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CHAPTER THIRTEEN

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CHAPTER THIRTEEN

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    1. 13-1

    2. CHAPTER THIRTEEN Research and Measurement

    3. 13-3 Ingredients of Effective Buying

    4. 13-4 Conditions Necessary for Effective Cross-Functional Teams Team members are carefully selected to ensure that each really has something to contribute Strong leadership Specific objectives and expectations, communicated to each team member Each team member’s normal job responsibilities are rearranged to provide necessary time and resources Performance evaluation and reward systems foster team participation and overall team performance

    5. 13-5 Criteria for Deciding Where to Direct Research Efforts Value of product or service - top dollar Product profitability - red dollar Price/cost characteristics Availability Quality Data flows

    6. 13-6

    7. 13-7 Value Analysis Value analysis compares the function performed by the purchased item with the cost in an attempt to find a lower cost alternative Value analysis is done on purchased items used in the ongoing production process Value engineering looks are cost saving possibilities in the design stage

    8. 13-8 Possible Value Analysis Research Topics Investment recovery Lease or buy Make or buy and continue making or outsource Packaging Specification Standardization Substitution Supplier switching

    9. 13-9 Commodity Studies Should provide the basis for making sound procurement decisions Should present purchasing management and top management with information concerning future supply and price of purchase items

    10. 13-10 Major Areas in a Commodity Study Current and future status of our company as a buyer Production process alternatives Uses of the item Demand Supply Price Strategy to reduce cost and/or ensure supply

    11. 13-11 Topics in Supplier Research Analysis of financial capacity Analysis of production facilities Finding new supply source Supplier cost analysis Single sourcing Supplier-purchased material quality assurance Supplier attitude survey Supplier performance evaluation Supplier sales strategy Countertrade

    12. 13-12 Four Common Purchasing Budgets Materials (operations) purchase budget MRO Budget Capital Budget Administrative Budget

    13. 13-13 Common Purchasing Activity Reports Total dollar volume of purchases Total dollars spent for department operating expenses Total number of purchase orders issued

    14. 13-14 Major Sections for Purchasing Operating Reports Market and economic conditions and price performance Inventory investment changes Purchasing operations and effectiveness Operations affecting administration and financial activities

    15. 13-15 Four Types of Performance Measurement Systems Efficiency-oriented Emphasizes cost and departmental operating efficiency Effectiveness-oriented Measure of direct and indirect contributions of supply Multiple objectives Considers both efficiency and effectiveness measures Naďve No goals, objectives, or pre-set performance measures Supply managers told that an appraisal will be made of their performance

    16. 13-16 Problem Areas in Purchasing Performance Measurement There are no industry-wide standards of functional performance A lack of management information systems support Differences in the scope and sophistication of supply Even within the same firm Operational versus strategic An historical focus on functional goals without linkages to the corporate goal-setting process

    17. 13-17 12 Guidelines for Establishing a Purchasing Measurement System Measures need to be designed for use at a point in time Each organization has specific measurement needs at a given point in time Measures should address financial results, supplier performance, computer systems and internal practices and policies Measures must change frequently Trend analysis is often useful Measures should not be overdone or underutilized

    18. 13-18 12 Guidelines for Establishing a Purchasing Measurement System Measures are only tools Benchmarking is a source of new ideas and measures Senior management must see value in the measures used Measures can show the effectiveness of purchasing and identify areas needing improvement Ensure the credibility of measures Continuous improvement in purchasing depends on measurement

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