Purchasing chapter 1, 2, 3, and 4

•A gatekeeping tool to manage the flow of information through three gates: 1. authority: Does the requisitioner have the authority to make the specified request at the specified budget level? 2. internal clarity: Is the need described in a clear and unambiguous way? 3. internal clearance: Is the description ready for communicating externally with potential suppliers?

A requisition and 3 gates

A group of co. coming together for a common cause. Ex. All provincial coming together to work with federal to get vaccines delivered.

Consortia

lGoal: Assure continuous availability at the lowest total cost of ownership -A cross-functional sourcing team especially during need recognition and description -Early supply and supplier involvement (ESI)

Effectiveness Tools that Optimize Strategic Spend

•Allows computer-to-computer exchange of business documents -purchase orders, shipping schedules and notifications, and invoices

Electronic Data Interchange (EDI)

•Allows requisitioning, authorizing, ordering, receiving, invoicing, and paying for goods and services through the Internet

Electronic Procurement Systems

•A suite of applications using a common data management system •Integrates functions within the organization and facilitates connection to supply chain stakeholders •Allows users to share information internally and externally in real time •Reduces opportunities for errors in transaction processes by eliminating dispersed organizational information systems

Enterprise Resource Planning (ERP) Systems

Concentrates on the strategic process of product or service sourcing, for example researching, negotiation and planning

Procurement

Process focuses on how products and services are acquired and ordered, such as raising purchase orders and arranging payment. 1. Transportation 2. inventory control forecasting and planning

Purchasing and 3 activities of purchasing

•A form of collaborative purchasing. •Goal: To deliver a wider range of services at a lower total cost through staff reductions, product and service standardization, improved supplier management capabilities, specialization of staff, and better customer service.

Purchasing consortia

Can mean a few different things: •One optional communication tool that is NOT a solicitation for business: (1) request for information (RFI) •Three options for soliciting business: (1) request for quotation (RFQ) (2) request for proposal (RFP) (3) request or invitation for bid (RFB or IFB)

What is an RFx?

long term - 3-5 years Midterm- 1-3 years

What is the area of time for long term and midterm?

1. Survival - to be able to pay and make profit 2. Growth 3. Financial - size of budget, profits, revenue... and making sure there is a good balance of input and output. 4. Environmental - clean air, water... environmental impact.

4 Normal organizational objectives

1. date 2. number (identification) 3. Originating dept 4. account number

4 things of information( out of many) needed for requisitions

•Suppliers submit bids after the auction event in an attempt to secure the business

1 Potential Supplier-Related Issues with Reverse Auctions

•Provides secure transmission and fast turnaround of large amounts of data •Reduces administrative costs

2 Benefits of EDI

•Buying firm submits phantom bids during the event to increase the competition artificially •Buyer includes unqualified suppliers to increase price competition

2 buyer related issue with reverse auctions

-Slow cycle time in the accounts payable process -Conflict between finance and supply policy

2 causes of late payments:

•Software as a Service (SaaS): -Applications that reside in the cloud -Users rent on a pay-for-use basis •Platform as a Service (PaaS): -Software development technologies -Allow users to create customized processes or tools •Infrastructure as a Service (IaaS): -Shared server capacity -Permits sharing of computing power and storage -Accessed as needed on a pay-for-use basis

3 Elements of Cloud Computing Relevant to Supply

1.The amount of purchased material and services as a percentage of total costs or total income 2.The nature of the products or services acquired 3.The extent to which supply and suppliers can provide competitive advantage

3 Factors that Influence Reporting Level

•Cost reduction and efficiency gains •Data accessibility •Speedier communication - data accuracy

3 Potential Benefits of Information Systems Technology

Advantages: 1. strategic focus 2. common suppliers 3. coordination of policies and procedures Disadvantages: 1. lack of recognition of unique business unit needs. 2. focus on corporate requirements, not on business unit strategic requirements. 3. lack of business unit focus.

3 advantages and 3 disadvantages of centralized model

Advantages: 1. geographical, cultural, political, environ appropriateness 2. easier communication with operating department 3. effective use of local sources. Disadvantages: 1. Difficult to communicate between business units. 2. ignores larger organizational considerations 3. lack of standardization.

3 advantages and 3 disadvantages of decentralized model

1. Operational - Risk of interruption of flow of goods or services. 2. Financial - Risk that the price of the goods or services acquired will change significantly. 3. Reputational - Risk that the Organizations reputation will be harmed by a supply decision. supplier dumps toxic waste

3 categories of supply risk and explanation

1. Effective interpretation of corporate objectives and supply objectives. ex origination goal is go expand rapidly.. in this direction will supply assurance help or will rock bottom prices help? INTERPRETATION 2. The choice of the appropriate action plan or strategy to achieve the desired objectives. ex. If supply assurance is more important, then the question is does single sourcing or multi sourcing help OR does in house manufacturing help? CHOOSE ACTION PLAN 3. The identification and feedback of supply issues to be integrated into organizational objectives and strategies. APPLY FEEDBACK ex. if newer tech can be accessed via supplier engagement, how can we use this as a differentiator?

3 challenges in setting supply objectives nd strategies

1. •Supportive organizational culture, structure, and systems 2. •A common compelling purpose, measurable goals, and feedback for individual and team 3. •Organized for customer satisfaction rather than individual functional success

3 key success factors for teams

1. •Maintaining a high degree of trust and professionalism 2. •Maintaining a strong similarity among consortium members and compatibility of needs, capabilities, philosophies and corporate cultures 3. •Mutual and equitable sharing of risks, costs and benefits to all stakeholders, including buying firms/members, suppliers and customers

3 keys for successful consortia

1. Large # of items 2. Large dollar volume involved 3. severe consequences of poor performance.

3 reasons to develop a robust SC process

1. Increase value and hence, increase savings 2. build relationships and drive innovation 3. improve quality and reputation.

3 reasons why purchasing is important

1. Globalization and SC complexity - lack of control through chain when farther away 2. Conflicting interests with suppliers - suppliers want manufact to commit to buy large quantities, stable volumes, with flexible delivery dates. Suppliers want stability, while manufact want flexibility in buying. 3. evolving relationships

3 risks in SC

•Private (operated for a single organization, managed internally or by a third party) •Public (operated over a network for general public use) •Community (operated for specific organizations, managed internally or by a third party)

3 types of cloud computing

1. Quality 2. Quantity 3. Delivery 4. Price 5. Service

5 Normal Supply Objectives

1. Assurance of supply 2. Cost reduction 3. SC support 4. Environmental change 5. Competitive edge 6. Risk management - in auto industry - airbags, crash test

6 major supply strategy areas

1. Improve the organiz competitive position INCREASE COMPETITIVENESS 2. Provide an uninterrupted flow of materials, supplies required to operate. CONSTANT FLOW OF SUPPLY 3. Keep inventory investment and loss to a minimum - keep balance so not to have too much inventory that you are paying excess storage MINIMAL INVENTORY 4. Maintain and improve quality QUALITY 5. Find or develop best-in-class suppliers. GOOD SUPPLIERS 6. Standardize where possible, the items bought and the processes used to procure them. STANDARDIZE 7. Purchase required items and services at lowest total cost of ownership - Quality costs, service cost, warranty costs, down time, MRO (maint. Repair & operations) costs, KEEP COST LOW 8. Achieve harmonious, productive internal relationships. HARMONIOUS INTERNAL DEPTS 9. Accomplish supply objectives at the lowest possible operating costs. KEEP COST LOW

9 Goals of supply

1.Recognition of need 2.Description of need 3.Identification and analysis of possible sources of supply 4.Supplier selection and determination of terms 5.Preparation and placement of the purchase order 6.Follow-up and/or expedite the order 7.Receipt and inspection of goods 8.Invoice clearing and payment 9.Maintenance of records and relationships

9 essential steps in supply process

Authority and responsibility for most supply-related functions assigned to a central organization

Centralized

•a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction."

Cloud computing

procurement

Deals with sourcing activities, negotiation, and strategic selection of goods and services.

Authority and responsibility for supply-related functions dispersed throughout the organization

Decentralized

One is a strategic process and the other is a transactional function when sourcing and acquiring products and services.

Difference between procurement and purchasing

- Supply strategy and goals aligned with those of other functional areas. ex. to obtain profit targets, finance does stuff... procurement goals contribute to profitability through long-term partnerships with key suppliers.

Horizontal alignment

Authority and responsibility shared between a central supply organization and business units, divisions, or operating plants

Hybrid organization - centralized/decentralized

Then supply decisions DO NOT lead to organizational goals. If functional areas are only focusing on their depts, there will be product suffering. To avoid this, they must align their goals and work together sharing info and making sure that everyone is helping out to prevent issues.

IF functional level supply strategy is out of sync with organizational strategy...

•(non-mission critical) -Dollar value and repetitiveness drive decisions -Establish a small dollar threshold -Prequalify suppliers -Use efficient order placement tools

Non strategic spending

Traditional view of supply objective

Obtain the right materials in the right quantity at the right time for the right person....

•Online, real-time, dynamic, declining-price auction for goods or services between one buying organization and a group of prequalified suppliers

Online Reverse Auctions

1. Corporate - What business are we in? - How will we allocate resources among these businesses? ex. are railroads in the business of running trains or in the business of movement? 2. Business - Decisions that mold the plans for a particular business unit to contribute to corporate strategy. 3. Function plans concern: - How each functional area contributes to business strategy - Allocation of internal resources.

Organizations much approach strategic planning at 3 levels: Name 3 levels and what first level asks and what other 2 do.

-make data more transparent, accurate, and accessible to decision makers -relieves supply decision makers of lower value-adding tasks

Process effectiveness driven by tech

•A person or a system identifies a definite NEED in the organization—what, how much, and when needed. what kind of value is being added by the good or service?

Step 1 in supply chain process: Recognition of need

•Needs should be driven by external customers. -External customer needs → Internal customers → Purchasers → Potential suppliers •An accurate description of the need (good, service, or combination) is essential

Step 2 in supply chain process: Description of Need

•Online tools •Colleagues- in SC you can have peers from other companies or internally •Existing suppliers- new need might be able to supply new materials

Step 3 in supply chain process: Identification of potential sources

•Analysis of qualified potential sources, source selection, and determination of terms. Once you get all the requested information, you team will analyze info and criteria for new suppliers.

Step 4 in supply chain process: Supplier Selection and Determination of Terms

•Several order placement tools available: -A purchase order -The supplier's sales agreement -A release against a blanket order

Step 5 in supply chain process: Preparation and Placement of Purchase Order

•Follow-up: routine order tracking to ensure the supplier can meet delivery promises •Expediting: the application of pressure on a supplier to meet the original delivery promise, to deliver ahead of schedule, or to speed up delivery of a delay

Step 6 in supply chain process: Follow up and expediting

pretty self explanitory.

Step 6 in supply chain process: Invoice clearing and payment

•The prime purposes of receiving are to: 3 reasons 1. Confirm receipt of order placed 2. Confirm shipment arrived in good condition 3. Ensure quantity ordered has been received

Step 6 in supply chain process: Receipt and inspection

•Update records based on law, accounting standards, company policy, and judgment •Update supplier performance scorecards •Link data to future decisions

Step 7 in supply chain process: Maintenance of Records and Relationships

• goods or services critical to the mission of the organization -May be high- and low-dollar-value purchases -For safety, production, or operation costs - goals being addressed

Strategic spending

Purchasing

The process of how goods and services are ordered.`

•Open offer auctions -Suppliers select items, see competitive offers, and enter offers up until a specified closing time. •Private offer auctions -The buyer offers a target price and quantity •Posted price -Buyer posts price and accepts first supplier to meet price

Three Types of Online Reverse Auctions

Corporate, business, functional - Supply strategy and goals at the functional or business unit level aligned with organizational strategy.

Vertical strategy and goal alignment