Category Supply Chain Management

Purchasing and Supply Management Introduction

May 30, 2007 0 comments

This category is devoted to my work at Marvin Engineering within 9 months contract. I wrote this material as I researched the scope and nature of supply chain management. If you are trying to pursue a career in this industry or just an IT person who happens to have a project, I hope this material will help you to get an understanding of the principles of purchasing and supply management and their application within various types of organizations and operating environments, to examine the relationship between purchasing and supply and other functions, and to consider relevant procedures, methods and techniques.

I will touch basics on the following topics:

  • the management issues involved in purchasing and supply functions in an organization;
  • the use of IT in P & S, the hierarchical structures necessary in organizations for the efficient management of P & S and logistics;
  • the source of a purchasing officer’s authority, the selection, quality and negotiation; and legal aspects of dealing with suppliers and the use of accurate recording systems;
  • the use of different types of contract;
  • the factors involved in controlling stock and logistics in a modern organization;
  • the ethics expected of modern professional business people.

There are several sub-categories to be discussed:

Objectives and Organization

The scope and objectives of purchasing, control of stock and inventory, and management of storage and distribution facilities within the organization. The impact of each organizational efficiency and profitability. Budgets. The relationship with other functions. Applications of information technology (IT) to purchasing and supply. Organizational structures and approaches in various environments (eg manufacturing, retailing), including Materials Management, Logistics and Physical Distribution Management concepts.

Purchasing Procedures

Origin of need and authority to purchase. Determination and control of quality and quantity. Supply sourcing, supplier evaluation and vendor rating, overseas sourcing (benefits and problems). Make or buy. Inquiry procedures. Tenders and quotations. Determination of prices, including commodity prices. Evaluation of offers. Negotiation of contracts and orders. Terms and conditions of purchase and sale. Placing the contract. Issuing the order. Acknowledgement of order. Cancellation. Expediting. Receipt, inspection and rejection of supplies. Invoice certification. Control of costs. Disposal of surplus and scrap materials. Purchasing Manuals. Records.

Purchasing Methods

Types of contract. Uses and limitations of competition and negotiation. Single and multiple sourcing. Competitive tenders and quotations. Comparative analysis of buying, hiring and leasing. Sources of information. Factors and criteria affecting choice of supplier.

Control of Stock and Inventory

Factors involved in determining stock levels. Stock and inventory control. Methods and mechanics of control: eg statistical, Just-in-Time (JIT) and Materials Requirements Planning (MRP 1) approaches and their applicability to various operating environments. Identification systems. Standardization, rationalization and variety reduction. Stock checking. Records and accounts.

Logistics, Storage and Distribution

Buildings and site layout. Storage and handling equipment. Packaging, containers, pallets. Locating, picking and dispatching supplies. Distribution by road, rail and air. Control and storage and distribution costs. Control of surplus, redundant and obsolete items and scrap. Security and safety aspects.

Professional Behavior

Relationships between the purchasing and supply function and its suppliers and users. The commercial, legal and organizational implications of professional behaviour. The ethical code of the Institute of Purchasing and Supply. Other codes of conduct.

Posted by Lisa
Categories: Supply Chain Management

Purchasing scope & objectives

May 30, 2007 0 comments

Development of purchasing and supply

See fig.

World class concepts

  • Supplier analysis
  • Single supplier
  • Partnership

Advancing technology

  • Computers
  • Spreadsheets
  • MRP2
  • EPOS
  • EDI

Government and policies

Compulsory competitive tendering (CCT)

Factors leading to the greater recognition of purchasing:

here will the the schema when this service becomes available

Purchasing scope & objectives

Finite resources

  • careful planning is essential

Fewer but larger suppliers

  • Iron & steel industry virtually annihilated
  • Chemical industry in the hands of a few vast conglomerates
  • Pharmaceuticals - same story
  • Car manufacturing is a global business

Increasing environmental awareness

  • waste disposal
  • re-cyclable components
  • returnable containers
  • concern for the planet

Development of purchasing and supply

  • Barter
  • Development of Currency
  • Banking
  • Rise of literacy
  • Improvements in communication
  • Letter, telegraph, telephone, telex, fax, EDI, e-mail
  • Pack-pony, horse & cart, train, lorry, artic, RDC

Purchasing scope objectives

Control of stock and inventory

Facts a buyer should know:

1. What material is required? (specification, design)

2. What quantity? (Production control, Purchasing manager)

3. When is it required? (Production control, Purchasing manager)

4. What quality is required? (Senior management, quality manager, program manager)

Inventory control

Control of stocks:

  • Raw materials (RM) + bought out parts (BOP's) & fuel
  • Work in progress (WIP)
  • Finished goods (FG)

Management of storage within the organization


  • Long term
  • Short term
  • Capacity v demand?
  • Time in storage?

Management of storage


  • Multi-national
  • National
  • Small and medium enterprises

Distribution facilities within the organization I.e.

Physical areas:

  • Incoming goods
  • Buffer stocks
  • Finished goods stores

Materials management

Control methods

  • Material Requirements Planning (MRP)
  • Manufacturing Resources Planning (MRP2)
  • OPT
  • Just-in-Time (jit)


schema becomes available when service avaliable

Supply Chain

schema becomes available when service avaliable

Posted by Lisa
Categories: Supply Chain Management

Application of IT

May 30, 2007 0 comments

Development of purchasing systems

1. Infant

  • simple clerical system

2. Awakening

  • improved manual systems - Cardex
  • beginnings of computer system but no integration

3. Developing

  • more integrated systems
  • Material Requirements Planning (MRP)
  • computer linking and networking

4. Mature

  • fully integrated organizational database
  • Manufacturing Resource Planning (MRP II)
  • all purchasing information generated by computer

5. Avanced

  • electronic data interchange (EDI) between major suppliers and customers with resultant benefits

Integrated databases give the following advantages:

  • logistics
  • TQM
  • flexible manufacturing
  • automation
  • JIT
  • reduced strategic acquisition costs

Integrated databases give purchasing department real time information on;

  • orders placed/outstanding
  • turnover by supplier
  • stock position
  • accounts outstanding
  • production/customer requirements
  • vendor rating - delivery & quality
  • new developments/projects

Electronic Data Interchange

EDI is the Transfer of data from one computer to another by electronic means using agreed standards

Types of data Transferred:

1. Trade Data

  • Quotations, Purchase Orders, Achnowledgement Notes, Delivery Instructions etc.

2. Technical Data

  • Specifications

3. Query/Response

  • Travel Agent
  • Booking Agent
  • Process Checking by Customer

4. Monetary Data

  • Invoice Payment Systems, Electronic Funds Transfer at point of sale (EFTPOS) - SWITCH



  • Open 24 hrs
  • Short delivery
  • Better prices?


  • Bankruptcy
  • Credit card security
  • hacking

Posted by Lisa
Categories: Supply Chain Management