The Rennes School of

Business

SC 411
Green Purchasing

Presented by: Dr. Tom McNAMARA

tom.mcnamara@rennes-sb.com
 Course Objectives
 Provide students with a sound
conceptual understanding of Green
Purchasing
• Emphasis on the strategic, tactical
and operational level across all
elements of Green Purchasing
 Ability to apply Green Purchasing
knowledge and skills to any business
department.
 Interact effectively with the various
functional areas of the firm.
 Course Methods
 Lecture Presentation
 Case study: Written & Video
 Case study presentations
 Simulation
 Problems and exercises
 Homework
 Group project (to be discussed)
 Optional Study Sessions (TBA)*
BA: To Be Announced
 Course assessment
 Group project written case: 40%
 Final exam: 60%

 Written reports are due during the 8th

session*

*We will review the requirements

 Additional Information can be
found on the school’s e-learning
platform
 To contact me:
 Room: 303

Office hours (virtual):

Wednesday 10h00 – 12h00

 tom.mcnamara@rennes-sb.com
 Additional Information:

Please make sure

that you are in
the correct
Group!
Any Questions?
 SC 411E

Green Purchasing

Session 1
Introduction to Purchasing
Presented by: Dr. Tom McNAMARA

tom.mcnamara@rennes-sb.com
 Just what is Purchasing?

Please watch this short video

 Some thoughts about the video:
 We normally use the words “Purchasing”,
“Procurement” and “Sourcing”
interchangeably
 Purchasing is usually divided into different
categories (e.g. by products, sectors,
markets, services, etc.)
 Purchasing is usually team based
 Purchasing usually works across departments
& functions
 The different terms we use:
 “Purchasing”, “Procurement” and “Sourcing”
• There is a difference
 The different terms we use…
 Procurement: Involves the process of
selecting vendors, establishing payment
terms, strategic vetting, selection, the
negotiation of contracts and actual
purchasing of goods.
• Procurement is concerned with acquiring
(procuring) all of the goods, services and work
that is vital to an organization.
 The different terms we use…
 Purchasing: A subset of procurement. It
generally refers simply to buying goods or
services, and often includes receiving and
payment as well.
 The different terms we use…
 Sourcing (Strategic): refers to activities
performed by procurement staff in locating
satisfactory and economic sources of supply
of goods and services.
• Sourcing decisions involves determining whether
to purchase a good or service from outside
organisation or to source it internally (make or
buy decisions).
 Why is
Purchasing
important?
 Purchasing
 A critical activity
• Provides a company with needed inputs
• Identifies key partners / suppliers
 A huge cost centre
• In the manufacturing sector the percentage of
purchases to sales averages 55%.
• This means that for every dollar of revenue
collected on sales, more than half goes back to
suppliers.
 A major area for cost savings.
• The “old” way – demand lower prices
• The “new” way - build relations with suppliers

1-19
What is Purchasing?

An evolution
 What is Purchasing?
Definitions
The Classic Definition
To buy materials of the right quality, in the right quantity
from the right source delivered to the right place at the
right time at the right price.

To be Contrasted with
Modern Definition
The process or function that, as part of an integrated supply chain, is
responsible for procuring or assisting users to procure in the most efficient
manner the required supplies at the right time, quality, quantity and price
and the management of suppliers, contributing to the competitive
advantage of the enterprise and the achievement of its corporate strategy.
 Key concepts
associated with
Purchasing
 Objectives of Purchasing
 Obtain goods and services:
• of the required quantity and quality
• at the lowest possible cost (total)
• at the best possible service and delivery
• while maintaining and developing
suppliers
 The scope of purchasing
• To supply the organisation with a flow of materials and services to
meet its needs.
• To ensure continuity of supply
•maintaining effective relationships with existing sources
•developing other sources of supply
• To buy efficiently and wisely
• To maintain sound co-operative relationships with other
departments by providing
•information
•advice
• To develop staff, policies, procedures and organisation to ensure
the achievement of these objectives.
 Purchasing Functions:
 Determining purchasing specifications
• right quality
• right quantity
• right time (delivery)
• right place (delivery / location)
 Selecting supplier
• right source
 Negotiating terms and conditions
• right price
 Issuing and administering purchase orders
 Purchasing Functions:
 Determining purchasing specifications
• right quality
• right quantity
• right time (delivery)
• right place (delivery & location)
 Selecting supplier
• right source
 Negotiating terms and conditions
• right price
 Issuing and administering purchase orders

“right” not “lowest/highest/quickest etc.”

 The Purchasing cycle:
1. Receive and analyse purchase requisitions
2. Select suppliers, receive quotations
(RFQ or RFP*)
3. Determine the right price
4. Issue purchase orders
5. Followup to assure correct delivery
6. Receive and accept the goods
7. Approve invoice for payment

*RFQ: request for quotation / RFP: request for proposal

 Issuing a Purchase Order
 Legal document
 Forms a contract with the supplier
upon acceptance
 Copies get sent to:
 Supplier
 Originator
 Accounting
 Receiving
 Purchasing file
 Price
There has been an evolution in the
concept of price.
 The lowest not always chosen

 Other factors to consider

• Capabilities with regard to JIT, IT, Logistics, etc.

 May include other services

“It is better to be cheated in the price than in the quality

of the goods”
- Baltasar Gracian
The price / cost iceberg
 The Purchasing Process:
Part Art / Part Science
1. Needs Identification 4. Market Engagement
& Analysis Strategy - Execute
2. Supply Market 5. Contract
Profiling Implementation and
3. Market Engagement Performance
Strategy - Management
Development

1-
 Question …

How exactly do
Buyers buy
things?
 Purchase Order Process
 Please watch a short video
explaining the purchase order
process

1-34
 Purchase Order Process
 Please watch a short video
explaining the purchase order
process

1-35
 The PO Process - Requisition
 The process starts with the
identification of a need – usually
with a purchase requisition
 It usually includes a detailed
description of the material or
service, the quantity, date
required, estimated cost, and
authorization
1-36
 Questions / Decisions
 Will you use an existing supplier or a new
supplier?
 Will you negotiate with an individual supplier
or …
 Will you deal with many suppliers by use of
a competative bid?
• RFQ / RFB: request for quotation –
request for bid (I know exactly)
• RFP: request for proposal (I don’t know)

1-37
 The Purchase Order
 This is a commercial document issued by a
buyer to a seller for products or services.
 It indicates the types, quantities, and
agreed upon prices for products or services
 Used for an initial or one-time purchase,
also called a “spot buy.”
 It is transmitted to the vendor and the
material is shipped / the service is provided

1-38
 Blanket Purchase Orders
 An open order, usually effective for one
year, covering repeated purchases of
an item or family of items
 Blanket orders eliminate the need to
issue a purchase order whenever there
is a need for material
 Most times there is an “escape clause”
where the buyer reserves the right to
cancel the blanket order at any time
 Purchase Order Types:
Firm Fixed Price Cost-Based Contracts
 The most basic type
 Price is not 100%
predetermined
 The price stated in the
agreement does not change
 The vendor is paid for all of
its expenses (within limit)
 The price can be obtained plus a profit
through: RFQ, RFP,
negotiations or some other
 These contracts usually
involve a lower level of risk
method
for vendors
 The simplest to manage:  They can result in lower
no need for extensive
overall costs to the
auditing or additional input
purchaser through careful
from the purchasing
contract management
department
(good luck).
1-40
 The PO Process: Receipt and
Inspection
The shipping and receiving process requires:
Material packing slip:

• Provided by the supplier, it contains the description

and quantity of the items in a shipment and refers
to the PO
Bill of lading:

• Provided by the transporter, it records the quantity

of goods delivered
Receiving discrepancy report:

• Details any shipping or receiving discrepancies. It is

often the job of purchasing or material control to
investigate and resolve discrepancies.
1-41
 The PO Process: Invoice
Settlement and Payment
 Once the item or service is delivered,
the buying firm issues an authorization
for payment
 Payment is made through the accounts
payable department.
 Electronic funds transfer (EFT): the
automatic transfer of payment from
the buyer’s bank account to the
supplier’s bank account.
1-42
Changing purchasing roles: reactive and proactive buying
 Thank you for your
attention!
I will be happy to answer any
questions you may have!

1-44
 Sources
 https://stillmed.olympic.org/media/Document%20Library/OlympicOrg/IOC/What-We-Do/celebrate-olympic-
games/Sustainability/Olympic-Games-Guide-on-Sustainable-Sourcing-2019.pdf
 https://www.environment.gov.au/system/files/resources/7b8df2bd-3bb9-49cc-b417-
5f2eb6e0ce37/files/sustainable-procurement-guide.pdf
 https://ec.europa.eu/environment/gpp/index_en.htm
 https://sppregions.eu/fileadmin/user_upload/Resources/Market_Engagement_Best_Practice_Report.pdf
 https://sppregions.eu/fileadmin/user_upload/Life_Cycle_Costing_SoA_Report.pdf
 https://www.ungm.org/Areas/Public/Downloads/BFABW_Final_web.pdf
 https://sustainable-procurement.org/sustainable-public-procurement/
 Pens
Session 1 Activity
 
Working in groups of 4 or 5, tell
me all of the information that you
would need to successfully get me
what I need. Be prepared to
present your information to the
class.
 Purchasing
 Please watch the video case study
and answer the question

 Be prepared to discuss your work

1) According to Mr. Paterson, how has procurement evolved in large
companies? In what areas has it evolved?
 2) Mr. Peterson believes that procurement organizations (and
companies) need to invest in their only asset – their employees. What
else should they invest in? Why?
 3) Mr. Peterson talks about the evolution that IBM’s procurement organization
underwent. What are some of the changes that he talks about? What are some of the
benefits and results of these changes at IBM?
 4) What are some of the concrete results and benefits that IBM has
achieved as a result of the evolution that Mr. Peterson talks about in
question 3?
5) What are some of the IBM’s skills, competencies, assets and
resources in terms of procurement?
 6) According to Mr. Peterson, what is the “extremely
advantaged position” that procurement professionals have?