Untitled Quiz

Module Information

• Module Title: Management of Purchases and Procurement
• Module: Procurement and Stock Management
• Section: Logistics Engineering and Transport
• Academic Year: 2024/2025
• Instructor: Ali HEBAZ
• Email: [email protected]

Course Objectives

• Gain a fundamental understanding of logistics and procurement concepts.
• Identify and understand the various components of procurement processes within a company.
• Recognize the key challenges in managing procurement within a company.
• Learn how procurement processes impact the overall efficiency of the enterprise.
• Learn about the role of the purchaser in an enterprise.
• Learn about international procurement.

Course Organization and Evaluation

• Total Contact Hours: 21 hours (4 hours/week)
• Class Days: Thursdays
• Class Time: 8:30 AM - 12:30 PM

Introduction

• What is logistics?
• What role does it play in an enterprise?
• What are its objectives?
• Outline of the course: Chapters on strategic role of purchasing, tools and methods for purchasers and international buying.

Introduction (Detailed)

• Logistics encompasses various realities: a specific industry segment; a function that views enterprises and inter-organizational connections through the lens of flows - physical, informational, and financial - requiring coordination for optimization of processes.

Origin of the word Logistics

• The French Academy Dictionary defines "logistique" as: the science of calculation; the part of military science tasked with supplying armed forces with necessities for sustenance, movement, and combat; a collection of techniques and material resources used for enterprise organization.

Introduction (Heskett and Ford)

• In 1973, Heskett isolated logistics as a separate management domain.
• In 1978, Heskett defined logistics as a process encompassing activities related to managing physical product flows, coordinating resources, and managing market channels, all with the objective of achieving a desired service level at the lowest cost.
• Henri Ford defined logistics as the process of placing the correct quantity of a certain product in the correct place at the correct time at the lowest possible cost.

Introduction (Objectives)

• Cost reduction
• Improved time management
• Reduction of stock levels
• Quality improvement (delivery timelines, product condition)
• Improved brand image through customer satisfaction.

Introduction (Performance)

• What differentiates a high-performing company from its competitors?
• Defining performance.
• Two key concepts for measuring company performance:
  • Efficiency: The ability to achieve objectives at the lowest cost.
  • Effectiveness: The ability to achieve the objectives set by management.

Introduction (Efficiency)

• Efficiency, in management, is a company's capacity to meet its objectives set by management.
• Effective companies are therefore companies that achieve their objectives.
• But at what cost?

Introduction (Efficency)

• Efficiency = optimization of resources allocated to achieve objectives.
• Evaluation of logistics performance considers criteria like cost, quality, reliability/flexibility, and time.

Introduction (CQFD)

• Logistics efficiencies are evaluated based on CQFD criteria (Cost, Quality, Flexibility, Delivery).

Introduction (Logistics as a Function)

• Logistics involves multiple facets.
• It encompasses inter-organizational relationships and internal business processes as well.

Introduction (Examples)

• Car manufacturers face challenges in anticipating demand for varied vehicle configurations and optimizing supply chain and production systems accordingly.
• Logistics plays a critical role here.

Introduction (Porter's Value Chain)

• A visual representation of how a company creates value.
• Activities are divided into primary and supporting activities that create value to the final client.
• The key is identifying where the company excels in the value chain compared to competitors.

Introduction (SWOT Analysis)

• Strengths, Weaknesses, Opportunities, Threats
• An approach to analysing both internal and external factors influencing a company's strategic goals
• Assists in developing appropriate strategies.

Introduction (Competitive Advantages)

• To produce at a lower cost than competitors, or to produce better quality goods with a higher price.
• Key is to identify the sources of competitive advantage.

Introduction

• Procurement definition.
• The procurement function in a company.

Introduction (Logistics Fragmentation)

• A breakdown of procurement process into upstream (procurement) and downstream (distribution) components
• Potential issues like stock levels, delivery delays, product quality, and customer dissatisfaction.

Mechanism of Integrated Logistics

• Visual representation (diagram) of the integrated approach to logistics, encompassing the end-to-end flow—from supplier to customer/consumer.
• Key concepts like alignment between supply and demand, optimal pricing and placement, and the calculation of profit margins while complying with quality and deadline criteria.

Process of Procurement as a Plan (Diagram)

• Process flow chart that visually represents the phases of planning and execution in a procurement operation.
• Highlights the sequence of tasks and decision points.

The Procurement Process

• Process diagram showing the steps involved in a procurement process starting with the identification of need to payment and after-sales review.
• Outlines the primary phases of procurement.

Chapter 1: Strategic Role of Purchasing

• Definition and scope of purchasing activities.
• Identifying the types of products purchased by different organizations (Production/Non-production).
• Focus on making the right decisions whether to produce in-house or outsource (make or buy).

Chapter 1

• Various types of Purchasing (classification).

Chapter 1 (Types of Purchasing)

• Direct Purchase (production related items).
• Indirect Purchase (non-production related items).

Chapter 1

• Different classes of purchasing activities related to production processes

Chapter 1 (Classifications)

• Types of purchasing activities by classification
• Materials - raw materials, finished goods -manufacturing
• Services- Maintenance, repairs, operations

Chapter 1: Role of Purchasing (Role and Importance)

• Key functions of purchasing and its significance to an enterprise.
• Establishing specific objectives like cost reduction, improved time management, and minimizing stock levels.

Chapter 1: Role of Purchasing (Objectives)

• Cost reduction
• Improved time management
• Minimizing inventory levels
• Enhancing the company’s performance

Chapter 1: Role of Purchasing (Key Issues)

• Impact on industrial processes
• Impact on financial structure
• Risks associated with the purchasing function

Chapter 1 (Industrial Issues)

• Maintaining the continuity of the production process.
• Ensuring availability and quality of materials.

Chapter 1 (Financial Issues)

• Impact on working capital needs.
• Optimizing inventory control to improve cash flow and financial performance.

Chapter 1 (Purchasing Risks)

• Importance of assessing and mitigating risks in international purchasing

Chapter 1 (Economic and Social Context)

• Global economic growth and its impact.
• Improvement in living standards and the rise in consumer demand.
• Increased importance of Information and Communication Technologies (ICTs).
• Transition to a market economy impacting pricing strategies.

Chapter 1: Emergence of Procurement as a Function

• The increasing significance of purchasing functions and their growing complexity within enterprises necessitates formal structures to manage the function optimally.

Chapter 1: Definition of the Procurement Function

• Procurement is responsible for receiving and processing requests for production, sales, and administrative requirements.

Chapter 1: Procurement function

• Negotiating appropriate terms with suppliers.
• Tracking orders through complete fulfillment.

Chapter 1: Procurement Function Diversification

• Differentiating "procurement" versus "supply".

Chapter 2: Tools, Strategies, and Methods for Purchasers (Strategic Procurement Process)

• Segmentation of purchasing portfolio.

Chapter 2: Tools, Strategies, and Methods for Purchasers (Market Analysis)

• Data collection methods for market analysis (e.g., press, trade directories, databases)
• Offering/demand analysis.
• Identifying potential suppliers.

Chapter 2: Tools, Strategies, and Methods for Purchasers (Supplier Evaluation)

• Evaluating suppliers for their production capacity.
• Evaluating supplier financial health

Chapter 2: Tools, Strategies, and Methods for Purchasers

• Visualizing purchasing portfolio.
• Analyzing market constraints and developing strategies to address issues.

Chapter 2 (Diagnostic Formulation of Procurement Strategies)

• Evaluating market conditions for existing and potential suppliers.
• Identifying key considerations in choosing and refining procurement strategies.

Chapter 2: Strategies (Types of Purchases)

• Examining procurement strategies.
• Differentiating specific procurement strategies for use in internal purchasing or outside sourcing based on level of risk and purchase value.

Chapter 2: Product Segmentation

• Identifying relevant purchase categories.

Chapter 2: Diagnostic

• Formulating procurement strategies to address identified risks

Chapter 2: Tools and Methods

• Cahier des charges function: technical and functional analysis.

Chapter 3: International Procurement Operations

• Logistics operations encompassing transportation, warehousing, allocation, and clearance procedures.
• Ensuring consistency with a defined logistical policy.
• Identification of critical logistical choices for the successful operation of an international purchasing process.

Chapter 3: Logistics Operations

• Establishing a methodology for international imports.
• Researching and evaluating suppliers considering quality, price, and delivery conditions.
• Negotiating purchase contracts with a focus on agreed terms, including Incoterms.

Chapter 3: Accessing External Providers

• Identification and selection of external logistics providers (freight forwarders, customs brokers).
• Importance of choosing a proficient provider and understanding their roles and responsibilities.

Chapter 3: Logistics Operations (Outsourcing)

• Sourcing goods and services internationally

Chapter 3: Choosing Logistics Providers (Evaluation)

• Assessing provider performance to ensure compliance with company standards and expectations.

Chapter 3: Management of International Orders (Logistics Operations)

• Ensuring timely and accurate delivery.
• Tracking and managing international orders.
• Considering potential challenges like delays, customs issues, and cross-border logistical complications.

Chapter 3 (International Purchases)

• Importance proper planning and execution.

Chapter 3 (International Transportation Documentation)

• Importance of contracts, and Incoterms for accurate and timely delivery of goods.