PROCUREMENT AND SUPPLY MANAGEMENT

Inbound-to-Operations Logistics Systems

These systems refer to the set of processes that precede and facilitate value-adding activities such as manufacturing, assembly, and so on. This topic also is of historical interest in the study of the supply chain and includes materials management and physical supply.

Materials Management

Definition - Materials management is the planning and control of the flow of materials that are part of the inbound logistics system.

Materials Management Functions

Procurement Total cost of ownership, right time, @ the

right place

Make or Buy What to buy from whom Material Planning Product line specific planning, Facility
Location, Network Design

Inventory Management How much to stock and where,

Trigger Points, Replenishments

Stores and Warehousing Storage Layout, Order

Processing, Receiving, Break Bulk, Pick Pack, What to stock and where

Materials Handling How to move product, Packaging,

Containerization

Major Concepts of Procurement

Horizontal Integrated Perspective Total Cost of Ownership (TCO)

Acquisition

Costs Ownership Costs Post-Ownership Costs

Improved Skills

Major Concepts of Procurement

Use of Innovative Tools

Linear

Performance Pricing Partnership Performance Contracts Lean Production Diagnostics Electronic Market Making & Online Bidding

Information & Insight

Procurement Cycle

Steps in the Procurement Cycle

Purchasing

receives the requisition Purchasing selects a supplier Purchasing places the order with a vendor Orders are monitored Orders are received

Supplier Selection

Vendor Selection Criteria

Quality
Reliability Capability

Financial
Vendor

Location

Electronic Procurement

Business-to business (B2B) purchases are estimated to be $1.3 to $2.0 trillion. Former uses of electronic data interchange (EDI) were costly and required special technology to implement have given way to the publicly available Internet. This has opened the door to increased applications of E-commerce techniques to procurement.

Electronic Procurement

Common uses of E-commerce

Research

vendor and product information Electronic check of available stock Price negotiation Order products or services Check on the status of an order Issue invoice and receive payment

Four Basic Types of E-commerce Models

Sell-side system
Administered

by the seller Usually free to the buyer

Electronic marketplace
Administered

by a third party Collection of electronic catalogs One-stop sourcing for buyers

Types of E-commerce Models

Buy-side system
Administered

by the buyer Pre-approves vendor access Expensive and usually the domain of large companies

On-line trading community

Maintained

by a third party Used by multiple buyers and sellers

Advantages of Electronic Procurement

Lower Operating Costs

Reduce

Paper Work Reduce Sourcing Time Improve control over inventory and spending

Improve Procurement Efficiency

Find

new supply sources Improve Communications Improve Personnel Use Lower Cycle Times

Advantages of Electronic Procurement

Reduce Procurement Prices

Improve

Comparison Shopping Reduce Overall Prices Paid

Disadvantages of Electronic Procurement

Security

of electronic messages Lack of face-to-face contact Other technological concerns

Standard

protocols System reliability