Purchasing and ordermanagementMaterialsflowSuppliersOperationsDistributionProcurementCustomersRequirements information flowOutbound logisticsInbound logistics
Purchasing and order management Customers Materials flow Suppliers Procurement Operations Distribution Requirements information flow Inbound logistics Outbound logistics
Purchasing and ordermanagementThe objective of purchasing is:to secure optimal supplier performancewith respect to optimum qualitytimely deliveryminimum costs? Purchase, procure, source, buypurchasing manager / chief buyer
Purchasing and order management The objective of purchasing is: to secure optimal supplier performance with respect to optimum quality timely delivery minimum costs. Purchase, procure, source, buy purchasing manager / chief buyer
Situations which can give riseto inter-departmental conflictsFinanceSubsystems goalPurchasingProductionMarketingLogistics·Bulk purchases ofAd:largerDd: working capitalDd: warehousingtiedupmaterialsdiscountscosts increasedLong productionDd:working capitalDd: narrow pdtDd:warehousingAd:lowcoststiedupcosts increasedrunsrangeAd: higher costsDd: discountsAd:more salesthrumore.Broad productDd:short,highDd: finished goodssmallonlowthru wideradministration&volumestocks highcostsrunsrangemore warehousingcustomer appealpurchasedspace.Tighter creditDd: possiblyAd:greateruse ofcontrolworking capitalloss of salesDd:systemcostsAd: more sales?Short timeDd: higherincreased in orderwith betterdeliveryto meet serviceoperating costsservicerequirementsAd:system costsDd:loss ofAd:loweroperatingcan be lowered by.Unit loadssales to smalleliminatingcostscustomersuneconomic calls
Situations which can give rise to inter-departmental conflicts Subsystems goal Purchasing Production Finance Marketing Logistics •Bulk purchases of materials Ad:larger discounts Dd: working capital tied up Dd: warehousing costs increased • Long production runs Ad: low costs Dd: working capital tied up Dd: narrow pdt range Dd: warehousing costs increased • Broad product range Dd: discounts small on low volume purchased Dd:short,high costs runs Dd: finished goods stocks high Ad: more sales thru wider customer appeal Ad: higher costs thru more administration & more warehousing space • Tighter credit control Ad: greater use of working capital Dd: possibly loss of sales • Short time delivery Dd: higher operating costs Ad: more sales with better service Dd: system costs increased in order to meet service requirements • Unit loads Ad: lower operating costs Dd: loss of sales to small customers Ad: system costs can be lowered by eliminating uneconomic calls
Relationships with otherfunctionsProduction controlPhysical distributionReceiving and storesFinanceDesign engineeringIndustrial engineering
Relationships with other functions Production control Physical distribution Receiving and stores Finance Design engineering Industrial engineering
The purchasing processRecognizeaneedSelect suppliersIssuetheorderTrack and receive the order
The purchasing process Recognize a need Select suppliers Issue the order Track and receive the order