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1、,物流英语,Learning objectives,3. Questions for Discussion,1. Main Content,2. Phrases and Terms,4. Case Study,Chapter 3 Procurement and Supplier Management,Learning Objectives,Learn the role of procurement and supplier management. Gain an understanding of purchasing management process. Get an overview of
2、 supplier selection and evaluation. Understand the types of relationships and mechanism of managing suppliers.,3.1The Definition and Role of Procurement,The cost of material as a percentage of sales has been estimated at approximately 53 percent for all types of manufacturing in the United States. F
3、or wholesalers and retailers, the cost of goods sold is even higher than of manufacturers. This indicates the magnitude of the benefits that are possible through better management of procurement and related supplier network. Undoubtedly, supplier management is of great significance to enhancing the
4、competitiveness of both manufactures and resellers.ri:sel ,ri:sel resell,3.1.1 Definition of Procurement Traditionally, the main activities of purchasing were to beat up potential suppliers on price and then buy products from the lowest cost supplier that could be found. That is still an important a
5、ctivity, but there are other activities that are becoming equally important. Because of this the purchasing activity is now seen as part of a broader function called procurement. The term purchasing and procurement are often used interchangeably, although they do differ in scope. Purchasing generall
6、y refers to the actual buying,3.1The Definition and Role of Procurement,of materials and those activities associated with the buying process. As we move into the future, purchasing will evolve into the procurement process of supply chain management described in chapter 2. In procurement the activiti
7、es are recognized as process-oriented and strategic. Structurally, commodity team, product supply groups, and cross-functional teams are more prevalent than in the past. The process itself is less transaction-oriented, depends on the implementation of good information systems, and focuses on closer
8、supplier relation with fewer,supplies, while considering sources from around the world. Purchasing activities are the routine activities related to issuing purchase orders for needed products. There are two types of products that a company buys: (1)direct or strategic materials that are needed to pr
9、oduce the products that the company sells to its customers; (2)and indirect of MRO (maintenance, repair, and operations) products that a company consumes as part of daily operations. The mechanics of purchasing both types of products are largely the same. Purchasing,decisions are made, purchase orde
10、rs are issued, vendors are contacted, and orders are placed. There is a lot of data communicated in this process between the buyer and the supplier-items and quantities ordered, prices, delivery dates, delivery addresses, billing addresses , and payment terms. One of the greatest challenges of the p
11、urchasing activity is to see to it that this data communication happens in a timely manner and without error. Much of this activity is very predictable and follows well defined routines.,The goals of purchasing are to: (1) Provide an uninterrupted flow of materials, supplier, and services required t
12、o operate the organization;(2) Keep inventory investment and loss at a minimum;(3) Maintain and improve quality;(4) Find or develop competent suppliers;(5) Standardize, where possible, the items bought;(6) Purchase required items and services at the lowest total cost; (7)Improve the organizations co
13、mpetitive position. (8)Achieve harmonious, productive working relationships with other functional areas within the organization.,Among the primary purchasing activities that influence the ability of the firm to achieve its objectives are supplier selection, evaluation, and ongoing management (sourci
14、ng); total quality management; purchasing management; and forward buying. 3.1.2 The Strategic Role of Purchasing The strategic role of purchasing is to perform sourcing-related activities in a way that supports the overall objectives of the organization. Purchasing can make many contributions to the
15、 strategic success of the organization through its,key role as one of the organizations boundary- spanning functions. Through external contacts with the supply market, purchasing can gain important information about new technologies, potential new materials or services, new sources of supply, and ch
16、anges in market conditions. By communicating competitive intelligence, purchasing can help reshape an organizations strategy to take advantage of market opportunities. Purchasing can help support the organizations strategic success by identifying,and developing new and existing suppliers. Getting su
17、ppliers involved early in the development of new products and services or modifications to existing offerings can reduce development times. The idea of time compression-getting market quickly with new ideas-can be very important to the success of those ideas and perhaps to the organizations position
18、 as a market leader or innovator. The role of purchasing ranges from a support role to a strategic function. To the extent that purchasing provides value to other functional areas, it will be included in important decisions and become involved early in decisions that,affect purchasing. Being well in
19、formed allows the purchasing function to better anticipate and support the needs of other functional areas. This support in turn leads to greater recognition and participation. Purchasing and logistics need to work closely in coordinating inbound logistics and associated material flows. The followin
20、g sections apply to purchasing of goods and services; they apply equally to purchasing of logistics services and managing relationships with logistics service providers.,3.2 Purchasing Management,3.2.1 Purchasing Research and Planning In the business environment, uncertainty makes the purchasing dec
21、ision more complex and the effects of theses decisions more long lasting. Important environmental considerations include uncertainty of supply and dependence on foreign sources for key commodities, price increase on key commodities, extended and variable lead times, energy shortages or price increas
22、es, an worldwide competition.,The changing environment makes it necessary for purchasing management to do a more effective job of researching the supply market and planning. Purchasing needs to provide information about supply conditions, such as availability, lead times, and technology, to differen
23、t groups within the firm, including top management, engineering and design, and manufacturing. This information is important when formulating long-term strategy and making short-term decisions. Key materials for which availability, pricing, and quality problems may,occur should be identified so that
24、 management can develop an action plan before problems become critical and costly. Strategic planning for purchasing involves materials screening, risk assessment, strategy development, and implementation. It is important to determine whether materials bottlenecks will jeopardize current and future
25、production; new products should be introduced; materials quality may be expected to change; prices are likely to increase or decrease, forward buying is appropriate. Management should develop specific plans to,ensure that the material supply chain will operate uninterrupted. Typical criteria to use
26、in identifying critical purchases are percentage of product cost, percentage of total purchase expenditure, and use on high-margin end items. Criteria used for determine the risk in the supply market include number of suppliers, availability of raw materials to suppliers, supplier cost and profitabi
27、lity needs, supply capacity, and technological trends. The more critical the purchase and the riskier the supply market, the greater attention the purchase requires.,Risk assessment requires that the purchaser determine the probability of the best or worst conditions occurring. Supply strategies sho
28、uld be developed for the predicted events. Asking these questions for any given strategy or situation can help purchasing managers ensure that they have considered the important issues. Implementation of a particular strategy requires the involvement of the top management and integration with the fi
29、rms overall business plan.,3.2.2 Measurement and Evaluation of Purchasing Performance Management must identify the information that is required to perform purchasing activities and to measure and evaluate purchasing performance. The following data should be included in the management information sys
30、tem in order to measure and evaluate purchasing performance: purchase item number and description; quantity required; date on which purchase requisition is received or authorized; purchase requisition or authorization number; suppliers quoted; date on,which quotes are required from suppliers; suppli
31、er is placed; purchase price per unit; quantity or percentage of annual requirements purchased; planned purchase price per unit; suppliers promised ship date; supplier lead time days or weeks for purchase item; date on which purchase item is received; quantity received; purchase item accepted or rej
32、ected unit/lot; storage location; buyer; work unit; requested price change; effective date of requested price change; date on which price change is approved; ship-to location. The information needs of each,of these groups are quite different. Top management, for example, may want to know how the fir
33、ms purchasing department compares with that of other example, may want to know how the firms purchasing department compares with that of other firms, and how effective it is. Corporate adj.法人的；共同的，全体的；社团的 functional managers, such as corporate vice presidents of purchasing, may want complete functio
34、nal reviews; policy and procedure auditsdt审计; and a review of key quantitative indicators, such as inventory, minority purchases, and administrative budget measures. The purchasing department,manager of the operating unit may want to have a series of regularly reported indicators in order to monitor
35、 performance and take corrective action when necessary. Purchasing organizations use a number of key performance measures for purchasing control, including price effectiveness; cost savings; workloads, administration and control; efficiency; vendor quality and delivery; material flow control; regula
36、tory, societal and environmental measures; procurement planning and research; competition; inventory; and transportation.,3.3 Supplier Selection and Evaluation,3.3.1 Importance of Supplier Selection and Evaluation The buying process is complex because of the variety of actors that must be considered
37、 when making such a decision. The process includes both decision makers and decision influences, which combine to form the decision-making unit (DMU). The process includes the following 12 steps:,identify needs, establish specification, search for alternatives, establish contact, set purchase and us
38、age criteria, evaluate alternatives, negotiate with suppliers, buy, use, and conduct post purchase evaluation. In the 1980s and 1990s, the increased concern for productivity improvement caused management attention to focus on the purchasing function and on the development of supplier ties with a red
39、uced number of suppliers. In order to determine the impact supplier performance on productivity, performance must be measured and evaluated.,Next, the date can be used to identify those suppliers with whom the firm wishes to develop long-term relationships, to identify problems so that corrective ac
40、tion can be taken, and to realize productivity improvements. A variety of evaluation procedures are possible; there is no best method or approach. The important thing is to make certain that some evaluation procedure is used. The manager must identify all potential suppliers for the items being purc
41、hased. The nest step is to develop a list,3.3.2Procedures of Supplier Evaluation,of attributes by which to evaluate each supplier. Once the attribute have been determined, the performance of individual suppliers should be evaluated on each attribute (e.g., product reliability, price, ordering conven
42、ience). A five-point scale (1=worst rating; 5=highest rating) is used in the illustration, but other scale may be used. After evaluating suppliers on each attribute, management must determine the importance of each of the attributes to the firm. If, for example, product reliability was of paramount
43、importance to the firm, that attribute would be given the highest important rating.,If the price was not as important as product reliability, management would assign price a lower importance rating. Any attribute that was not important to the firm would be assigned a zero. The next step is to develo
44、p a weighted composite measure for each attribute. This is done by multiplying the suppliers rating for an attributes importance. The addition of the composite scores for each supplier provides an overall rating that can be compared to other suppliers. The higher the composite score, the more closel
45、y the supplier meets the needs and specifications of the procuring company. One of the major benefits of,this approach is that it forces management to formalize the important elements of the purchasing decision and to question existing methods, assumptions, and procedures. The rewards associated wit
46、h the proper selection and evaluation of suppliers can be significant. Purchasing activities can have positive effects on the firms profits. Not only a reduction in the cost of materials will increase the profits margin on every unit that is manufactured and sold, buy the lower cost associated with
47、the materials purchased will also reduce the investment in inventories. Better logistics service,by suppliers will also result in lower inventory in units required and thus dollars invested. In addition, customer service improvements are possible because the manufacturing process can operate smoothl
48、y, without slowdowns and shutdowns. The service improvement can result in higher unit sales and in some cases higher prices. And since effective purchasing management results in the acquisition of high-quality materials, there is also less likelihood of customer return of finished goods due to produ
49、ct failure.,3.4 Supplier Relationship Management,3.4.1Definition:Supplier relationship management is the supply chain management process that provides the structure for how relationships with suppliers are developed and maintained. As the name suggests, it is similar to customer relationship management. Just as close relationships need to be developed with key customers, management should forge close cross-functional relationships with a small number of key suppliers, and maintain more traditional buyer and salesperson relationships,with the others