BADM 2160 INTRODUCTION TO PURCHASING
Supply Chain Management by
Burt, Petcavage and Pinkerton
The overall objective of this chapter is to give the reader a sense of the importance of purchasing and the supply chain and how they fit in to and impacts the business environment.
Careers in Purchasing and Supply Management
1. Does purchasing sound like a class (or career) you would be interested in? Why or why not? 2. Share with your classmates what you know about the function of purchasing. 3. Can you identify someone who might be a mentor during your early days if you decided to pursue a career in purchasing? (Note: This individual may be a great candidate for your Interview Project!)
What are the five rights involved in the process of professional purchasing? 1. Right Item or service
2. Right quality
3. Right quantity
4. Right price
5. Right time
List and describe the five stages of the Supply Management process. 1. Machines
The Five M’s
What resources make up what management authorities refer to as the Five M’s and what is the relevance of each in the production process? 1. Materials are crucial to the production process. If there is an inappropriate amount of materials available (whether it be the wrong quantity, wrong quality, or not available at the right time), company costs are increased while company profits are decreased. 2. Manpower is the first source of productive power. Manpower existed before machines and the Industrial Revolution. Without manpower, production would cease to exist. 3. Machines are relevant to the production process because machines made it possible to produce multiples of the same product in a larger volume in a shorter amount of time. 4. Money is the essential bottom line in production. It costs money to make money. Without money, materials, manpower or machines would not be available. Without these things, a company would have no profit. 5. Management is important because it effects sales and costs, which is the bottome line of production.
Describe the shift these resources have undergone through the years. What has driven these changes?
Supply Management and the Bottom Line
REVIEW EXHIBIT 1.2 A Graphic Reproduction of Supply Management’s Impact on the Bottom Line.
Why do the authors describe supply management as a core competency of the firm?
It drives sales and costs.
How can Strategic Supply Chain Management help a company strengthen their bottom line?
List and define the ways supply management can contribute to increased sales:
1. Faster to market – When a successful product is shown to be first on the market, many times that company stands to hold 40-60% of the profit. 2. Improved quality – If the quality of products is bad, then it will drive consumers to competitors. Effective supply management will ensure that quality products are being placed on the market. 3. Pricing flexibility – When cost of service or production is reduced, pricing elasticity occurs. If the cost of a product is marked down, then more consumers are willing to buy a product. 4. Innovation – Approximately 35% of all successful new products resulted from technology developed within the supplier base, which drives down production costs. Costs are driven down b/c there is no need to buy from an outside supplier. 5. Enhanced customer satisfaction – Helping to achieve shorter fulfillment times,...
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