Chapter 1

1. Chapter 1 Purchasingand Supply Management

2. Corporate Supply Challenges Increased outsourcing places great reliance on suppliers to respond to end-customer needs Greater dependence on suppliers for design and build responsibilities for complete subassemblies and subsystems Increased global competition Development of new product technologies Evolving information systems Trend to single sourcing with fewer key suppliers and strategic supplier relationships

3. Corporate Supply Opportunities Identify opportunities to reduce unit costs for products and services Identify opportunities to increase revenue Implement supply initiatives to improve customer satisfaction Reduce total costs of ownership Improve efficiency and effectiveness of the supply process Maximize value from suppliers Work with key suppliers to provide product and service innovations

4. 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.”

5. Characteristics of an Integrated StrategicProcurement and Sourcing Function Executive Leadership Executive committee support for integration across company and strategic business unit corporate plans • Strategic Positioning • External/internal customer focus • Matrix management • High-level positioning - second, third or fourth levels • Functional Leadership • Company-wide customer-focused leadership • Establish integrated visions workers at results and processes • Drives supply base/supplier management strategies company-wide • Integration • Cross-functional, cross-location teaming • Part of the technology, manufacturing and SBU planning process

6. Characteristics of an Integrated StrategicProcurement and Sourcing Function Supply Base Strategy Quality driven Design standardization Concurrent engineering Supply base optimization Commercial strategy emerging • Supplier Management • Focused on supplier development • Joint performance improvement efforts • Value focused • Total cost improvement • Supplier benchmarking • Systems • Global databases • Historical performance data • Strategic • EDI, Internet, EFT, CAD, CAM • Measurement • Customer orientation • Total value/cost focused • Benchmarking with best in class

7. Purchasing’s Operational and Strategic Contributions 1. Supply Contribution Operational Strategic Trouble Prevention Opportunity Maximization

8. Purchasing’s Operational and Strategic Contributions 2. Supply Contribution Direct Indirect Enhancing Performance of Others Bottom-Line Impact

9. Purchasing’s Operational and Strategic Contributions 3. Supply Contribution Negative Neutral Positive Operationally acceptable Strategically acceptable Directly acceptable Indirectly acceptable Operationally deficient Strategically deficient Directly deficient Indirectly deficient Operationally acceptable Strategically deficient Directly acceptable Indirectly deficient

10. The Opportunities for Contribution of the Supply Function Profit-leverage effect Return-on-assets effect Information source Effect on efficiency Effect on competitive position and customer satisfaction Effect on organizational risk Effect on image Training ground Management strategy and social policy

11. Challenges Facing Purchasing B2B e-commerce Supply chain management Measurement Purchase of non-traditional goods and services Contribution to corporate strategy Recognition by senior management