Read Chapter 1 on below and Review

Write a short summary to describe the 7 steps of the Procurement Process (No more than 400 words)

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You do not have to depend on the course textbook and PowerPoint slides.

Chapter 1

Purchasing and Supply Management

Key Issues Addressed in Chapter 1

Evolution of the supply function

The potential contribution of supply to organizational goals and strategies

Operational versus strategic

Direct versus indirect

The profit leverage effect as a measure of supply impact on profitability (the income statement)

The ROA effect as a measure of supply impact on asset performance (the balance sheet)

The nature of organizations and the implications for supply

Competitive Factors Affecting Supply

Increased outsourcing places great reliance on suppliers

Greater dependence on suppliers for design and build responsibilities for subassemblies and subsystems

Increased global competition requires best value from suppliers for price, quality, delivery and sustainability performance

Development of new product technologies

Evolving information systems

Trend to single sourcing and strategic supplier relationships

Greater importance of supply chain environmental and social sustainability performance

Risk management

A supply chain orientation to managing relationships with suppliers and customers

Opportunities for Supply to Contribute to Organizational Success

Increase revenue

Improve customer satisfaction

Reduce total costs of ownership

Reduce lead times through process efficiencies

Identify opportunities for product/service innovations by collaborating with suppliers

Improve supply chain sustainability performance

Minimize financial, operational and reputational risks

Provide information to others in the organization in areas such as market conditions and new products and services.

The Evolution of the Supply Function

Late 1800s:

The Handling of Railway Supplies Their Purchase and Disposition, published 1887

1900-1950s:

reliable access to supply of raw materials, supplies and services

1970s:

senior management attention on the supply function:

international shortage of basic raw materials

price inflation

The Evolution of the Supply Function

1990s:

challenges of global supply chains

increased reliance on suppliers because of outsourcing

early 21st century:

supply chain integration

lower transaction costs

faster response times

Challenges: sustainability, globalization, technological innovations and risk management

The Evolution of the Supply Function

The Evolution of the Supply Function

Supply Management

The integration of related functions to provide effective and efficient materials and services to the organization.

Includes:

Operational and strategic responsibilities

In some organizations supply may have additional responsibilities for some or all of the following: receiving, inspection, warehousing, inventory control, materials handling, packaging, scheduling, in/outbound transportation, and disposal

Note: The terms purchasing, procurement and supply management are used interchangeably in this text.

Steps in the Procurement Process

(1) recognition of need

(2) translation of that need into a

commercially equivalent description

(3) search for potential suppliers

(4) selection of a suitable source(s)

(5) agreement on order or contract details

(6) delivery of products and/or services

(7) payment of suppliers

Logistics Management

Logistics management is that part of supply chain

management that plans, implements, and controls the efficient, effective forward and reverse flow

and storage of goods, services, and related

information between the point of origin and the

point of consumption in order to meet customers

requirements.

--Council of Supply Chain Management Professionals (CSCMP)

Examples of Logistics Activities

customer service

demand forecasting/planning

inventory management

logistics communications

material handling

order processing

packaging

Supply Chain Management

The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technological resources are critical to successful supply chain integration.

--Institute for Supply Management (ISM) Glossary

Characteristics of an Integrated Strategic Procurement and Sourcing Function

Characteristics of an Integrated Strategic Procurement and Sourcing Function (contd)

Profit-Leverage Effect ($ millions)

Return-on-Assets Factors

Purchasings Operational and Strategic Contributions

Purchasings Operational and Strategic Contributions

Purchasings Operational and Strategic Contributions

Manufacturing and Services Organizations

The Opportunities for the Indirect Contribution of the Supply Function

Reducing total costs of ownership (income statement)

Improving ROA/reduction in inventory investment (balance sheet)

Information source

Effect on efficiency

Effect on competitive position

Effect on customer satisfaction

Effect on image

Risk management

Training ground

Management strategy and social policy

Differentiations for Supply in Public Organizations

Differentiations for Supply in Private Organizations

Challenges Facing Supply

Capturing opportunities in the supply chain

Establishing the appropriate set of measures to evaluate the contribution of supply and supply initiatives

Managing financial, operational and reputational risks

Improving supply chain sustainability performance

Managing growth and influence in total spend, span of supply chain activities, meaningful involvement in supply-related decisions, and involvement in strategic corporate activities

Integrating the use of technologies in supply processes, including e-commerce, digitization, and artificial intelligence

Providing effective contribution to organizational success