Mia Delić, MA Course: Procurement ManagementSummer Semester 2013University of ZagrebEmail: mdelic@efzg.hr

PROCUREMENT MANAGEMENT

Mia Delić, MA

Room A 301 (south, 3rd floor) Office hours:

Tuesday 14-16Wednesday 10-12

mdelic@efzg.hr

Gerneral informations

2 preliminary exams (midterms): (1) 28th March 2013 (2) 23rd May 2013

Facebook groupProcurement management 2013Weekly forum discussions

Introduction

A well-known statement of the objectives of purchasing is: to acquire the right quality of

material,at the right time, in the right quantity, from the right source,at the right price.

The following broad statement of objectives is suggested:

To supply the organisation with a flow of materials and services to meet its needs

To ensure continuity of supply by keeping effective relationship with existing sources and by developing other sources of supply

The following broad statement of objectives is suggested:

To buy efficiently, obtaining by ethical means the best value for every pound spent

To develop staff, policies, procedures, and organisations to ensure the achievement of these objectives.

Some more specific objectives of purchasing department are:

To select the best suppliers in the market

To help generate the effective development of new products

To protect the company΄s cost structure

To maintain the correct quality/value balance

To monitor supply market trends To adopt environmentally

responsible supply management

To summarize.. firms need access to competitive and productive supply markets if they are to be in business at all. The trend is from tactical to strategic procurement, establishing collaborative relationships with external resources.

The purchasing cycle

The main stages in the purchasing process may be summarised as:

Recognition of need Specification Make-or-buy decision Source identification Source selection

The purchasing cycle

Contracting Contract management Receipt, possibly inspection Payment Fulfilment of need

The purchasing cycle

The idea of the purchasing cycle is to indicate the main activities in which purchasing might be involved;

The activities included in the cycle do not cover all of those that a purchasing staff might be involved with (negotiation, vendor rating..)

Purchasing development

30 years ago:Purchasing was a service

function, often subordinated to production, finance..

Purchase and supply was concerned with buying supplies at the lowest price (activity was essentially clerical)

Little involvement with suppliersReactive

15 years agoPurchasing and supply was still

concerned with lowest price but aware of other factors affecting price like quality and delivery

More involved with suppliers and other internal functions

Purchasing development

TodayPurchasing and supply are

becoming strategic Purchasing is seen as an activity

of considerable strategic importance

Most of organisation activity concentrates on the establishment and development of appropriate relationship with suppliers.

Purchasing development

21 century perspectives for procurement

An increase in the strategic importance of purchasing (key activities will include supplier evaluation, selection and management);

Tactical purchasing activities (ordering) will increasingly be automated;

The internet will be the main vehicle for electronic purchasing which will be used for purchase transactions;

Organisations in the supply chain will increasingly share resources including intellectual information, people;

Environmental factors will become increasingly important to purchasing considerations.

Reactive buying- Purchasing is a cost

centre - Purchasing receives

specifications- Purchasing reports to

finance or production- Buyers respond to market

conditions- Problems are supplier΄s

responsibility - Price is key variable- Emphasis on today- Negotiations win/lose- Plenty of suppliers =

security- Plenty of stock = security- Information is power

Proactive buying- Purchasing can add value- Purchasing contribute to

specification- Purchasing is a main

management function- Purchasing contributes to

making markets- Problems are a shared

responsibility- Total cost and value are key

variables- Emphasis strategic- Negotiations win-win- Plenty of suppliers = lost

opportunities- Planty of stock =waste- Information is valuable if shared

Reactive vs. Proactive buying

The scope of the purchase function

Operational level Daily production and distribution

planning; Production scheduling for each

manufacturing facility in the supply chain;

Demand planning and forecasting; Sourcing planning in collaboration

with all suppliers;

The scope of the purchase function

Operational level Production operations, including the

consumption of materials and flow of finished goods;

Managing non-moving, short-dated inventory and avoiding more products to go short-dated;

Price determination, returns...

The scope of the purchase function Tactical/managerial level

Sourcing contracts and other purchasing decisions;

Production decisions (contracting, scheduling, planning process);

Inventory decisions (quantity, location, and quality of inventory);

Transportation strategy (frequency, routes, and contracting);

Cost reduction techniques...

The scope of the purchase function Strategic level

Long-range planningStrategic network optimization

(number, location, and size of warehousing, distribution centers);

Strategic partnership with suppliers, distributors and customers;

Product life cycle management;Aligning overall organizational

strategy with supply strategy.

Case study BMW

What are the key objectives of the procurement department?

Which goal would you add to develop the procurement department?

What are some of the main conclusions of the study?

http://www.youtube.com/watch?v=AkGMVQl8_jI