Purchasing and Supply Management Textbook PDF

Chapter 1 Purchasing and Supply Management Copyright © 2011 by The McGraw-Hill Companies, Inc., All Rights McGraw-Hill/Irwin Reserved.  Chapter O...

Chapter 1 Purchasing and Supply Management Copyright © 2011 by The McGraw-Hill Companies, Inc., All Rights McGraw-Hill/Irwin Reserved.  Chapter Overview  Evolution of Supply management  Corporate Supply Chain Challenges  Corporate Supply Chain Opportunities  Characteristics of an integrated Supply Chain  ROA and Profit-leverage effect  Purchasing operational and strategic contribution Copyright © 2011 by The McGraw-Hill Companies, Inc., All Rights McGraw-Hill/Irwin Reserved.  1-3 The Evolution of the Supply Function early early 1900s 21st century Clerical and tactical Strategic orientation Focus on policies and Global supply chains procedures Executive level leadership Key challenges: availability Key challenges: of supply and cost Sustainability, security, management globalization, risk management  1-4 The Evolution of the Supply Function  By 1990s firms faced challenges of global “supply chains” and an increased reliance on suppliers Outsourcing has led to increased reliance on suppliers for key components and services  Technological developments in the early 21st century provides expectations for supply chain integration, lower transaction costs and faster response times. New challenges in the areas sustainability, globalization, supply chain security and risk management  1-5 Supply Chain Management “The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration.”  1-6 Corporate Supply Challenges  Increased outsourcing places great reliance on suppliers to respond to end-customer needs  Greater dependence on suppliers for design and build responsibilities for complete subassemblies and subsystems  Increased global competition  Development of new product technologies  Evolving information systems  Trend to single sourcing with fewer key suppliers and strategic supplier relationships  1-7 Corporate Supply 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 costs of ownership (TCO)  Improve efficiency and effectiveness of the supply process  Maximize value from suppliers  Work with key supplier to provide product and service innovations  1-8 Characteristics of an Integrated Strategic Procurement and Sourcing Function Executive Leadership Strategic Positioning Executive committee support for External/internal customer focus integration across company and Matrix management strategic business unit corporate High-level positioning plans Functional Leadership Integration Company-wide customer-focused Cross-functional, cross-location leadership teaming Establish integrated visions work Part of the technology, at results and processes manufacturing and product Drives supply base/supplier planning process management strategies company- wide  1-9 Characteristics of an Integrated Strategic Procurement and Sourcing Function Supply Base Strategy Supplier Management (SRM) Quality driven Focused on supplier development Design standardization Joint performance improvement Concurrent engineering efforts Value focused Supply base optimization Total cost improvement Commercial strategy Supplier benchmarking emerging Measurement Systems/Technology Customer orientation Global databases Total value/cost focused Historical performance data Benchmarking with best in Strategic class EDI, RFX Tools  1 - 10 ROA and Profit Leverage Effect Impact of a 10% cost reduction *** INSERT REVISED FIGURE 1-1 HERE  1 - 11 The Opportunities for Contribution of the Supply Function  Profit-leverage effect  Return-on-assets effect  Information source  Effect on competitive position and customer satisfaction  Effect on organizational risk  Effect on image and brand