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:
- Record
of open orders (for obtaining status and initiating follow-ups)
- Record
of closed orders (for historical data, past order research)
- Purchase
log ((tracking actions-PO #, status, supplier, item description, value of
order)
- Commodity
records (specifications, supplier, price, quality/delivery history)
- Supplier
records (who, terms, historical experience with, products)
- Contract
records (products, prices, terms, delivery schedule, duration, ordering
procedures)
- Special
tool records (GFE, i.e. when required, accountability, availability)
Handling
the Inevitable Rush Orders
- Planning
and coordination reduces the need for rush orders
- Appropriate
approval levels should be required to initiate rush orders
- Degree
of reliance/use of rush orders/premium transportation should be a critical
performance measure
- Rush
orders are not always “bad” (example: low-density, high value items that
are rarely needed)
Small
Order Quantities
- Decentralization
of authority to approve/execute small purchases
- Arrangement
of standing agreements such as blanket purchase agreements (BPA - no
orders initially issued, just terms and conditions, product descriptions,
authorized ordering officials, etc.)
- Petty
Cash, Credit Card
- Supplier
Store on customer's premises (an outsourced approach)
- Systems
Contracting (page 81) is a variant of the BPA
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) -
- Definite
quantity (quantity is certain, delivery is variable)
- Requirements
(all requirements over specified period, minimum order quantity stated)
- Indefinite
quantity (time is certain, quantity is variable)
Computer-Based
Systems/EDI
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
-------------------------
Cases:
Randal
Placido