics information U.S. infrastructure (highways, etc.) enables us to move goods and products cheaper than in China CHAPTER 2 – Supply Strategy

An Organization Must Approach Strategic Planning on Three Levels Corporate – Decisions and plans that answer the questions –What business are we in? How will we allocate resources among these...
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