CLASS 2: ENABLING CONCEPTS

 

PROCEDURES THROUGHOUT THE PURCHASING CYCLE:

 

1 - Recognition, Definition, Description, Transmission of Need-

·        Specific purchase request

·        Standard purchase request

o       Automated

·        Bill of materials (structured BOM), production schedule (MRP Schedule)

o       Automated Supply Chain

o       Just-In-Time Materials Management

 

It is critical that the need be defined clearly, completely as it is the foundation upon which a successful procurement rests.

 

2 - Supplier Selection and Preparation of Purchase Order-

 

Supplier Selection (Sourcing) is critical and based on such things as -

·        History with vendor (past performance)

·        Vendor size relative to order

·        Community and socio-economic considerations

·        Risk mitigation

Purchase Order should contain Product Description plus boilerplate items such as-

·        Acceptance provisions

·        Delivery performance

·        Termination provisions

·        Assignment/subcontracting

·        Warranties

·        Invoicing/payment procedures

 

3 - Acknowledgement and Follow-Up of the Order-

 

·        Contract requires buyer offer and seller acceptance

·        Purchase order constitutes buyer offer

·        Seller acceptance can be in the form of either formal notification or performance of the contract

4 - Receipt and Inspection-

·        Fits the complexity of the procurement (may be simply "kick, count, condition" verification)

·        Formal, technical inspection may be necessary (i.e. Vendor-site QA, sample testing, etc.)

 

5 - Invoice Audit and Completion of the Order-

 

Cross checking/matching of Purchase Order, Receiving Report, and Invoice to verify that –

·        You bought it

·        You got it

·        You are paying what you agreed to pay for it

 

Purchase Department Records

 

Purchasing function is document intensive; therefore, careful attention to records and record keeping is necessary.   Automated purchasing and supply chain systems normally maintain such typical records as:

 

 

Handling the Inevitable Rush Orders

 

 

Small Order Quantities

 

o       "Catalog" of products covered is developed

o       Ordering authority exists over a specified period of time

o       Ordering officials, procedures are pre-determined

o       Lends itself to electronic ordering (EC, fax, telephone)

 

 

 

Long Term Solutions to Integrated Purchasing over Time

 

Long-term contracts (annual and multi-year) -

 

Computer-Based Systems/EDI (More about this in Class 9)

 

Electronic Commerce (EC)

o       Same basic process as manually based systems

o       Leverages information technology to enhance purchasing process

o       Tracks process

o       Produces reports

 

Data Base Requirements Include:

 

·        Vendor Data

·        Product/Price

·        Quality

·        Delivery History

 

·                    Product Data

·        Stock Number/Price History/Vendor Interface/Performance

·        Inventory Interface

 

·        Customers (Data Base, on-line requisitions, order processing/status)

 

·                    Requisition Process

·        System Generated (MRP, BOM)

                              - Based on EOQ, Production Schedules, automatic-  no authorization required

                              - Inventory-level Generated (for required stockage levels)

 

Critical Issues to Consider:

·        Platform: Hardware (standalone vs. distributed/client server environment), Operating System, Interfaces Required

·        Training

·        Standardization (ANSI X.12, XML, Open Buying on the Internet)

·        Security Issues (credit card numbers, electronic signatures, etc.)

 


ORGANIZATION:

 

 

 

PERSONNEL:           Manager

 

                                    Contracting Officers/Specialists

                                    Buyer Supervisors/Buyers/Assistant Buyers

                                          Expediters

                                    Contract Administrators

                                    Cost/Price Analysts

                                    Property Managers

Qualifications:

 

                              Personal characteristics of-

§         Business Skills

§         Integrity

§         Dependability

§         Initiative

§         Human skills

§         Attention to detail

§         Mechanical aptitude

 


Background experience-  (discuss student ideas about following skill attributes for picking a buyer

·        Business

·        Technical

·        Production 

 

                              Importance of formal education- ??

 

Some cautions about the job -

§         Can be boring if not packaged for maximum job enrichment

§         Advancement can be slow, thereby increasing turnover

§         Regressive (that’s backwards, stodgy management)

§         Loss of enterprise perspective

 

Other personnel considerations -

 

·        Entry level is normally buyer, clerk, expediter obtained from within organization or from schools

·        Promotion normally from within is desired -

·        Some positions are internships, upward mobility formally structured training, OJT

 

Opportunities for continuous Professional Training through such organizations as -

·        National Contract Management Association

·        National Association of Purchasing Management

·        Job Rotation

·        Local/Contracted Courses through colleges, universities, training providers

 

Manager should remember that -

·        Purchasing is a people intensive activity!

·        Expertise that is gained should then be retained

 

Previous Class discussions talked about purchasing as being an "integrative function of business".  Trends in industry/government include the following: (page 127)

 

Cross-Functional Teams (Integrated Process Teams)

 

·        Review and development materials requirements and specifications

·        Participate in source selection/negotiations

·        Oversee performance

·        Certify suppliers

·        Plan future purchasing approaches

 

 

 

 

The "Materials Management" concept:

 

·        Focus is on "total" materials requirements - (life-cycle approach) to facilitate -

o       Coordination

o       Control

o       Oversight

 

·        Single Point of management of all activities affecting materials, such as:

o       Inventory

o       Traffic

o       Receiving

o       Warehousing

o       Disposal

o       Sometimes even production control- when little or no transformation of purchased materials is required during the production process (or, optionally, the "buyer-planner")

·        Emphasizes optimizing the materials "system" within the organization

·        Integrated approach to management of all production materials from raw through work in process to finished state:

o       Planning

o       Acquisition

o       Flow

o       Inventory management

o       Distribution

o       Disposition

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Cases:

Randal

Placido

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