Download - Chapter 3 - Industrial
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1. Able to discuss how effective purchasing andmaterials management provide a competitiveadvantage.
2. Illustrate strategies designed to provide the
proper supply and tell why these are used.3. Explain total cost ownership, value analysis,
and other forms of economic purchaseevaluation.
4. Describe the processes that purchasing usesto evaluate vendors and their offerings, aswell as how the process varies depending onthe organizations experience.
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5. Recognize the major ethical issues facing
purchasing agents and how they respond
to those issues.
6. Understand differences in government
purchasing and compare government
needs in industrialized nations with those
of developing countries.
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Delivering morebenefits
Or lowering costs
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1. Provide appropriate levels of supply of theright product or service.
- JIT shipping products such that they arrive atthe customers location exactly when needed.
- Concurrent manufacturing suppliers scheduletheir own manufacturing based on the shipmentneeds of their customers.
- supplier can also keep inventory costs down,because the supplier can engage its own supplies in
JIT systems.
2. At the correct level of quality.
3. For the lowest total cost.
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= effective purchasing
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Determining the price a company pays goesbeyond the peso cost.
TOTAL COST PURCHASE PRICE DELIVERYSTORAGE SERVICE
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Cost of ownership goes beyond the price paidfor a product
TOTAL COST OFOWNERSHIP PRODUCT PRICE
DELIVERY INSTALLATION
MAINTENANCE / REPAIRPOWER COSTS
SUPPLY COSTSOPERATING COSTSFINANCING
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Economic Order Quantity (EOQ) the
quantity minimizes both ordering and
storing costs.
- Any more than that would raise costs
and not be economical.
Forward buying buying in larger quantities
than are currently needed because the
discount is greater than the carrying costs.
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A method of comparing the benefit,
function and cost of materials, components,
and work processes.
Complexity Management the process of
identifying links among the components
that raise costs if any changes are made.
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What is New
Currently AlternativesBeing Done Being
Considered
COMPARE
BENEFITSRECEIVED
FUNCTIONS OFPRODUCT
COST OFMATERIALS
WORK PROCESSINVOLVED
OUTCOME: GREATER VALUE FOR LESS COST
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Adversarial purchasing philosophy to haveseveral vendors for each product.
Partnership purchasing philosophy or preferredsupplier systems seeks to maximize the benefitsof collaboration between the buyer and a few
suppliers. Provides: High purchase-volume materials, components, or products of
strategic importance
Specialized products requiring information and training foreffective use
Services that require specialized knowledge for cost
reductions or performance Materials that no other suppliers can provide
Single sourcing when a company selects onesupplier to satisfy all needs in a given area.
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Buy-Grid Model explaining how
companies make decisions.
Two Parts:
Buy-phase model people go through a series of
steps when making decisions.
Buy-class model refers to the type of buying
decisions: new buys, straight rebuys and
modified rebuys
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High-purchase-volume materials,components or strategic products
Information and training for effective product
use
Services requiring specialized knowledge forcost reductions and/or performance
Materials unavailable elsewhere
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1. REDUCE PURCHASING COSTS
CUTBACK ON EMPLOYEES
REDUCE NUMBER OF VENDORS/TRANSACTIONS
BUILD RELATIONSHIPS
CENTRALIZE PURCHASING ACTIVITIES
USE THE INTERNET
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2. OUTSOURCE IN-HOUSE ACTIVITIES
TRAINING
MANUFACTURING PROCESSING ACTIVITIES
INVOLVE SUPPLIERS (ESI)
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3. CROSS-FUNCTIONAL TEAMS MADE UPOF COMPANY DEPARTMENTS,SUPPLIERS, CUSTOMERS
4. INCREASE PROFESSIONALISM THROUGHCERTIFICATION PROGRAMS ANDESTABLISH A CODE OF ETHICS
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63% have business degrees 21% are certified purchasing managers
20% have other certifications
67% are male
The average CPM is 45.8 years old with 15years of purchasing experience.
Spends an average of 28.4 million per year
Earns an average 67,000 per year
50% are on product development team
70% are responsible for managing inventory
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1. WHAT IS A CROSS-FUNCTIONAL TEAM?2. CAN YOU RECOGNIZE ONE AT YOUR
CLIENTS ORGANIZATION?
3. DO YOU KNOW HOW TO GET YOURCOMPANY INCLUDED IN YOUR CLIENTSCROSS-FUNCTIONAL TEAM?
4. WILL YOUR COMPANY GIVE YOU THEPEOPLE RESOURCES TO SUPPORT YOUR
CLIENTS NEEDS?
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Best-Value Provider
Action In-House Partner
Training
Transaction Processing
Paper Processing
Product DesignProduct Manufacturing
Component Part Manufacturing
R&D
Marketing
SalesAdvertising
Research
Support
Human Resources Administration
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ACCEPTABLE RISKBuy the Products,Components or Services
UNACCEPTABLE RISKRetain Production andProvide Services
RISK ASSESSMENT
FINANCIAL RISKSResource Allocation
Investment of Resources
Accurate Cost Analysis
Legal Issues
MARKETING RISKSCustomer Impact
Supplier Impact
MANUFACTURING RISKS
Reliability
Expertise
Equipment
Patent Protection
POLITICAL RISKS
Management commitment/
willingness to partner
Turf Battles
Internal Strife
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Moral codes of conduct, rules for
how someone should operate
that can be followed as situation
demand.
Ethical Issues Facing Purchasing
Receiving giftsAccess to information
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Case 3.2 Newell Industries (page 92)