Samenvatting Purchasing Management

Samenvatting Purchasing Management

Framework by Monczka for purchasing excellence, MSU model

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Introduction (Chapter 1&2&7):

Improved purchasing performance may contribute to increased customer value and can establish a higher firm profitability.

Sourcing: Finding sources of supply, guaranteeing continuity in supply, ensuring alternative sources of supply and gathering knowledge of procurable resources.

Value Chain Management: Challenging suppliers to improve the value proposition to the end-customers of the value chain. Usually the suppliers works closely together with the customer’s technical and marketing staff to reduce the product’s overall costs and add new designs or features to the product which increase the value or the end-customer.

Total Cost of Ownership (TCO): Total costs that a companies will incur over the lifetime that a certain product is purchased

Derived demand: Indirectly observed demand by customers, not Point-Of-Sale (POS) data but demand as ordered by your (non-end) customers

Purchasing process model Van Weele

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Differences in individual versus organizational purchasing:

• Scale/size/volume (has an influence of discounts and savings; economies of scale)
• Repetition (expertise/skills/knowledge)
• Interaction with other functions/divisions
• Often larger geographical scope
• More commercial pressure
• More regulation (By governments and the company)

Purchasing & business strategy (Chapter 3&7) + paper Spina, Caniato, Luzzini & Ronchi (past, present & future purchasing) and paper Carter, Carter, Monczka, Slaight & Swan(future of prurchasing)

Global sourcing: Proactively integrating and coordinating common items and materials, processes, designs, technologies and suppliers across worldwide purchasing, engineering and operating locations.\

+ Lower unit costs
+ Benchmarking current suppliers
+ Accessing new markets/technologies

- More complicated distribution and logistics
- Increasing handling costs
- Problems when dealing with different cultures
- Contractual problems
- Higher uncertainty about on-time delivery and quality
- Political dynamics

Reshoring: Relocating departments of the company back to the homeland

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Purchasing is becoming more strategic, an area in which firms can compete which each other.

Strategic alignment: aligning the firm’s purchasing activities according to the firm’s strategy. So purchasing must use the company’s objectives to set the goals for the purchasing function.

Spend analysis: Very basic questions about the expenditures, suppliers and the market

Portfolio management: questions about the current suppliers

Purchasing portfolio model (Kraljic): shows in what kind of category a certain product belongs

Customer Portfolio Analysis (Porter): places a company’s customer in different groups

Dutch windmill model: combines these two models and checks if there is a fit between the purchasing of the buyer with the supplier’s attractiveness of the customer.

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Kraljic

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Porter

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The partnership or cooperation works best when both parties see each other in the same way, else problems can occur.

Supplier selection and evaluation (Chapter 2) + De Boer (Supplier selection) and Lines (Best Value Project Delivery)

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Supplier selection:

Step 1: recognize need for evaluating sources of supply: Using new products/materials or suppliers

Step 2: Identify key purchasing requirements

Step 3: Determine appropriate sourcing strategy

Step 4: identify potential supply sources

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Link with the purchasing portfolio model of Kraljic!!

Step 5: limit suppliers in selection pool

Step 6: determine method of supplier evaluation and selection, evaluation methods (De Boer)

Step 7: select supplier and reach agreement/contract

De Boer, Labro & Morlacchi (2001): A review of methods supporting supplier selection:

Supplier selection decision models are used to eliminate personal preferences of purchasers in supplier selection.

DEA (Data Envelopment Analysis): sorts the supplier in efficient/inefficient by weighing the benefits and the costs of every supplier. Used to create a ranking of suppliers based on attractiveness.

• Linear models: sum of importance of attribute * performance on attribute (both difficult to rate)
• Total Cost of Ownership (TCO): total costs of purchasing handling the product
• Mathematical programming (MP): decisions are formulated on mathematical formulas, which have to be maximized or minimized (quantitative and objective)
• Statistical models: rarely used, but based on statistics and probability
• Artificial Intelligence models(AI): computers trained to make the supplier choice
  Notitie in mijn aantekeningen dat dit nog wel eens een exam question zou kunnen zijn

Lines, Perenoud & Sullivan (2013): Optimizing cost and schedule performance through best value project delivery: application within a design-build project

Best Value Business Model (BVBM): improves project performance through value-based evaluation of proposals

Selection Phase: gathering information about the suppliers and the products and evaluation criteria

Pre-award clarification period: The best rated supplier in the first step is involved in the planning of the project

Performance Measurement

• Weekly Risk Report (WRR): weekly update about the possible risks that the project can incur

Public procurement:

• Non-discrimination, no differentiation on nationality
• Equality, handle all the bidding suppliers equally
• Transparency, publicly announce tender and motivating award decision
• Proportionality, fairness of tender/realistic demands

 RAVA-plan: risk assessment/value added plan. Used to identify how suppliers identify and minimize risks, control and responsibility of the project and add value to the project by cost minimization, speed up the process or increase customer satisfaction. The customer is interested in the differences between suppliers.