Episode05PPTSlidesVideo - Episode 5 Procurement Processes...

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Unformatted text preview: Episode 5 Procurement Processes Procurement Processes What do we buy? How much? Why? What process do we use to purchase goods and services? Whats our focus when buying goods and services? 2 Part 1 Foundation Concepts Procurement: what is it? Supply Management ISM defines supply management as the identification , acquisition , access , positioning and management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives Strategic Sourcing Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. Procurement Procurement can be defined as the purchase of merchandise or services at the optimum possible total cost in the correct amount and quality. Related terms: buying, purchasing, acquisition Why is procurement an important issue in SCM? Were no longer in a vertically integrated world. Companies are highly dependent on suppliers. Its a major cost area. 55% of every revenue dollar is spent on purchase of goods & services Effective procurement brings opportunities for Cost reduction Improved order to delivery timeliness Shorter product development cycles Access to supplier expertise and technology Improved product quality Procurement: whats the goal? Strategically manage sources of supply to reduce the total cost of ownership. This involves the efficient acquisition of products and services The right materials In the right quantity In the right condition At the right time From the right source With the right service At the right price Procurement: what do companies buy? Product-related purchases Direct Materials used in production processes and affects product value Component parts Raw materials Process materials Indirect Materials used outside production processes Maintenance Repair Operations Services Capital Equipment Finished Goods Indirect Materials 21% Services 33% Direct Material 51% Procurement: what types of purchases exist? Procurement what are the benefits? Primary Benefits of Effective Sourcing Reduction in Cost Per Unit Pricing Improvements Lower unit price Volume rebates Payment term discounts Supply Chain Savings Cost of capital Warehousing costs Shipping costs Reduced Lifecycle Costs Maintenance costs Operating costs Disposition costs Improved Operating Efficiency Reduced Procurement- Related Operating Expense PO Processing...
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This note was uploaded on 05/19/2011 for the course BUSINESS MKT taught by Professor Johnston during the Spring '11 term at Missouri State University-Springfield.

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Episode05PPTSlidesVideo - Episode 5 Procurement Processes...

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