Purchasing-Dr_Nora-Ch3 - Chapter Three Supply Organization...

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Chapter Three Supply Organization
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INTRODUCTION Every organization in both the public and private sector is in varying degrees dependent on materials and services supplied by other organizations. Purchasing and supply management is, therefore, one of the key business processes in every organization. Hence, the key question is: What are the activities and responsibilities of supply management?
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Supply Activities and Responsibilities Supply management can be described as a series of activities that must be managed effectively for the organization to deliver best value to the final customer. Roles and responsibilities of supply fall into four general categories: 1. What is acquired. 2. Supply chain activities. 3. Type of involvement in categories 1 and 2. 4. Involvement in corporate activities. 3
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1. What is acquired Items acquired by the supply group vary from organisation to organisation and items are added or deleted depending on circumstances in the buying organisation. The acquisition segments include raw materials, standard and special direct purchases, MRO, capital, services, and resale. Nontraditional purchases are spend categories that have typically been managed outside of the purchasing and supply management process. 4
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In some organizations, purchasing activities are limited to production-related materials and services, leaving responsibility for nonproduction or indirect materials and services in the hands of users (annual spend in such items “non-traditional” vary from 2%-40%). Other organisations have recognised the significant opportunities from applying the skills of their supply group and the benefits of a structured sourcing process in the acquisition of non-traditional materials and services. 5
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2 . Supply Chain Activities Today’s supply management organization has more responsibilities than the traditional “buying” activities once associated with the function. The activities handled by the supply function vary from firm to firm, even within the same industry. However, regardless of company size, there are a number of activities common to most supply organizations, i.e. Purchasing/buying, Purchasing research, Inventory control, Transportation, Disposal, Forecasting and planning, Outsourcing, Nonproduction/nontraditional purchases, Supply chain activities 6
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3 . Type of Involvement Supply can have : no involvement , documentary , professional , or meaningful involvement in what is acquired and in supply chain activities.
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