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Principles of Supply Chain Management:

A Balanced Approach

Prepared by Daniel A. Glaser-Segura, PhD

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± Describe the role of purchasing and understand its impact on
an organization¶s competitive advantage.
± Have a basic knowledge of manual purchasing and e-
procurement.
± Understand and know how to handle small value purchase
orders.
± Understand sourcing decisions and the factors impacting
supplier selection.
± Understand the pros and cons of single versus multiple
sourcing.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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± Describe centralized, decentralized, and hybrid purchasing

organizations and their advantages.
± Describe and understand how globalization impacts,
purchasing, and describe and understand the opportunities and
challenges of global sourcing.
± Understand total cost of ownership and be able to select
suppliers using more than unit price alone.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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‡ The Role of Purchasing in an Organization
‡ The Purchasing Process
‡ Sourcing Decisions: The Make-or-Buy Decision
‡ Roles of Supply Base
‡ Supplier Selection
‡ How Many Suppliers to Use
‡ Purchasing Organization: Centralized versus
‡ Decentralized Purchasing
‡ International Purchasing/Global Sourcing

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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Obtaining merchandise, capital equipment; raw materials, services,
or maintenance, repair, and operating (MRO) supplies in exchange
for money or its equivalent.


  

wholesalers and retailers who purchase for resale.

Ô 
  


purchase raw materials for conversion, services, capital equipment,
& MRO supplies.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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1. Ensure uninterrupted flows of raw materials at the lowest total cost,
2. Improve quality of the finished goods produced, and
3. Optimize customer satisfaction.


    

± Actively seeking better materials and reliable suppliers,
± Work closely with strategic suppliers to improve quality materials, and
± Involving suppliers and purchasing personnel in new product design
and development efforts.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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Older system, prone to duplication of effort

and error

 
 
  
  - stating product,

quantity, and delivery due date are clearly.

     
- Buyer identifies suppliers

& issues a request for quotation (RFQ).

   
  The purchase order is the buyer¶s

offer & becomes a binding contract when accepted by supplier.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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    ?



  
 
  

 
   - relevant

information such as quantity and date needed.

  
 
       at purchasing

department (hardcopy or electronically).

   
 
     Product

description, closing date, & conditions are given.

           
  

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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± Time savings
± Cost savings
± Accuracy
± Real time
± Mobility
± Trackability
± Management
± Benefits to the suppliers

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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‡Procurement Credit Card/Corporate Purchasing Card

‡Blank Check Purchase Orders
‡Blanket or Open-End Purchase Orders
‡Stockless Buying or System Contracting
‡Petty Cash
‡Standardization & Simplification of Matls & Components
‡Accumulating Small Orders to Create a Large Order
‡Using a Fixed Order Interval

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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‡ ( 
 buying materials and components from suppliers
instead of making them in-house. The trend has moved toward
outsourcing.
‡ 
 
 refers to acquiring sources of supply
‡ 

 
 refers to acquiring customer¶s operations.


 
     
 

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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‡ | 


 : Especially for components that are non-vital to the

organization¶s operations.

‡   

: A firm may be at or near capacity.

‡ K
   : Firm may not have the necessary technology

and expertise.

‡ 
: Suppliers have better technology, process, skilled labor,

and the advantage of economy of scale.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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‡   
  

‡     
‡   

‡    


‡ |  - lead-time transportation,
and warehousing cost
‡ K  

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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  - suppliers that a firm uses to acquire its materials,
services, supplies, and equipment.

Firms emphasize long-term strategic supplier alliances consolidating

volume into  

suppliers, resulting in a 
  

.

Preferred suppliers provide:

± Early supplier involvement- Information on the latest trends in materials,
processes, or designs
± Information on the supply market
± Capacity for meeting unexpected demand
± Cost efficiency due to economies of scale

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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The process of selecting suppliers, is complex and should
be based on multiple criteria:

± Product and process ± Order System and cycle

technologies time
± Willingness to share ± Capacity
technologies and ± Communication capability
information ± Location
± Quality ± Service
± Cost
± Reliability

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing
 

  
Single-sourcing- a risky proposition. Although trends favor
fewer sources, avoid single source.


 


  
 
 


   
 

‡ To establish a good relationship ‡ Need capacity

‡ Less quality variability ‡ Spread risk of supply
‡ Lower cost interruption
‡ Transportation economies ‡ Create competition
‡ Proprietary product or process ‡ Information
‡ Volume too small to split ‡ Dealing with special kinds of
business

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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Purchasing Organization dependent on
many factors, such as market conditions
& types of materials required.

± |
 ?
- purchasing

department located at the firm¶s corporate
office makes all the purchasing decisions.

± 
 ?
- individual,

local purchasing departments, such as
plant level, make their own purchasing
decisions.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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± Concentrated volume- ± Closer knowledge of
leveraging purchase volume requirements
± Avoid duplication ± Local sourcing
± Specialization ± Less bureaucracy
± Lower transportation costs
± No competition within units
± Common supply base

A 
 
 
- both decentralized at

the corporate level and centralized at the business unit
level may be warranted.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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u 

± Opportunity to improve quality, cost, and delivery performance.
± Requires additional skills and knowledge to deal with
international suppliers, logistics, communication, political
environment, and other issues.

‡ Ô
 


  performs service for a fee.

‡ Ô
 
 buys and takes title to the goods.
‡ 
  imports & carries wide variety of goods.

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
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© 2005 Thomson Business and Professional Publishing