1-introduction to purchasing warehousing and distribution
TRANSCRIPT
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PURCHASING,
WAREHOUSING ANDDISTRIBUTION
Do. Dr. Blent Sezen
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Suppose you are a car manufacturer..
You would buy materials, manage inventories and
distribute the final product.
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PURCHASING AND MATERIALS
MANAGEMENT A widely used organizational approach to purchasing
management involves a concept known as materialsmanagement.
This concept recognizes purchasing as one ofseveral activities dealing with the planning for,acquisition of, and utilization of materials.
In this approach, organization is structured so that allactivities bringing materials into and through the plantare combined under one person known as thematerials manager.
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PURCHASING AND MATERIALS
MANAGEMENT The basic rationale for this type of organization is
that, taken alone, the functions of purchasing haveconflicting objectives.
For example, purchasings concern that supply becontinuous may conflict with inventory control' semphasis on minimizing inventory levels, or withtraffic's objective of shipping in full loads.
The expanded use of computers has made it possiblefor the materials manager to coordinate thisincreased level of operations.
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Physical Distribution
Physical distribution takes the output-finished goods-from the end of the firm's production process to thecustomer.
This transaction may involve packaging, finished goods warehousing, outbound transportation, delivery to customers,
customer complaints, and accounting for all product costs since the product left
the production line.
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Delivery to customers
Do we carry only the final products?
What if our final product is a sub-material for another
product?
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Logistics
Logistics contributes to both the materialsmanagement and the physical distributionfunctions.
Logistics function manages the shipment ofall incoming goods from suppliers and alloutgoing goods to customers.
The firm's traffic manager typically carries outthese activities.
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Purchasing Objectives
Purchasings responsibility is to buy materials of the
right quality, in the right quantity, at the right time, at
the right price, from the right source, with delivery at
the right place.
In most concerns continuity of operations is of critical
importance.
The purchasing function must not allow production to
be disrupted by a lack of needed materials.
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Purchasing Objectives
Furthermore, this objective must be achieved with a
minimum investment in inventories.
Achieving this objective of security with a minimuminvestment demands a fine balancing of various
factors: risk of shutdown, the cost inherent in forward
buying, and the economies of quantity purchases.
Weighing these factors calls for experience and a
high order of professional judgment.
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Purchasing Objectives
Another objective is the maintenance of
adequate quality.
Quality refers primarily to the suitability of anitem for its intended purpose.
The objective is to procure the goods that arebest suited rather than those of highest
absolute quality.
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Purchasing Objectives
In addition to product quality, the services
offered by the suppliers must be evaluated in
the light of the organization's own needs.
An initial low cost quoted by one supplier may
legitimately be rejected in favor of a supplier
with a higher initial cost balanced by valuable
service factors.
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Purchasing Objectives
A further objective of purchasing is to avoid
duplication, waste, and obsolescence of the various
items purchased.
The purchasing department can do much to eliminate
these risks by considering each purchase in relation
to long-range operating plans as well as the short-
range considerations of the immediate purchase.
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What are we going to learn?
Purchasing Topics:
Purchasing Strategy & Forecasting
Purchasing Procedures and Techniques
Supplier Selection & Evaluation
International Purchasing Currency Issues in International Purchasing
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What are we going to learn?...
Warehousing and Distribution Topics
Inventory Management
Warehouse Management
Material Handling
Transportation Management Management of Distribution Channels
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Purchasing Strategy & Forecasting
How to make a make-or-buy decision.
What is vertical integration?
How many suppliers do you need?
Which suppliers should be selected?
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Purchasing Strategy & Forecasting..
How do we forecast the quantity to be
purchased?
What kind of forecasting methods should be
used?
What is time series forecasting?
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Purchasing Procedures and Techniques
What are the basic steps of purchasing?
Purchasing documentation and forms.
What is a blanket order?
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Purchasing Procedures and Techniques
Some recent trends in procurement:
Electronic Ordering
Stockless Purchasing
Standardization, and
Just in Time Purchasing.
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Supplier Selection & Evaluation
How do we find the suppliers?
What are the differences between local,
national and foreign suppliers?
What are the advantages of buying direct andbuying from distributor?
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Supplier Selection & Evaluation..
What are the issues when buying from a
developing country?
Single vs. Multiple sourcing
What are the supplier evaluation factors?
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Supplier Selection & Evaluation..
Supplier evaluation methods:
Categorical Method
Weighted Point Method
Cost-Ratio Method
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International Purchasing
How does the buyer locate the best sources
internationally?
Differences in currency, language and
culture.
What is culture?
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International Purchasing
What are the cultural characteristics of
countries?
What is the effect of these cultural issues in
purchasing?
What are the differences in legal systems?
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International Purchasing
What is Case law and Code law?
What are the types of agreements?
What are the ways of protection in
international purchasing?
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Currency Issues in International
Purchasing
Why do we have
so many different
currencies?
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Currency Issues in International
Purchasing
What is the currency problem in purchasing?
What is Bretton Woods Agreement?
What is exchange risk?
Why do we take this risk?
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Currency Issues in International
Purchasing
Three methods to reduce the risk of buying in
a foreign currency :
Forward contracts
Futures contracts
Currency options
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Inventory Management
Why do we haveinventories?
Why this army stocksthese tires?
What is ABC Analysis?
What is Just-in-Time Inventory?
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Inventory Management
What are the inventory related costs?
What to answer?
a) When to place an order for an item, and
b) How much of an item to order.
What is Economic Order Quantity and how do
we calculate it?
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Inventory Management
Basic Inventory Models:
Economic Order Quantity Model
Production Order Quantity Model
Backorder Inventory Model
Quantity Discount Model
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Warehouse Management
Is it only a storage facility?
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Warehouse Management
What are the benefits of warehousing?
How do we design a warehouse?
What are the design factors that should be
considered?
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Warehouse Management
What are the alternative warehousestrategies?
Warehouse alternatives include:(1) Private warehouses,
(2) Public warehouses, and
(3) Contract warehouses.
What are the differences between andadvantages of these strategies?
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Warehouse Management
What are the issues in planning a
warehouse?
Site Selection
Product-Mix Considerations
Expansion Selection of Material-Handling System
Warehouse Layout
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Warehouse Management
What are the issues related to the security
of warehouses?
Pilferage Protection
Product Deterioration
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Material Handling
What are the handling activities?
Receiving
In-storage handling Shipping
What are the special considerations indesigning a material handling system?
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Material Handling
What kinds of equipment are used in material
handling systems?
What are the considerations in equipment
selection?
What are the advantages and disadvantages
of each type of material handling equipment?
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Material Handling
New developments in material handling:
Semi-automated material handling
Automated material handling
Information directed systems
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Packaging
Consumer packaging vs. industrial packaging
Damage protection in packaging
Increasing the efficiency in packaging throughunitization
Alternative materials used for packaging
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Transportation Management
Choosing from Transportation Alternatives
Transportation Rate Determination
Factors Affecting the Freight Rates
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Transportation Management
Quantity discounts in transportation
Evaluating the carrier alternatives
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Management of Distribution
Channels
Relationship management with channel
members
Trust, dependence and commitment
Learning from successful relationships