PURCHASING IS NOT AS SIMPLE AS IT SEEMS !!

BY

SWANZY AWOZUM

(MSc. SCM, BSc. PSM & CERT. ‘A’) E-Mail: swanzy2383@yahoo.com

Phone: +233 0244 666 914, or 0207606003

The Definition Of Purchasing – Profiting From

Purchasing Is Not As Simple As It Seems

So what is the definition of purchasing? Well the dictionaries say something like "a central

business area where purchasing of items is undertaken". A non-business orientated person will

have a definition of purchasing that involves buying things they like or want.

Obviously, the business has much more to lose if it does not understand the importance in getting

purchasing just right. The layperson will think that it is just a case of listing what you want to

buy, going out and purchasing them and then getting on with the rest of business. Any

entrepreneur that took this as their definition of purchasing would soon go bankrupt. It is

probably one of the most important business concepts to grasp. So what is the correct definition

of purchasing?

Business management is complex and there are many areas that need to be controlled. These

are cash flow, profit, quality, inventory costs, contractual issues and product availability not to

mention maintaining your business strategies and marketing needs. All of these are affected by

the purchasing strategies and management of the company. If the business does not have

products – then they will not be able to sell to their market. If they have too much money tied up

in their stock room, they will not be able to spend it on other things like staffing or new

equipment. If they do not control their spending and who they are spending with, not to mention

what they are spending on – then they are soon to see the inside of a bankruptcy court.

Therefore, the definition of purchasing that a company has is very important. If your company

just has a list of companies and products to buy from them, how do you know that there is not

something elsewhere that is better, cheaper and more easily obtained?

Your purchasing department is by far the most important area of your business but they

need to know what you want from them. Tell them that you expect them to manage, control and

check on the following: inventory, costs, when you really need to pay your bills and from whom

they are buying. Impress upon them that you really need to manage your cash flow, receive

quality goods and buy best available. Most of all tell them that they are the most important

people in your company and make them believe you. You will have a much more profitable

company if you do.

PURCHASING MANAGEMENT

Purchasing management directs the flow of goods and services in a company and handles all data

relating to contact with suppliers. Effective purchasing management requires knowledge of the

supply chain, business and tax laws, invoice and inventory procedures, and transportation and

logistics issues. Although a strong knowledge of the products and services to be purchased is

essential, purchasing management professionals must also be able to plan, execute, and oversee

purchasing strategies that are conducive to company profitability.

Sourcing reliable suppliers is a crucial part of purchasing management. Purchasing managers,

agents, and buyers usually learn about new products and services from Internet searches, trade

shows, and conferences. They meet with potential suppliers in their plants whenever possible.

Skills in foreign languages may be helpful for sourcing suppliers in other countries. Purchasing

management professionals must always assess potential suppliers in terms of the supplier's

ability to deliver quality merchandise at a suitable price on time.

Purchasing management professionals must be good negotiators, understand technical product

information, have good mathematical ability, understand spreadsheet software, understand

marketing methodology, and be outstanding decision makers. Increased responsibilities in

purchasing management require good leadership skills, and higher positions often require a

master's degree in a business related subject. Entry level purchasing management positions such

as junior buyers, assistant buyers, and purchasing clerks, often require a college degree and some

product knowledge.

Purchasing management is the management of purchasing process, and related aspects in an

organization. Because of production companies purchase nowadays about 70% of their turnover,

and service companies purchase approximately 40% of their turnover [1]

, purchasing

management is one of the most critical areas in the entire organization and needs intensive

management. Purchasing management also covers the areas of outsourcing and insourcing.

Models used to aid purchasing managers include the Newsboy model as well as the Order up To

(OUT) model.

1. Purchasing Process

Purchasing Process includes as usual 8 main stages as follows:

1. Market survey

Requisitioning

1. Approving

2. Studying Market

3. Making Purchase Decision

4. Placing Orders

5. Receipting Goods and Services Received

6. Accounting Goods and Services

7. Receiving Invoices and Making Payment

8. Debit note in case of material defect

2. Purchasing Management Process

Purchasing Management Process consists usually of 3 stages:

1. Purchasing Planning

2. Purchasing Tracking

3. Purchasing Reporting

3. Purchasing Planning

Purchasing Planning may include steps as follows:

creating purchasing projects and tasks

providing related information (files, links, notes etc.)

assigning purchasing tasks to employees

setting task priorities, start/finish dates etc.

assigning supervisors

setting reminders

control and evaluation

4. Purchasing Tracking

Purchasing Tracking consists of:

checking task's status and/or history of changes

receiving status notifications

sorting, grouping or filtering tasks by current status

highlighting overdue tasks,,,

5. Purchasing Reporting

Purchasing Reporting includes:

comparing actual and estimated values

calculating purchasing task and project statistics

sorting, grouping or filtering tasks by attributes

creating charts to visualize key statistics and KPIs

FACE 2 OF PURCHASING MANAGEMENT

Purchasing Task Management: Strategy in Action

Why Purchasing Management is so important

Purchasing management is no longer seen as 'just a part' of logistics or marketing, but as a

strategic factor in the entire organization. According to the recent research production companies

purchase nowadays approximately 70% of their turnover, service companies purchase

approximately 40% of their turnover. While many companies understand the importance of

purchasing and its strategic impact on the whole organization, purchasing process still requires a

more intensive management.

Actual Purchasing Management Problems

In many companies and organizations, the purchasing process goes hand in hand with mounds of

paperwork, faxes and even handwritten ordering sheets. Managers waste a lot of time on data

searching and transmitting, status meetings, reminding each other about important tasks, personal

conversations for delegating tasks to employees and controlling them, manually creating reports

etc.

Effective Purchasing Management Solutions

Nowadays to stop wasting time and money,

and to provide the right product, at the right

price, at the right place and at the right time,

a head of purchasing department needs a

possibility to manage all information and

communication flows in a real time mode,

including purchasing planning, execution,

tracking and reporting. A team leader needs a

system that provides a total control on

Purchasing Management Process , Supplier

Management Process and all purchasing

team's work at a lowest operational level,

supports discovering of hidden “bottlenecks”

and fruitless costs, finding new sources of

added value and so on. To manage

purchasing process and tasks effectively a

head of purchasing department and his/her

team needs not only to be a professional and

create a team's motivation from achieved

results but also to have at his/her disposal a

powerful centralized purchasing data and

task management system. The most advanced

companies have already understood it and

implemented a purchasing data and task

management on the basis of appropriate

software. It gives them new possibilities to

drill down into organization of purchasing

process details and find new sources of

additional strategic advantages such as time

and cost at a lowest operational level. Now

it's time to benchmark their best practice for

all organizations. Download purchasing task

management software right now.

Purchasing Task Management Software

Purchasing project and task management software provides you with a centralized purchasing

data management system, a connecting-link between purchasing strategy and purchasing tactics.

It allows you to avoid not only a lot of paperwork and redundancy but, what's more, you will be

more efficient at managing the purchasing process that consists of 3 main stages:

1. Planning

2. Tracking

3. Reporting

Planning

creating projects and tasks

adding all related information (notes, files, links etc.)

to a task

assigning tasks to resources

setting task priorities

setting start/finish dates

selecting supervisors for certain projects and tasks

setting reminders (if needed)

creating specific statuses for purchasing workflow and

specific attributes with their values for purchasing

tasks

Tracking

checking current status of a task and its changes

history

receiving notifications on status changes (or other

attributes)

grouping/sorting/filtering tasks by status

marking overdue tasks by a different color

automatically

Reporting

comparing of estimated and actual values

calculating statistics for tasks and projects

grouping/sorting/filtering tasks by any attributes

generating charts on key statistics for selected

tasks/groups/resources

What Management Wants From Purchasing

Are You Giving Your Management These Results?

Cost Savings – Management wants Purchasing to save money. But successfully achieving and

reporting cost savings requires a careful approach. Be sure to align your definition of cost

savings with management’s definition, track your cost savings, and focus on total cost reduction,

not just price reduction at any cost.

Productivity Improvements – Management will always expect you to do more work with fewer

resources. No matter whether you’re in a tactical or strategic purchasing organization, there are

many productivity metrics that you can choose from to track productivity gains: PO’s per buyer

per day, average length of sourcing cycle, man-hours per dollar saved, etc.

Brand/Differentiation Support – Your organization’s mission or vision statement should give

you some clues as to how your organization wants to be perceived in the marketplace and how it

wants to be differentiated from its competition, such as offering higher quality, faster cycle time,

better service, lower cost, or something similar. Make sure that your decisions and metrics

support your management’s brand and differentiation strategy. As brainless as this sounds, you’d

be surprised how many organizations have a mission of being the “highest quality provider” in

their industry, yet their purchasing departments measure only cost savings.

Customer Satisfaction – Sometimes, being in purchasing can make you feel separated from

your organization’s customers. But management relies on things that you’re responsible for, like

assuring continuity of supply, to keep its promises to its customers. Realize that you can

personally be responsible for your organization’s failure to meet customer expectations. In this

day of tough competition, organizations simply have to meet customer expectations to survive

and you have a critical role in that survival.

Positive Cash Flow – In some organizations, the timing of monetary receipts and payments is

critical. Those organizations cannot afford to have more cash leaving the company than coming

in during certain periods. Be aware of that and negotiate appropriate terms with your suppliers.

But don’t just pay them late and hope that they don’t notice like some organizations do!

Spotlight On Professional Development Opportunities

Are you tired of not getting enough opportunities, respect, and money out of your

purchasing career? Well, guess what? Nothing will change unless you take action towards

becoming a world-class purchasing professional.

You see, today's employers refuse to reward employees for yesterday's skills. They demand

that purchasing professionals like you use the most modern skills and achieve unprecedented

results. They want you to save more money, achieve better operational performance, and reduce

risk.

Purchasing Management – The Profit

Management Group In Your Company.

As in most business organizations, purchasing management involves people, processes and

technology. So what is purchasing? Purchasing involves the sourcing, purchasing and delivery of

goods and services that a company needs either in its manufacturing and business management

or for stock that it resells at a profit.

The purchasing department is a very important, if not the most important, part of a business as its

good management directly impinges on the bottom line.

One of the fundamentals of purchasing is that goods are purchased at the best price and terms in

order to deliver the best profit for the company.

This means that strong and easily understood purchasing procedures need to be in place. Some

companies interchange the word procurement for purchasing, in others procurement means

purchasing via tender and purchasing means the day to day purchasing via Master Sales

Agreements with a select group of suppliers.

One of the methods that are used to ensure good purchasing management on day-to-day

purchases is the use of purchase orders and purchase requisitions constrained by a known set of

rules and procedures. Purchase orders are used to order directly with an agreed supplier.

Purchase requisitions are usually raised by people external to the purchasing department when

they need a particular product either for maintenance purposes or to increase stock in abnormal

situations.

In larger companies, and indeed even in some smaller companies, computerised purchasing and

procurement systems facilitate purchasing management. As well as managing day-to-day

purchasing, these systems can also manage a tender process and ad hoc purchasing activities.

One particular aid to management of your purchasing department is the production of a set of

procurement-analysis figures. These can often be tailored to your own company’s particular

needs.

In charge of purchasing management will be the Purchasing Manager and they will have a

number of purchasing clerks and administration clerks working for them. They will all have job

descriptions that detail their roles and responsibilities.

There have been a number of purchasing trends over the last few years. Two of the most

important are JIT (Just In Time) which was bought over from Japan in the 1990’s. It is the

ordering of inventory only when it is just in time to use. In the 2000’s e-procurement is

becoming more popular as internet security and computer power becomes stronger and more

prevalent.

Such is the important of the purchasing department, that comprehensive procurement guidelines

are designed and published by governments, government offices, large companies, trusts and

charities.

These often define such things as environmental purchasing, end of life disposal and dangerous

materials. If countries recognize the importance of their publishing department, shouldn’t you

have a firm purchasing management process in effect?

Detailed outline on purchasing managemnt

Purchasing process

Purchasing is the formal process of buying goods and services. The Purchasing Process can

vary from one organization to another, but there are some common key elements.

The process usually starts with a 'Demand' or requirements this could be for a physical part

(inventory) or a service. A requisition is generated, which details the requirements (in some cases

providing a requirements speciation) which actions the procurement department. A Request for

Proposal (RFP) or Request for Quotation (RFQ) is then raised. Suppliers send their quotations in

response to the RFQ, and a review is undertaken where the best offer (typically based on price,

availability and quality) is given the purchase order.

Purchase orders (PO) can be of various types, including:

Standard - a one time buy;

Planned - an agreement on a specific item at an approximate date; and

Blanket - an agreement on specific terms and conditions: date and quantity and amount

are not specified.

Purchase Orders are normally accompanied by Terms and Conditions which form the contractual

agreement of the Transaction. The Supplier then delivers the products/service and the customer

records the delivery (in some cases this goes through a Goods Inspection Process). An invoice is

sent by the supplier which is cross-checked with the Purchase Order and Document which

specifying that the goods received. The payment is made and transferred to GL.

How to design a Purchasing Process Part 1

With the introduction of modern technology, Purchasing Processes have been able to change

dramatically. Improved methods of communication have meant that Order requests can be

transferred electronically, notification of delivery emailed, supplier payments automated.

While many businesses may find the utopia of fully automated procurement a strategy rather

than reality, purchasing departments often find themselves in a hybrid where a mixture of

technology, partners and culture may be unable to accept a fully automated approach and

traditional and contemporary processes co-exist.

In designing purchasing processes it’s important to take into account both how information

systems can be leveraged and where business constraints and govenance exist. Whilst some

fundamentals e.g. originating need – communicating the need to the supplier – delivery – the

payment of the supplier - may exist in most processes – how they are deployed can vary

depending on the overall strategy of the business and the prevalence of, and confidence in,

Information Systems.

When designing purchasing processes it’s helpful to understand both the traditional and

contemporary methods in order to select the appropriate element that applies (or can apply)

to your organisation.

Traditional Purchasing Process

Where information technology is not heavily ingrained - Traditional Purchasing processes

tend to be characterised by high levels of bureaucracy, encumbered with manual

authorisation (often requiring multiple signatures independent of the order value.), slow

communications and a focus on unit price rather than long term commodity arrangements.

Due in part to the lack of readily available Management Information.

The diagram below provides an example of a traditional purchasing process.

* The process may require authorisation at various intervals – including at the requisition,

Purchase Order, supplier payment process – this may be multiple authorisations at each stage

e.g. the operator and his/her supervisor.

* Sourcing and tendering may focus on obtaining multiple cost/availability options from

various suppliers rather than leveraging formal long term contracts. There may be little to no

pressure on limiting the number of suppliers used.

* Manual Purchase Orders are raised and sent to suppliers – manual acknowledgements are

also requested. Communication is slow and paper based.

* Periodic expediting activity takes place to ensure delivery schedules are adhered to

* Items are delivered and forms/documents are transferred within the business to close down

orders

* Manual invoices are submitted and subject to authorisation procedures often requiring

signatures to indicate that the Purchasing process has completed satisfactory (and that the

order has been met).

In the second part of our guide - we'll look at how technology plays it's part in a modern

technology driven Purchasing Process. How to design a Purchasing Process Part 2

How to design a Purchasing Process Part 2

In the first part of this series (How to design a Purchasing Process Part 1) we looked at the

traditional purchasing process, in this article we'll take a look at what role technology has in

shaping processes.

Contemporary Purchasing Process

Where information systems are prevalent much of the authorisation and communication methods

that are present in the traditional process can be automated or abolished. Management

Information is also more widely available (and of better quality) and enables the organisation to

move towards Automated processes which rely more on exception management rather than

transaction management.

The resultant culture is therefore one that focus's more on Supplier Relationship Management

and a long term approach that one that focuses purely on Transactions.

* Modern ERP systems monitor inventory and trends and automate requisitions based on

forecast need

* Automated workflow and approvals engine route requirement to be authorised (where

applicable)

* Where formal orders are required suppliers informed electronically either as part of established

B2B network or via electronic message. Supplier acknowledgement and changes to terms

updated in realtime.

* For low value or less complex commodities – a mixture of Procurement Cards and online

catalogues can be used negating the need for formal orders whilst ensuring that robust controls

are still in place

* Use of barcodes/RFID speed up the delivery process, electronic messages covering proof of

dispatch and delivery are transmitted by the ERP and stakeholders are advised in realtime

* Electronic Invoices are submitted and are matched by the ERP against the Purchase order and

delivery and then routed for payment negating the need for human intervention. Where

Procurement Cards are used – Transaction Management systems route and aide process activity

Systems can dramatically reduce the amount of paper documents within a purchasing

environment while streamlining the process via use of workflow systems.

Summary

Purchasing Activity is usually responsible for significant amounts of businesses spend, it’s

important therefore that processes balance risk and control – technology can be beneficial –

automating processes, facilitating decision making and it’s prevalence within an organisation can

have a significant influence over the structure of procurement process. Technology can also

eliminate bureaucracy – streamlining processes and eliminating waste.

When Designing Purchasing Processes, consider the following

* How is the requirement identified

* What is the authorisation process within the business

* How will the organisation communicate with it’s supply base

* Is a tender process required?

* How are costs managed within the process

* Consider also where performance indicators/measures can be applied

Using Purchasing cards to streamline the purchasing process

While Purchasing cards (or corporate credit cards) are nothing new in business, many may be

unaware that they represent an effective method of streamlining an organizations purchasing

process helping to both reduce costs whilst empowering procurement staff to focus on value add

activity.

For many organizations a typical supplier spend profile may be similar to the diagram below in

the example a large number of suppliers have a spend less than $1000 per annum while at first

glance this may not raise many eyebrows, when you take into account the cost of processing

transactions (which could be over $200) it warrants further investigation. Businesses often

differentiate between mission critical commodities (eg production materials) and other non-

critical items e.g. stationery. These non-critical items are likely to be relatively low risk in so

much that they do not require complex terms and conditions, specifications or ordering

processes, however many organizations use identical processes for these transactions as they

would for a million dollar piece of production material.

Many organizations utilize purchasing cards for managing travel and expenses, in this case

purchasing cards represent an effective replacement for petty cash processes. However this only

accounts for a proportion of an organization’s low value spend. Typically low risk and low value

purchasing transactions represent an excellent target for purchasing cards which can remove the

bureaucracy and administration cost whilst empowering employees.

Process

With the removal of the typical purchasing route, the purchasing process is streamlined with the

removal of the traditional purchase order steps and approvals. Requirements are able to be

channeled via more cost effective routes. A typical purchasing card process is shown below – of

particular interest to the originating company is the information that is provided by the bank.

The information that can be provided by the bank in the form of a statement (usually electronic)

can be extremely useful to purchasing departments. There are various levels of data that are

provided from Level 1 data which is the basic transaction information, Level 2 data – more

detailed tax information to Level 3 which includes all data normally associated with an invoice

e.g. Item codes, descriptions, unit of measure.

Whilst the level of information provided depends on the suppliers ability to pass data (which is

usually dependant on the annual transaction volume) all data is useful as it allows the purchasing

organization to review spend on an individual basis. Where data is combined with a transaction

management system (used for processing and coding transactions) the data becomes even more

useful as it can be used to provide profiles of the organizations spend allowing purchasing teams

to review:

1/ Areas of spend within the business at an individual level

2/ Spend on/off contract

3/ Opportunities for Supplier management programs

One concern that purchase organizations have is how to ensure purchase card spend remains on-

contract. Staff can be encouraged to use suppliers by embedding a purchasing card with the

merchant (a lodged card) and then advising staff of the group deal and appropriate ordering

mechanisms – statement data can then be analyzed (by individual) to capture spend off contract

appropriate corrective actions can then be instigated. Another common concern is that card

schemes may be open to abuse, purchasing cards are a balance of risk and control – whilst

purchasing processes can be improved, risks remain that the cards may be open to abuse –

organizations need to ensure that limits and controls (through merchant type restrictions and

spend limits) are in place and the issuing of cards is tied into an appropriate personnel process

(e.g. Staff can be fired if cards are abused).

Whilst benefits exist for the company operating the card scheme there are also benefits for

suppliers in accepting cards. Certainly improved payment times are most prominent with

payments taking around four days as opposed to a typical company payment cycle – savings can

also be made with the need for invoices removed and the associated impact on accounts

receivable.

In summary, purchase card schemes can help remove bureaucracy from purchasing processes

whilst empowering staff and improving management information. In general schemes require

appropriate administration (and benefit from a management team) and organizations should

consider appropriate controls. Through process improvements, card schemes can bring

significant financial benefits to organizations and unsurprisingly such schemes are becoming

ever more commonplace in both public and private institutions.

How QCD metrics can be used to measure the Supply Chain

Quality Cost and Delivery (QCD) metrics are nothing new having originated in the

manufacturing sector and are an important element of the lean improvement toolkit. Key

Performance Indicators (KPI’s) play an important role in illustrating business activity and QCD

can often be an excellent start point when developing business measures.

Used as the raw ingredients of a KPI system, QCD measures are sufficiently flexible to be

tailored to most organizations and can be well aligned with most business activities including

Supply Chain. As with any improvement method, QCD shouldn’t just be used to measure but

should be applied as part of a larger continuous improvement toolkit – for example forming the

basis for a visual management system.

QCD doesn’t just mean that there are three measures, far from it - in this article will take a look

at some examples of how QCD can be applied to Supply Chain together with their benefits and

issues.

Measuring Quality in the Supply Chain

Measuring Quality is often referred to as measuring Not Right First Time (or NRFT) – referring

to where the product delivered fails to meet the required specification.

Quality can be best defined as measuring the errors or failures within a process or activity.

Measuring Quality can play an important role in analyzing customer satisfaction – no customer

wants faulty products after all! There are various Supply Chain processes where Quality can be

applied for example:

• Monitoring the number of goods inwards rejections your organization records (expressed as a

measure against total receipts)

• Measure the quantity of returns made by your customer

• Monitoring the number of times the Purchasing Department cannot process a purchase request

because the requisition is incomplete.

The third example is important as measuring quality doesn’t have to be applied to a commodity

or product deliverable but could be a deliverable within an internal process as in the example of

the requisition. It may also be possible to place a cost against failure that you can also measure –

for example the cost of a customer return multiplied by the number of returns received in a

period.

Measuring Costs in the Supply Chain

Cost may seem an obvious choice to monitor and as with the example of Quality this can be

multi faceted.

For example:

• Monitoring the fluctuating costs of commodities – for example the cost of 100 widgets last year

was $100 this year that cost for the same widgets is $150.

• Process Costs may also be monitored for example the organizations cost to procure (for

example organizations such as CIPS attempt to put a cost against activities such as raising

purchase orders – benchmarking these costs against industry may allow you to understand if you

have waste in your organization.

• The value of inventory.

When analyzing costs ensure that you have your Finance team on board! – Ensuring that the

figures that you use are agreed by your Finance team will eliminate the possibility of confusion

when you quote the figures later on!

Measuring Delivery in the Supply Chain

Measuring delivery or timeliness allows organizations to review the overall effectiveness of their

(or their suppliers) processes. Commonly referred to as Delivery Schedule Adherance –

examples of measuring delivery include

• Analyzing the ability of your suppliers to deliver in accordance with agreed schedules.

Calculate your overall DSA then measure individual suppliers against your business average.

• Time taken for a sales team to respond to an enquiry

DSA can be measured in a variety of ways – for some supply chains a delivery on or before the

date requested may suffice – for others only delivery on the exact day requested may suffice

(early deliveries may incur extra storage costs for example). When analyzing delivery it is

imperative that capture the data required to make the calculation this may mean making small

changes to your process to enable you to make effective measurements.

Summary

Clearly Quality Cost and Delivery metrics can be directly related to measuring supply chain

activity – not only that - doing so can provide a valuable mechanism into finding areas for

improvement.

While QCD can be aligned with most industries it isnt’ a panacea for example – it may not be the

best method when analyzing certain forms of service industry (consulting for example) –

however where physical and information flows exist (such as the Supply Chain) QCD is an

established and proven technique which can form the starting point for introducing performance

measurement into your organization

CASE- TOYOTA SUPPLY CHAIN

What is Kyoryoku Kai

Kyoryoku Kai is a Japanese term for supplier association which is widely used within lean

supply chain activity. In essence Kyoryoku Kai is a collection of a company's most important

suppliers which work together to develop, through improved communications, more efficient

methods of working. Usually suppliers, who are part of such an association, meet on a regular

basis to discuss improvements and production techniques – to lower the total cost of production.

Kyoryoku Kai have their roots in the 1930’s with Toyota who encouraged association between

its (then) twenty major suppliers. Whilst not being directly involved in the running of the

association – Toyota was a beneficiary in the improvements derived from the association.

Supplier associations by there very nature infer some delegation of control by the primary

contractor – and this decrees to an extent the size of the network involved (single supplier

networks do not benefit from Kyoryoku Kai.). Control is usually delegated by the primary

manufacturer to a supplier or subcontractor that “chairs” the relationships and co-ordinates

improvement activity.

Kyoryoku Kai have been prominent in the automotive industry as a way of organising the supply

chain – this method has become prominent within each of the major manufacturers today and

indeed has spread out to other industries such as the

information technology sector. It’s widely acknowledged that today’s supplier Associations

Forms one of the fundamentals of a world class supply chain.