Chapter 1:

Introduction to Purchasing
and Supply Chain
Management
Purchasing and Supply Chain Management
South-Western Cengage Learning

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Agenda

• A new competitive business environment

• Why purchasing is important
• Understanding the language of purchasing and
supply chain management
• Achieving purchasing and supply chain benefits

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Tutorial 1
A new competitive business
environment
• Increasing numbers of world class global competitors
• Sophisticated customer base
• More performance at lower cost
• Widely available information sources
• Balance of power between buyers and suppliers
• Greater levels of outsourcing

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Factors Driving SCM

• Low cost and wide availability of information

• More closely linked members of a supply chain
• Higher levels of competition in domestic and international markets
• Requires greater quickness, agility, and flexibility
• Customer expectations and requirements
• Constantly changing and more demanding
• Ability of an organization’s supply chain to identify and mitigate risk
• Minimize disruptions
• Competition is now between supply chains, not just between companies

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Why is purchasing important?

• Increasing value and savings

• Building relationships and driving innovation
• Improving quality and reputation
• Reducing time-to-market
• Managing supplier risk
• Generating economic impact
• Contributing to competitive advantage

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Purchasing
• A functional group (i.e., a formal entity on the organization chart) as well as
a functional activity (i.e., buying goods and services)
• a.k.a. as procurement
• Activities
• Supplier identification and selection
• Buying
• Negotiation
• Contracting
• Supply market research
• Supplier measurement and improvement
• Purchasing systems development

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#vids

https://www.youtube.com/watch?v=URvWSsAgtJE

https://www.youtube.com/watch?v=Mi1QBxVjZAw
Definition
• Supply management:
• A strategic approach to planning for and acquiring the
organization’s current and future needs through effectively
managing the supply base, utilizing a process orientation in
conjunction with cross-functional teams to achieve the
organizational mission

• Supply chain:
• Set of 3 or more organizations linked directly by 1 or more of
upstream or downstream flows of products, services, finances,
and information from a source to a customer
• Subset of the value chain

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Definitions (cont.)

• Supply chain management

• Endorses a supply chain orientation and involves
proactive management of two-way movement and
coordination of goods, services, information, and
funds from raw material through end user

• Value chain
• Primary and secondary support activities that can
lead to competitive advantage

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Value Chain
Enablers of Purchasing and SCM

1. Capable human resources: professionals need to...

a. view the supply chain holistically
b. manage relationships
c. analyze competitive markets
d. decision making
e. cost management
f. analyze big data
g. understand e-business systems
Enablers of Purchasing and SCM

2. Proper organizational design

a. centrally-led supply teams
b. co-location of supply personnel with internal
customers
c. cross functional teams
d. supply strategy coordination and review sessions
between business units
Enablers of Purchasing and SCM

3. Real-time collaborative technology

capabilities：Cloud-based systems should support
them to perform:
a. demand planning
b. order commitment, scheduling, and production
planning
c. distribution and transportation scheduling
d. materials replenishment
e. reverse auctions
f. intranets
Enablers of Purchasing and SCM

4. Right measures and measurement systems:

a. use data from visible sources
b. quantify what creates value
c. use goals that change over time
d. rely on benchmarking to establish performance
targets
e. link to business goals
f. assign accountability