Supply Management

In group activity, what are the 3 principal factors determining level of performance
1. The capabilities of the individuals
2. The motivation of the individuals
3. The organizational structure within which the individuals
The importance of supply mgmt in any firm is determined largely by 4 factors
1. Availability of materials and services
2. Absolute dollar volume of purchases
3. Percent of product cost represented by materials and services
4. Types of materials and services purchased
The six classifications of work in a purchasing operation are:
1. Management
2. Buying/supply mgmt
3. Contract and relationship mgmt
4. Strategic planning and research work
5. Follow-up and expediting
6. Clerical activities
Operational strategies: small firms
Handled by a purchasing or supply manager and one or two assistants; each may have varying responsibilities
Operational strategies: Large firms
Dept may have 100-300 purchasing and supply professionals; extremely large companies may have 1,000 or more buyers.
Operational (tactical) activities
These tasks are required to accomplish an uninterrupted flow of materials and services.
Strategic activities
Profit generating activities (opposite of operational)
Operational responsibilities
1. Placement of purchase orders
2. Managing contract and blanket order releases
3. Expediting inbound orders
4. Maintaining continuity of supply to production lines
5. Managing supplier relationships
6. Transactionally focused activities
Strategic responsibilities
1. Supplier development responsibilities
2. Coordinating the procurement systems
3. Developing long-term contracts
4. Developing and integrating supply strategy
5. Managing risks in supply chain
6. Strategically focused activities
Centralized authority
A single person makes decisions
Hybrid structure
One that includes both centralized and decentralized decision making
Decentralization of purchasing authority
Personnel from other functional areas such as production, engineering, operations, marketing, finance, etc. make unilateral decisions/negotiate with suppliers.
Benefits of centralized purchasing:
1. Reduction of potential duplication of effort
2. Leveraging of volume purchases
3. Consolidation
4. Transportation savings
5. Allowance of specialization
6. Reduction of suppliers’ costs
7. Improved inventory control
8. Lower administrative costs
9. Centralized control
10. Reduction in the costs of services
EDI (Electronic Data interchange) was early stage. e-commerce has been a catalyst, enabling organizations to benefit from the hybrid supply management structure.
Materials mgmt (evolved in 60’s)
An integrated systems approach to the coordination of materials activities and the control of total material costs. Purchasing, planning, scheduling, transportation and warehousing functions fell under materials manager. (solely)
Supply chain mgmt (80’s & 90’s)
Encompasses the planning and mgmt of all activities involved in forecasting, sourcing, and procurement and all incoming logistics mgmt activities.

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