Purchasing Management Process Chapter 3

Study Notes

Operational Excellence
- Ensures timely availability of goods and services.
- Aligns purchasing with internal customer requirements.
- Credibility of buyers and purchasing department at stake if poorly executed.
Cost Control and Reduction
- Focus on managing purchasing-related spending.
- Aim for the lowest Total Cost of Ownership (TCO), which includes Direct and Indirect Material Costs.
- Reduce indirect costs by minimizing waste in supply processes.
Continuous Improvement
- Encourages product and process innovation through supplier partnerships.
- Suppliers can introduce new product and production technologies.

Aims to minimize risk exposure in supply markets.
Avoid dependency on a few suppliers to mitigate risks.
High quality and punctual delivery are prioritized over price.
Diversify purchasing requirements to enhance supply and technological stability.

Purchasing decisions impact various business activities and should not be made in isolation.
Focus on optimizing total cost of ownership instead of lowest price.
Requires close cooperation with different disciplines and top management.
Purchasing managers should lead coordination among all participants.

Buyers must understand internal customer needs beyond just brand preferences.
Focus on improving price/value ratio and supplier performance.
Encourage alternatives to current products and collaborate on component designs.

Supply management evolves as an organization matures.
Competitive business environments increase pressure on purchasing for fiscal contributions.
Clarity in company strategy enhances integration of purchasing issues.

Information and Communication Technologies (ICT) facilitate modern purchasing and supply management.

Top Management Commitment
- Active involvement of top management in purchasing strategy influences success.
Functional Leadership
- The purchasing manager's style and leadership impact procurement performance.

Facility Services: Cleaning, catering, security, and maintenance.
Financial Services: Banking, insurance, accounting, and payroll.
Professional Services: Legal consulting, management consultation, risk management.
Technical Services: Maintenance, development, and engineering support.
Transportation Services: Warehousing, logistics, and transportation.
Human Resources Services: Training, recruitment, and temporary staffing.
Marketing Services: Sales support, advertising, and website development.

Input Specification: Describes resources and capacities required from the provider.
Throughput Specification: Details activities the provider must perform.
Output Specification: Specifies the expected results or deliverables from the service.

Defined service scopes complicate qualification requirements for suppliers.
Intangible products necessitate thorough checks on supplier references and experiences.
Preliminary assessments focus on provider organization, expertise, staff qualifications, and quality management.

Preference for output specifications to ensure quality and deliverables.
Supplier reputation, expertise, and customer references are crucial factors.
Agreements should include performance, communication structures, and dispute resolution processes.
Contracts must involve agreements on key personnel and service quality systems.