1、Contemporary LogisticsTwelfth EditionChapter 6ProcurementLearning Objectives(1 of 2)6.1 To compare procurement,purchasing,and supply management6.2 To review procurement objectives6.3 To review supplier selection and evaluation approaches6.4 To review Kraljics Portfolio MatrixLearning Objectives(2 of
2、 2)6.5 To establish issues associated with global procurement 6.6 To identify social and environmental aspects of sustainable procurement6.7 To describe the concept of supply chain finance and how it can be used in procurement relationshipsProcurement(1 of 7)Refers to the raw materials,component par
3、ts,and supplies bought from outside organizations to support a companys operations Procurement costs often range between 60 and 80 percent of an organizations revenuesProcurement(2 of 7)Currently has a more strategic orientation in many organizations Procurement manager may have responsibility for:R
4、educing cycle timesPlaying an integral role in product developmentGenerating additional revenues through collaboration with the marketing department11John Hyatt,“The Rise and Rise of Procurement,”CFO 28,no.4(2012):5759.Procurement(3 of 7)“Procurement”and“purchasing”are sometimes viewed as synonymous
5、 terms Supply management is viewed as a relational exchange approach involving a limited number of suppliersProcurement(4 of 7)Electronic commerce continues to bring many changes to the procurement discipline including Electronic procuremento Procurement cards(p-cards)Reverse auctionsProcurement(5 o
6、f 7)Procurement cards(p-cards)Similar to Visa and MasterCard,but used for an organizations buying needs Number of authorized employees is limited Detailed statement is provided each monthCan implement control processes that:oMeasure usageoIdentify procurement trends oLimit spending during a procurem
7、ent cycleoBlock unauthorized expendituresProcurement(6 of 7)Benefits of procurement cards(p-cards)Reduction in the number of invoices Firm will make one payment each month regardless of the number of p-card holders Allows employees to make purchases in minutes versus days Generally allow suppliers t
8、o be paid in a more timely fashionProcurement(7 of 7)Challenges of procurement cards(expansion overseas)Currency differences Availability of technology Difference in card acceptance Cultural issues with the programProcurement Objectives Supporting organizational goals and objectives Managing the pur
9、chasing process effectively and efficiently Managing the supply base Developing strong relationships with other functional groups Supporting operational requirementsSupplier Selection and Evaluation(1 of 3)One of procurements most important responsibilities Involves stating an organizations needs an
10、d determining how well various potential suppliers can fulfill these needsFigure 6.1:Supplier Selection FrameworkSupplier Selection and Evaluation(2 of 3)Steps to supplier selection and evaluation1.Identify need for supply2.Perform situation analysis3.Identify and evaluate possible suppliers4.Select
11、 supplierso Single-source approacho Multiple-source approach5.Evaluate decisiono Process-based approacho Performance-based approachSupplier Selection and Evaluation(3 of 3)Evaluate decisionProcess-based approachoIs an assessment of the suppliers service and/or production process(supplier audit)Perfo
12、rmance-based approachoIs focused on the suppliers actual performance on a variety of criteria including cost and qualityoMany companies use supplier scorecards to report performance informationProcurement Portfolio Approach(1 of 4)Within the“situation analysis”step for supplier selection and evaluat
13、ion,procurement managers must be continually aware of the supply and demand characteristics of the:Raw materials Component parts Purchased suppliesProcurement Portfolio Approach(2 of 4)Kraljics Portfolio Matrix2 Used to classify corporate purchases in terms of their importance and supply complexity
14、Goal is to minimize supply vulnerability and getting the most out of the firms purchasing power2Peter Kraljic,“Purchasing Must Become Supply Management,”Harvard Business Review 61,no.5(1983):109117.Figure 6.2:Kralijic Portfolio MatrixSource:Peter Kraljic,“Purchasing Must Become Supply Management.”Ha
15、rvard Business Review 61,no.5(1983):109117.Procurement Portfolio Approach(3 of 4)Supplier development(reverse marketing)Refers to aggressive procurement involvement not typically part of supplier selection Can include:o Purchaser initiating contact with suppliero Purchaser establishing prices,terms
16、and conditions,and other behaviorsProcurement Portfolio Approach(4 of 4)Supplier development(reverse marketing)Motivation to adopt supplier development includes:o Numerous inefficiencies associated with suppliers initiating marketing efforts toward purchaserso Purchaser may be aware of important ben
17、efits which are unknown to the suppliero Compel suppliers to meet necessary requirements to achieve competitive advantage in the supply chainGlobal Procurement(Sourcing)(1 of 3)Refers to buying components and inputs anywhere in the world Driven by:Factor-input strategy(organization is seeking low-co
18、st or high-quality sources of supply)Market access strategy(organization is sourcing in markets where it plans to do significant business)Global Procurement(Sourcing)(2 of 3)Components of global sourcing development model:Planning Specification Evaluation Relationship management Transportation and h
19、olding costs Implementation Monitoring and improvingGlobal Procurement(Sourcing)(3 of 3)Challenges in establishing a successful global sourcing strategy include understanding hidden costs as supply bases are expanded Examples of hidden costs:Increased costs of dealing with suppliers outside the dome
20、stic market Duty and tariff changes that occur over supply agreement life Increased inventory-related costs associated with global supply chains Rising levels of logistics cost volatility(e.g.,ocean freight rates)Sustainable Procurement(1 of 7)Refers to the integration of social and environmental co
21、nsiderations into all stages of the purchasing process Goal is to minimize the impact of procurement activities on human health and the environmentSustainable Procurement(2 of 7)Social responsibility Socially responsible procurement consists of five dimensions:o Diversityo The environmento Human rig
22、htso Philanthropyo SafetySustainable Procurement(3 of 7)Social responsibility Ethical considerationso“Win-at-all-costs”philosophy can exacerbate unethical behaviorSustainable Procurement(4 of 7)Social responsibility Areas of ethical concern in procurement:o Gift giving and receivingo Bribes and kick
23、backso Misuse of informationo Improper methods of knowledge acquisitiono Lying or misrepresentation of the trutho Product quality(lack of)o Misuse of company assetso Conflicts of interestSustainable Procurement(5 of 7)Investment recovery Identifies opportunities to recover revenues or reduce costs a
24、ssociated with:o Scrap materialso Surplus materialso Obsolete materialso Waste materials Often the responsibility of the procurement managerSustainable Procurement(6 of 7)Investment recovery Can provide an organization the opportunity to simultaneously do well and do good in the sense that investmen
25、t recovery:o Increases a sellers revenues(reduces a sellers cost)o While addressing selected environmental considerationsSustainable Procurement(7 of 7)Investment recoveryEven the best-managed organizations generate:oExcess(surplus)Stock materials that exceed reasonable requirementsoObsolete Materia
26、ls not likely to ever be used againoScrap Materials that are no longer serviceable,have been discarded,or are a by-product of the production processoWaste Materials that have been spoiled,broken,or otherwise rendered unfit for further use or reclamation(have no economic value)Supply Chain Finance(1
27、of 2)Refers to a set of technology and financed-based processes that strives to optimize cash flow by:Allowing businesses to extend their payment terms to their suppliers While simultaneously allowing suppliers to get paid earlySupply Chain Finance(2 of 2)Transactions between buyers and sellers are
28、facilitated by financial technology firms(FinTech)FinTech companies use cloud-based software to optimize the connection between procurement and accounts payableKey Terms(1 of 2)Bribes Excess(surplus)materials FinTech Global procurement(sourcing)Investment recovery Kickbacks Kraljics Portfolio Matrix
29、 Multiple sourcing Near-sourcingObsolete materialsProcurementProcurement cards(p-cards)PurchasingKey Terms(2 of 2)Scrap materials Single sourcing Strategic sourcing Sustainable procurement Supplier audit Supplier development(reverse marketing)Supplier scorecards Supply chain finance Supply chain management Total cost of ownership(TCO)Waste materials
