Lecture 1

Purchasing & Materials Management

Course Introduction
Keith B. Carter
1
 INTRODUCTION
About Keith B. Carter Corporate Measurement Family
http://www.keithbcarter.com
Student Exchange to Russia
Mandarin
New YorkChange Management
KPMG
Poetry Copyrighted
NUS
Ches
s Church
Electrical and Computer Systems Engineering Director, Purchasing

Blue-sky Thinker Entrepreneur Business Process Re-engineering

Speaker
Script-writing Ping Pong Rensselaer Polytechnic Estee Lauder
Institute Goldman Sachs
Accenture
Replaced Fax with eCommerce
Supply Chain Intelligence Play Saxophone
Board member Taught Poetry Club Singapore
Website Design
Snowboarding
Delivered $89 million in savings
Corporate Compliance Spanish
Love To Love To Shop
Travel
Love To Eat Cornell MBA
Supply Chain Strategy
Supply Chain Excellence
Certified Counter Terrorism Practitioner Play Bass Guitar ,

 Purchasing Needs To Balance
Purchasing In the Balance

 Job Description of a
Procurement Officer

Evaluation and
Recommendations to help
company meet business
needs

Optimize companys
resource utilization
through more efficient
procurements
With Negotiations
With Better Vendor
Selections

 Video: Intro to Procurement

 P&MM Course Overview

Whats This Course About?

Purchasing & Materials Management Concepts
Supply Chain Strategy
Suppliers Management
Inventory Planning (forecasting)
Procurement Innovation
Negotiations
Where We Are?, Where To Play?, How To Win?, Did We Succeed?
Classroom = Corporate Meeting, Participation Required
Provide at least one statement/question per class
Contribute to each group activity.
Negotiation Activity

 P&MM Goals/Benefits

Enable students to understand the principles, strategy, and

GOAL tactics of Purchasing and Materials Management

WHY? HOW? BENEFITS?

Deliver Procurement Action plan: Enable You To Deliver

and supply chain Procurement Excellence
practitioners
GOAL:and 1. Understand principles Lower Total Delivered
leaders into the
Costs
market place 2. Learn best-practices
3. Develop business cases Execute purchasing
based on learnings and
analysis Understand the role in
context of the organization

 Outline
Course Overview
Introduction to P&MM
Scope of Purchasing & Supply
Purchase Requirements
Business Intelligence Tool

 Assessment

Individual Assignments 20%

Group Assignments 20%
Midterm 30%
Final Group Project 30%

 Resources
Book: Purchasing and supply chain
management 9/e, by Lysons & Farrington
ISBN:
https://www.cips.org/book-shop/Books/Boo
ks1/Purchasing-and-Supply-Chain-Managem
ent-9th-Ed/

OPTIONAL Book: Actionable Intelligence:

A Guide to Delivering Business Results
with Big Data Fast! By Keith Carter.
http://www.wiley.com/WileyCDA/WileyTitl
e/productCd-1118915232.html
ISBN:978-1-118-91523-3

 Logistics

IVLE: Lecture notes and examples are there

Groups
- 4-5 students per group
- Sign-up on IVLE
- Selected by Lecture 3

Assignments due dates will be announced.

 What is Purchasing?

Definition of Procurement

Procurement is the process of acquiring goods, works and services,

covering both acquisition from third parties and from in-house providers.
The process spans the whole life cycle from identification of needs,
through to the end of the useful life of an asset. It involves options
appraisal and the critical make or buy decision.

Objective of Purchasing

To buy materials of the right quality, in the right quantity from the right
source delivered to the right place at the right time at the right price.

 What is Materials Management?

Materials Management

Is concerned with the flow of materials to and from production or manufacturing.

Is the planning, organization and control of all aspects of inventory embracing

procurement, warehousing, work in progress and distribution of finished goods.

How do we compare?

Inventory Transportation Cost of service Customer Service

 Video: Real Procurement

 Your First Negotiation

Count off 1,2 and remember your number

1s will be seller, come up when called

2s will be buyer, come up when called

Take 10 minutes to read and prepare

Wait for further instructions... 15

 Negotiate!

You may begin, you have 15 minutes.

The buyers tour bus leaves promptly.

When negotiation, talk VERY quietly till all

are done.

16

 Individual Assignment 1
(See Guidelines on IVLE)
Introduction Slide
Create introduction slide, similar to my slide with Big and
Small words:
Whats important to you?
What do you like to do?
What website do you like?

Example is on IVLE, please submit via IVLE

Deadline: Noon, Monday, 16 Jan 2017

Contact Information

Lecturer: Keith B. Carter

Email: keithcarter@nus.edu.sg

18

 And One More Thing Future

of Procurement

Cloud to Procurement
improve partner Functions
collaboration in Augmented by
the supply Artificial
chain Intelligence

19

 Additional Reading

20

 What is supply
Logistics and Supply chainsChain?

A supply chain is that network of organisations that are involved,

through upstream and downstream linkages, in the different processes
and activities that produce value in the form of products and services
in the hands of the ultimate customer or consumer.

Supply chain processes from a purchasing perspective

Search Acquire Use Maintain Dispose

Supply chain processes from a suppliers perspective

Manufacture
Research Design Sell Service
or provide

 Three Flows of Supply Chain

Goods
Cash

Warehouse/Packaging
Information
Retail
Forecasting Decisions
Stock Deployment Decisions
Purchasing Decisions
Manufacturing Decisions
New Product Introduction
Decisions

Suppliers Customers

 The Scope of Purchasing & Supply

Specifying requirements
Analysing supply markets
Developing Purchasing & Supply strategies & plans
Appraising & short-listing potential suppliers
Obtaining & selecting offers
Negotiating & contracting
Managing supplier relationships
Managing inbound logistics
Managing Purchasing & Supply performance

 Specifying Requirements

Types of requirements:
Capital requirements

Goods for sale

Production requirements:
Bill of Materials (BOM)

Correctly specifying the requirements is the starting point to

obtaining value for money & avoiding misunderstanding
with suppliers

 Specifying Requirements

The Rights of Purchasing & Supply

1. Buy materials of the right quality

2. In the right quantity

3. From right source
4. At the right time
5. At the right place
6. At the right price

 Right quality
Design, size & colour
Functionality & ease of use
Performance & reliability
Flexibility
Conditions of use
Safety requirements
Packaging & labelling
Standards (ISO)
Testing & performance specifications

 Right quantity, time & place

For independent demand items:

Demand forecasts

Established inventory reorder levels or periods

Methods used for setting order quantities: EOQ

For push-based dependent demand systems:

MRP or ERP system

For pull JIT systems:

Kanbans

 Purchase orders must take account of

supply lead times

Consider the difference between order

quantity & delivery quantity

Specify where the goods or services are

to be delivered and how these should be
delivered

 Right price

Right price rather than lowest price

Total cost of acquisition (TCA): price plus the full cost of

getting the goods/services to the point of use

Total cost of ownership (TCO): TCA plus all other costs of

owning, using & disposal of the goods.

Specifying the price or TCA / TCO will be used as an

internal benchmark against which suppliers offers will be
assessed

 Right source
Right support service:
Complying with governmental & customs regulations
Financing support, or special payment terms
Documentation & information
Training, coaching & technical support
IT support

Right supply chain:

Without the right supply chain the other rights may not be
attained
Determining capabilities & motivations in upstream
suppliers & supply chains to secure the required goods &
services over time