Purchasing and Supply Management Exam 1

Factors Driving SCM

• low cost and wide availability of information

• higher levels of competition in all markets

  • quickness, agility, flexibility

• Constantly changing and more demanding customer expectations and requirements

• Ability to identify and mitigate risk

  • minimize disruptions

• Competition is now between supply chains, not just companies

Importance of Purchasing

• increasing value and savings

• building relationships and driving innovation

• improving quality and reputation

• reducing time-to-market

• managing supplier risk

• generating economic impact

• contributing to competitive advantage

55%

percent of revenues that purchased content makes up in manufacturing

joint cost reduction with suppliers

• both buyer and supplier must benefit

• suppliers can contribute innovative ideas

buyer focues

• core competencies

• outsources non-core activities and materials

• need for the ability to track materials back up through the supplier’s supply chain

reducing time to market

• include suppliers early in the product design process to take advantage of their expertise

• Early supplier involvement can lead to an average of 20% improvement in material costs, material quality, and product development times

supplier risk

• magnified by sourcing strategies that emphasize global sourcing, single sourcing, and JIT inventory

• need to develop business continuity plans to mitigate

5 rights of purchasing

getting the right:

• quality

• quantity

• time

• price

• source

Elements of the Purchasing Process

• Identify user requirements

• Evaluate user needs

• Identify suppliers to meet that need

• Develop agreements with suppliers

• Develop ordering mechanism

• Ensure payment occurs promptly

• Evaluate whether the need was effectively met

• Drive continuous improvement