Download PRODUCTIONS/OPERATIONS MANAGEMENT

12s-1
Purchasing and Supplier Management
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-2
Purchasing and Supplier Management
Chapter 12 Supplement
Purchasing and
Supplier Management
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-3
Purchasing and Supplier Management
Purchasing
• Purchasing is responsible for obtaining
the materials, parts, and supplies and
services needed to produce a product
or provide a service.
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-4
Purchasing and Supplier Management
Goal of Purchasing
• Develop and implement purchasing
plans for products and services that
support operations strategies
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-5
Purchasing and Supplier Management
Duties of Purchasing
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Identifying sources of supply
Negotiating contracts
Maintaining a database of suppliers
Obtaining goods and services
Managing supplies
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-6
Purchasing and Supplier Management
Purchasing Interfaces
Legal
Operations
Accounting
Purchasing
Data
processing
Design
Suppliers
McGraw-Hill Ryerson
Receiving
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-7
Purchasing and Supplier Management
Purchasing Cycle
Legal
• Requisition received
Operations
Accounting
• Supplier selected
• Order is placed
Purchasing
Data
processing
• Monitor orders
• Receive orders
Design
Receiving
Suppliers
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-8
Purchasing and Supplier Management
Value Analysis vs Outsourcing
• Value analysis
– Examination of the function of purchased
parts and materials in an effort to reduce
cost and/or improve performance
• Outsourcing
– Buying goods or services from outside
sources rather than making or providing
them in-house
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-9
Purchasing and Supplier Management
Deciding Factors for Outsourcing
• Cost to make vs. cost to buy
• Stability of demand
• Quality from suppliers
• Maintaining close control
• Idle capacity available
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-10
Purchasing and Supplier Management
Deciding Factors for Outsourcing
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Lead times for each alternative
Who has patents, expertise, etc.
Stability of technology
Consistency/conflict with current
operations
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-11
Purchasing and Supplier Management
Factors for Make or Buy Decisions
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Available capacity
Expertise
Quality considerations
Nature of demand
Cost
Core elements
Strategy
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-12
Purchasing and Supplier Management
Determining Prices
• Predetermined or fixed prices
• Competitive bidding
• Negotiated purchasing
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-13
Purchasing and Supplier Management
Determining Prices
• Published price lists
– fixed or predetermined prices
• Competitive bidding
– e.g. government purchases of standard
goods or services
• Negotiating
– win-win transaction
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-14
Purchasing and Supplier Management
Myths of Negotiated Purchasing
• Negotiation is a win-lose confrontation
• Main goal is to obtain the lowest price
• Each negotiation is an isolated
transaction
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-15
Purchasing and Supplier Management
Centralized vs Decentralized Purchasing
• Centralized purchasing
– Purchasing is handled by one special
department
• Decentralized purchasing
– Individual departments or separate
locations handle their own purchasing
requirements
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-16
Purchasing and Supplier Management
Suppliers
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Choosing suppliers
Evaluating sources of supply
Supplier audits
Supplier certification
Supplier relationships
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-17
Purchasing and Supplier Management
Factors in Choosing a Supplier
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Quality and quality assurance
Flexibility
Location
Price
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-18
Purchasing and Supplier Management
Factors in Choosing a Supplier
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Product or service changes
Reputation and financial stability
Lead times and on-time delivery
Other accounts
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-19
Purchasing and Supplier Management
Evaluating Sources of Supply
• Vendor analysis: Evaluating the sources
of supply in terms of price, quality,
reputation, and service
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-20
Purchasing and Supplier Management
Evaluating Sources of Supply
• Vendor analysis - evaluating the
sources of supply in terms of
– Price
– Quality
– Services
– Location
– Inventory policy
– Flexibility
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-21
Purchasing and Supplier Management
Supplier as a Partner
Aspect
Partner
Adversary
Number of suppliers
Length of
relationship
Low price
Reliability
Openness
Quality
Volume of business
Location
One or a few
Long-term
Moderately important
High
High
Insured at the source
High
Proximity may be
stressed for short lead
times
Relatively high
Many; play one off
others
May be brief
Major consideration
May not be high
Low
Buyer inspects
May be - many suppliers
Widely dispersed
Flexibility
McGraw-Hill Ryerson
Relatively low
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
12s-22
Purchasing and Supplier Management
Supplier Partnerships
• Ideas from suppliers could lead to
improved competitiveness
– Reduce cost of making the purchase
– Reduce transportation costs
– Reduce production costs
– Improve product quality
– Improve product design
– Reduce time to market
– Improve customer satisfaction
– Reduce inventory costs
– Introduce new products or services
McGraw-Hill Ryerson
Operations Management, 2nd Canadian Edition, by Stevenson & Hojati
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.