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Issues to be addressed
Every organisation engaged in procuring goods & services faces certain important questions:
Did the organisation fetch a good price for the procurement? Are the suppliers reliable? Will they deliver good quality at the right time? How efficient is the procurement process? How can an organisation benefit from its suppliers? Should the organisation develop new sources?
Purchasing & Supply Management is a structured set of planning methodologies that enables organisations to answer the above questions
Changing Cost Structure Quick Response requirements Need to create Lean organisations Importance of New Product Development
Components of Expenditure
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Procurement Process
Steps
Need Identification
Receive purchase request Estimate the order size Finalise the specifications
Vendor Selection
Search for Vendors RFP/RFQ Negotiations
Order Placement
Price Fixation Delivery & payment terms Purchase order generation
Order Acceptance
Inward goods inspection Acceptance/Rejection Updating stocks in stores
Order Receipt
Follow-up with vendor Receipt of material as per specifications
Supply Management
Alternative Approaches
Multiple Sourcing (Traditional)
Dealing with multiple suppliers every time an item is procured and obtaining some gains from the competitive scenario that a supplier faces in the process
Single Sourcing
Developing long term collaborative relationship based on mutual trust and dependability to obtain lower prices and several other benefits that were missed out in a multiple sourcing model
Multiple Sourcing
Avoid engaging in any conflicts with the supplier Engage in joint cost reduction exercises to obtain low cost inputs Exchange relevant business information; Obtain better business gains
Single Sourcing
Suppliers informed of future business prospects; Capacity and Technology investments on account of certainty Benefit from cooperation, mutual trust, & dependability
Incoming materials transportation Telephone, Telex, Telegram etc. Purchase department salaries Incoming quality control stores salaries Incoming material inspection Receiving stores salaries Stationary charges in purchase dept. Travels and visits to supplier works Materials planning & control dept. salaries Insurance charges for incoming material Other costs and depreciation Total expenses for the year
Ranbaxy Laboratories
Recent initiatives
Experiments with Associated Capsules
Sharing of data, process improvements, extensive training, technical support
Supplier of printed aluminium foils with multiple joints - solved quality (sealing) problems Quality problems (black particles) in sugar
Cast iron pipes in sugar plant changed after detailed study, loan provided
Third vendor meet (1995) - name changed to Partners meet, Vendor Awards instituted
E- Procurement
Three emerging forms
E-Procurement denotes the set of strategies a purchase manager could employ to identify appropriate sources of supply, finalise the terms of the trade and place the order, all electronically
Launching several pilot projects in the next 2 years will be a valuable exercise for organisations