Read Chapter 4 below

Write a short summary to describe the basic 9 steps in the supply process.

NOTE: FINAL ANSWER must be a minimum of 300 words.

Chapter 4 Supply Processes and Technology Key Question Addressed in Chapter 4 Which process or processes will be most effective and efficient to support the exchange of money (the buyer's responsibility) for goods and services (the supplier's responsibility)? Reasons to Develop Robust Supply Processes - Large number of items - Large dollar volume involved - Need for an audit trail - Severe consequences of poor performance - Potential contribution to effective organizational operations inherent in the function Strategy and Goal Alignment - "Where, when, and how can supply personnel contribute to short- and long-term goals and strategies of the organization?" - Vertical alignment: - supply strategy and goals at the functional or business unit level aligned with organizational strategy - Horizontal alignment: - supply strategy and goal alignment with other functional areas Information Flows - Inward flows - information from within the organization sent to supply - information from external sources sent to supply - Outward flows - information from within supply sent to others within the organization - information sent from supply to external sources Steps in the Supply Process 1. Recognition of need 2. Description of need 3. Identification and analysis of possible sources of supply 4. Supplier selection and determination of terms 5. Preparation and placement of the purchase order 6. Follow-up and/or expedite the order 7. Receipt and inspection of goods 8. Invoice clearing and payment 9. Maintenance of records and relationships Step 1: Recognition of Need - A person or a system identifies a definite need in the organization-what, how much, and when needed - The greatest opportunity to affect value is when needs are recognized (step 1) and described-e.g., product conception and design (step 2) Supply and supplier(s) can contribute more in these steps than later in the acquisition process Step 2: Description of Need - Needs should be driven by external customers. External customer needs Internal customers Purchasers Potential suppliers - An accurate description of the need (good, service, or combination) is essential - Unclear or ambiguous descriptions, or over-specified materials, services, or quality = unnecessary costs - Supply management and the internal customer or cross-functional sourcing team share responsibility for accurate descriptions A Requisition - A gatekeeping tool to manage the flow of information through three gates: (1) authority: Does the requisitioner have the authority to make the specified request at the specified budget level? (2) internal clarity: Is the need described in a clear and unambiguous way? (3) internal clearance: Is the description ready for communicating externally with potential suppliers? Information Needed for Requisitions - Date - Number (identification) - Originating department - Account number - Complete description of material or service and quantity - Date material or service needed - Any special shipping or service-delivery instructions - Signature of authorized requisitioner Issue an RFx - One optional communication tool that is NOT a solicitation for business: (1) request for information (RFI) - Three options for soliciting business: (1) request for quotation (RFQ) (2) request for proposal (RFP) (3) request or invitation for bid (RFB or IFB) Step 4: Supplier Selection and Determination of Terms - Analysis of qualified potential sources, source selection, and determination of terms - Applicable tools range from a simple bid analysis form to complex negotiations Step 5: Preparation and Placement of Purchase Order - Several order placement tools available: - A purchase order - The supplier's sales agreement - A release against a blanket order - Failure to use the proper contract form may result in legal complications or improper documentation Step 6: Follow-up and Expediting - Follow-up: routine order tracking to ensure the supplier can meet delivery promises - Expediting: the application of pressure on a supplier to meet the original delivery promise, to deliver ahead of schedule, or to speed up delivery of a delay - Expediting: - may be caused by poor planning inside the buying or the selling organization - may indicate the need for process improvements. Step 7: Receipt and Inspection The prime purposes of receiving are to: 1. Confirm receipt of order 2. Confirm shipment arrived in good condition 3. Ensure quantity ordered has been received 4. Forward shipment to proper destination (storage, inspection, or use) 5. Ensure proper documentation is registered and accessible to appropriate parties Eliminate or Reduce Inspection - One goal of supply management is to ensure that quality is built in: internally during the design stage and externally in the suppliers' processes - When quality is assured, incoming inspection can be eliminated Step 8: Invoice Clearing and Payment - An invoice is a claim against the buying organization - Payment for services may vary from payment for goods. - Invoice clearance procedures are not uniform - Checks and audits of invoices are based on cost-benefit analysis - Aligning Supply and Accounts Payable - Often, payment terms are not met to improve working capital utilization and conserve cash - Root causes of late payment: - Slow cycle time in the accounts payable process - Conflict between finance and supply policy - Information systems and electronic fund transfers (EFT) may shorten cycle times - Having accounts payable part of the supply department can help to align processes - Improving the Procure-to-Pay Process - Procure-to-pay (P2P) is a term used to describe the steps in the purchasing process from issuance of the purchase order (step 5) to payment of the invoice (step 8). - Focuses on the transactional steps in the supply chain that control the flow of information, delivery of materials and services, and financial transactions. - Making this process as seamless as possible can reduce order cycle times, decrease administrative costs, and improve the satisfaction of internal customers and suppliers. Step 9: Maintenance of Records and Relationships - Update records based on legal requirements, accounting standards, company policy, and judgment - Some records can be stored electronically, which simplifies management of purchasing documents. - Update supplier performance scorecards - Link data to future decisions A Sample Sourcing Process and Flowchart