Purchasing Research, Performance & Ethics

Slide 17.1

Definition and Importance

Definition of Purchasing Research
The systematic gathering, recording and analyzing of data about problems relating to the purchasing of goods and services.

Why It Is Important
Rapid changes in technology and economic circumstances Purchasing done in conditions of uncertainty EDP enables vast amounts of data to be stored Increased use of outsourcing Focus on partnering E-procurement facilitating real time ordering Purchasing growing in stature
Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics

Slide 17.2

Purchasing Performance Evaluation

Definition
Purchasing performance evaluation may be defined as the quantitative or qualitative assessment over a given time towards the achievement of corporate or operational goals and objectives relating to purchasing economics, efficiency and effectiveness.

Difficulties in Measuring 1. 2. 3. 4. Lack of definition e.g., efficiency Lack of formal objectives and performance standards Problems of accurate measurement Differences in the scope of organizational purchasing

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics

Slide 17.3

Purchasing Audits
Definition
A comprehensive, systematic, independent and periodic examination of a companys purchasing environment, objectives and tactics to identify problems and opportunities and facilitate the development of appropriate action plans.

Examples of Auditing Purchases, Suppliers and Prices

1. 2. 3. 4. 5. 6. 7. What are principal purchases? Who are principal suppliers? What attempts have been made to achieve single and partnership sourcing? How and by what criteria are supplies appraised? In what ways is value for money obtained? What environment purchasing policies are in existence? What savings have been achieved in the period under review?

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics Benchmarking Types of Benchmarking

INTERNAL BENCHMARKING A method comparing the performance of an operating unit or function within an organisation with those of a similar business within the same industry. FUNCTIONAL BENCHMARKING A method of comparing internal functions with those of the best external practitioners of those functions irrespective of the industry in which they are in (this may also be referred to as operational or genuine benchmarking). COMPETITIVE BENCHMARKING A method of comparing organisational performance against that of competing organisations.

Slide 17.4

STRATEGIC BENCHMARKING A method for evaluating alternatives, implementing strategies and improving performance by understanding and adapting successful organisations who may be competitors or partners.

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics Purchasing Ethics Concern for the well being of others Respect for the legitimate authority of others Honesty and trustworthiness

Slide 17.5

Compliance with the law (but with the right to express conscientious objection through civil disobedience)

Basic justice i.e., being fair Refusing to take unfair advantage

Benevolence i.e., doing good

Preventing harm
Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics Benefits of Ethical Codes

Slide 17.6

Provide a basis for working together Setting boundaries as to what constitutes ethical behaviour Provide a safe environment for all subscribers Provide a commonly held set of guidelines

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics

Slide 17.7

World Bank Purchasing Violations Contract irregularities and violations of the Banks procurement guidelines Bid rigging Collusion by bidders Fraudulent bids Fraud in contract performance Fraud in an audit enquiry Product substitution Defective pricing and parts Cost/labour discharging Bribery and acceptance of gratuities Solicitation and/or receipt of kickbacks Misuse of bank funds or positions Travel fraud Theft and embezzlement Gross waste of bank funds
Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Research, Performance & Ethics

Department of Environment has stated that:

Slide 17.8 Environmental Purchasing Policies

The procurement of supplies and equipment is a potent instrument of environmental policy. Careful purchasing of it gives full weight to environmental considerations in the selection of products and can help improve environmental standards by reducing pollution and waste. It can also, through the natural operation of the market, influence purchasers and suppliers in their pricing policies and product ranges.

Steps Required to Give Effect to the Above Objectives:

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 STEP 7 STEP 8 STEP 9 Prepare environmental policy Communicate the policy to stakeholders, employees and suppliers Prepare guidelines for employees and suppliers Appraise suppliers Incorporate environmental requirements into specifications Adopt life-cycle approaches Prepare guidelines for disposals Provide appropriate training Ensure regular audit of compliance with policy and guidelines

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005