SUPPLY CHAIN MANAGEMENT

PROCUREMENT MANAGEMENT

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 P U R C H A S I N G

The Strategic Role of Purchasing

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 Providing input in the form of goods or services

What is Procurement? are needed in the production activities or other

activities in the company

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 The Classification of Goods

Raw materials and

components for
production needs

Maintenance, Repair,
and Operating Supplies
(MRO) consist of
machine parts and
office stationery

Capital Equipment
consist of machine
and other long term
equipment

Procurement also provides

Transportation Consulting
Services Services
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The Development of Procurement

Expert Opinion United States of

Procurement activity is a America
strategic activity.
One of the association
Eficiency and value
procurement in USA is
creation is not only in
National Association of
production section but
Purchasing Management
also in procurement
( NAPM).
section.

1974 1980 2007 2001 2004

Amer (Harvard Business Carter and Friends Europe
Review (HBR))
The company leadership Procurement related with The changing of
believes that the supplier and how to make Federation named
procurement has a an innovation especially International Federation
passive role in the in product and service in of Purchasing and
business a company. Material Management
(IFPMM) became
Federation of Purchasing
and Supply Management
(IFPSM)

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 ACTIVITIES RELATED SUPPLY MANAGEMENT

Design strategic relationships with suppliers

Selecting appropriate suppliers

Chose and implement appropriate technology to

support procurement activities

Simple Portfolio Maintain procurement related data bases,

Managing purchasing activities , and Evaluating
Presentation supplier performance

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 P U R C H A S I N G

The Purchasing Process

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 THE PROCESS OF PURCHASING
Follow up,
Expediting,
Receipt,
Recognition of Description of Supplier Inspection,
Identification and Preparation and Issuance
Needs The Need Selection Invoice, Order
Study of Available Suppliers of the Purchase Order Close

All of the instructions above are steps in

Bidding Process

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 General Steps of Routine Purchase
Purchasing
Supplier Warehouse User Finance
Section
Create PR /
Create POs and MR and send to
send to the purchasing
suppliers. Send department
copy to
Send warehouse,
confirmation user, and
whether the finance.
order is
fulfilled. If Monitor and
possible, send expedite
as agreed. shipments if
necessary.

Receive items Notes :

and inspect PR/MR =Purchase Requisition / Material Requisition
with the PO =Purchase Order
quality.
Make a
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payment
The Procurement Process is a Cross Functional Process
Manager /
leader
approval User makes a
The user
procurement
creates PR proposal

Procurement User needs

creates PO
goods

Supplier Integrated Process between

gives elements
confirmation

Supplier
sends Goods
Warehouse F & A do the
receives Warehouse payment
goods enters the item
data

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P U R C H A S I N G

Supplier Selection

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 Supplier Selection

Repair Services

Quality Price These are some criterias

of supplier selection.
Criteria Packaging
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Based on Dickson 1966, Quality
Delivery
Criteria Score
3.5
3.4
There are 22 criterions that identified by Dickson. The tables will be show some informations.
Performance history 3.0
The number in the second column shows the level of importance of each criterion based on a collection of answers
from the survey responded by 170 purchasing managers in the United States. Respondents were asked to choose a Warranties and claim policies 2.8
number from 0 - 4 on a Likert scale, 4 means it is very important.
Price 2.8
Technical capability 2.8
Financial position 2.5
Prosedural compliance 2.5
Communication system 2.5
Reputation and position in industry 2.4
Desire for business 2.4
Management and organization 2.3
Operating controls 2.2
Repair service 2.2
Attitudes 2.1
Impression 2.1
Packaging ability 2.0
Labor relations records 2.0
Geographical location 1.9
Amount of past business 1.6
So, the table shows that the average respondent sees quality as the most important aspect in Training aids 1.5
choosing a supplier. The price turned out to only rank number 5 and had a score that was
Reciprocal arrangements 0.6
significantly lower than the quality and delivery aspects
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 KODAK
CORPORATION
Each company must decide their own
criterions that will be used in supplier
selection. Ten years ago Kodak
Corporation redesigned the procurement
system for global operations. Kodak is a
company engaged in innovative
industries, so they choose suppliers who
have the ability to support innovation
strategies. These are the criterions that
Kodak wanted from the supplier :

Technical Support Cycle Time

Innovative Ideas

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T E C H N I Q U E

Supplier Selection

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 Technique for Supplier Selection

01 Decide the Criteria of

Supplier Selection

Evaluate Each Alternative

Determine the weight of each 04
criterion
02 Criterion

Analytical Hierarchy
Process (AHP)

Identified the Alternative Calculate the Weight of Each

03 Supplier that will be Supplier
05
evaluated

Sort Supplier Based on

06 Weight Value
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 CASE STUDY
The WHS company is an HS type motorcycle assembler company. The company will
be expand in a Java Province. Every 2-3 years the company changes the model. This
year the model change made is the change in the design of the headlamps needed.
Then, the criterions required in the AHP are carried out.

Supplier
Selection
Contents Title

Delivered
Inovation Time Quality Communication Finance

Technology Distance Certification Infrastructure Offering

R&D Team Capacity Practice Manager Potencial

History Consumer Response

Contents Title

Supplier 1 Supplier 2 Supplier 3

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 Calculation Steps
Criterions Q P D

Quality (Q) 1 2 5

Price (P) 1/2 1 4

Delivery (D) 1/5 1/4 1

KRITERIA Q P D Bobot

Quality (Q) 0.59 0.62 0.50 (0.59+0.62+0.50)/3 = 0.57

Price (P) 0.29 0.31 0.40 (0.29+0.31+0.40)/3 = 0.33

Delivery (D) 0.12 0.08 0.10 (0.12+0.08+0.10)/3 = 0.10

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 Calculation Steps
01
After the weights of each
criterion are obtained,
pairwise comparisons are
made to provide an
assessment of each vendor
on each criterion.
03
02
The assessment is carried
out using the same scale as
Assessment is done by the weight determination
asking questions, for
example:
For the quality aspect, how
good is supplier 1 compared
to supplier 2?
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Calculation Steps

Quality Criterion

SUPPLIER S1 S2 S3

S1 1 3 7

S2 1/3 1 3

S3 1/5 1/3 1

S1 S2 S3 Nilai
S1 0,652 0,692 0,636 0,66
S2 0,217 0,231 0,273 0,24
S3 0,130 0,077 0,091 0,10
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Calculation Steps

Price Criterion
S1 S2 S3
S1 1 1/2 1/4
S2 2 1 1/3
S3 4 3 1

S1 S2 S3 Nilai
S1 0,143 0,111 0,158 0,14
S2 0,286 0,222 0,211 0,24
S3 0,571 0,667 0,632 0,62

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Calculation Steps

Delivery Criterion

S1 S2 S3
S1 1 1/3 1/4
S2 3 1 1/2
S3 4 2 1
S1 S2 S3 Nilai
S1 0,125 0,100 0,143 0,37
S2 0,375 0,300 0,286 0,96
S3 0,500 0,600 0,571 1,67

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 Aggregate Value

Final Result The aggregate value of

each supplier is
Quality (0.57) Price (0.33) Delivery (0.10) calculated by adding up
S1 0,66 0,14 0,12 0,43 the multiplication results
S2 0,24 0,24 0,32 0,25 between weights and
S3 0,10 0,62 0,56 0,32 values ​for each criterion.

SUPPLIER 1
THE BEST SUPPLIER BASED
O N F I N A L R E S U LT.
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 Portfolio of Supplier
Relationships
Bottleneck suppliers Critical strategic suppliers
High • Difficult to find substitution • Important
Commodity •
•
Monopoly Market
New suppliers find it difficult
• Difficult in Substitution

Portofolio Level of
Difficulty
to enter

Non-critical suppliers Leverage suppliers

Matrix •
•
Availability enough
Standardize Items
•
•
Enough Availability
Possibility Substitution
Low • Possibility in Substitution • Standard Spesification
• Low Value • High Value
Rendah Tingkat kepentingan Tinggi

Low Level of High

Importance
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 Portfolio of Supplier
Relationships

Bottleneck suppliers Critical strategic

High Simplification / suppliers

Focus of Standardization of Items Strategic partnership,

Competitive Strategic

Management Level of
Difficulty
Non-critical suppliers Leverage suppliers
Process Simplification, Bargaining Power with
Price Consumer
Low

Low Level of Importance High

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 P R O C U R E M E N T

E - PROCUREMENT

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 ELECTRONIC PROCUREMENT

Portfolio Presentation
You can simply impress your audience and add a unique zing and appeal to your Presentations.
I hope and I believe that this Template will your Time, Money and Reputation.

Allow you to select a supplier in an Allow you to make a sole purchase of
open environment or an exclusive
your required products/materials, or make
supplier in a closed environment
a joint-purchase with other buyer
members.
Allow you to set up a reorder point in
Allow you to purchase a product or
relation with a level of inventory. The
material by way of bargaining, biding or
system can then automatically issue a
fixed-pricing.
purchase order for you.

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AN APPLICATION EXAMPLE
Moai Quick Start:
Negotiation Capabilities: Globalization Features:
• Multi-line bidding
• Foreign language
• Multi stage bidding support
• Weighted scoring
• Multi currency
• Document management
conversion
eRFQ Capabilities:
• Localized time zone
• RFQ, RFP
• Supplier management
• Approval workflow
• Countdown timer
• Reporting & graphical tool

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 SUPPLY CONTRACT

CONTRACT  Specifies parameters for buyer supplier relationships.

It includes terms on:

Specification Quantity Price Quality Time

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Buyback Contract

• Allows a retailer to return unsold inventory up to a specified amount at an

agreed upon price
• Increases the optimal order quantity for the retailer, resulting in higher
product availability and higher profits for both the retailer and the supplier
• Most effective for products with low variable cost, such as music, software,
books, magazines, and newspapers
• Downside is that buyback contract results in surplus inventory that must be
disposed of, which increases supply chain costs
• Can also increase information distortion through the supply chain because
the supply chain reacts to retail orders, not actual customer demand

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