You are working in an International Corporation where the Head Office is in New York, USA. As a Purchasing Manager, you are reporting to the new Finance Controller who reported duty a month ago from Head Office. Your new boss scheduled an induction meeting with you two weeks later. You are required to prepare a report before the meeting on the purchasing functionalities and the development of purchasing strategy of your office.
In order to complete the report, the following areas have to be considered and evaluate in your report:
1. Identify the key purchasing activities that take place in your office.
2. Name at least 1 external and 3 internal function that your purchasing team involved in your office.
3. From the following 5 corporate-wide purchasing objectives, analyze THREE (3) objectives by referring to your existing purchasing strategies, how your purchasing team incorporate these objectives into the purchasing practices and strategies. (Refer to: Cost-reduction Objectives; Technology / New product development Objective; Supply-base Reduction Objective; Supply Assurance Objective; Quality Objective)
Remarks
1. The report must be typed on standard white paper A4 size with Times New Roman 12 pt font; single-spaced with one-inch margin on all sides of the report. Number every individual page.
2. Question 1 and 2 carry 30 marks each. Question 3 carries 40 marks
3. Use cover sheet to identify all students’ names and student nos.
Supplementary Notes
Functions of Purchasing/Kaleidoscope of Purchasing and Supply Activities
Traditionally, purchasing is believe to fulfil three major functions: Buy at a low price, ensure timely delivery and guarantee an agreed-upon level of quality
1. Sourcing: Matching purchasing requirements with sources of supply, ensuring continuity of supply, exploring alternative sources, validating supplier compliance to meet or exceed customer criteria for quality, delivery, quantity and price.
2. Value Analysis: Consist of components as price for quality received, financing and delivery.
3. Supplier Development: Increase collaboration with suppliers require buyer to have knowledge on supplier capabilities, resources, product lines, delivery and information system.
4. Internal Integration: Purchasing must work closely with other business units within the company in order to synchronize with others’ requirement and expectation to meet the overall objectives of the company.
5. Supplier Scheduling: Sharing time-phased schedule of demand in an interest interface with the supplier enable the purchaser to exercise an effective purchasing plan.
6. Contracting: Awarding the right supplier when they all expected requirement can be fulfilled after the selecting process.
7. Cost Management: Continuous search for ways to reduce administrative costs, purchase prices and inventory carrying costs etc.
8. Purchasing and Receiving: Including order preparation, order entry, order transmission, order receiving, quantity and quality checking etc.
9. Performance Measurement: Regularly monitor the product and service quality of the supplier against some target benchmark in order to carry out continuous improvement.
10. Supply Information: Providing information on any new products, processes, materials and services, supply availability, lead times and related production technology.
Other Function of Purchasing
1. Identify the most cost effective and quality supply source of products and services
2. Responsible for the selection of the most suitable suppliers and determine the most appropriate supply base
3. Responsible for the development of different strategic purchasing strategies for different products in different market segments.
4. Conduct various negotiations with suppliers to obtain the best trading terms for the company.
5. The migration of functional to process integration will continue with specific emphasis on the use of service providers.
6. Guarantee an alternative supply source during supply shortage with the existing suppliers.
External Functions
Suppliers – purchasing primary responsibility is to maintain open communications with suppliers
Government – Consult with government agencies on various matters, including the Environmental Protection
Local Communities – The purchasing may sometimes award a certain percentage of business to qualified minority suppliers in order to uphold the company’s social image.
Internal Function
Operations – Major link through operation strategy development. The strategic plans of the purchasing must be aligned with the sales and operations plan.
Quality Assurance – Large volume of externally purchased items, therefore the purchasing team need to have a close linkage with the QA department in areas like supplier quality training, process capability studies
Engineering – The need of producing after the clock makes the two departments to work even closer in order to improve the efficiency.
Marketing/Sales – Many new products ideas come from marketing personnel where Purchasing must select suppliers to match with
Legal – Purchasing often confers with legal department on issues that include patent ownership, intellectual property, product liability claims, anti-trust issues etc.
Accounting and Finance – The communication0 linkage between purchasing and accounting is electronic, through e.g. material control system, on-order or in-transit report, received status report, accounts payable system as well as the make-or-buy decision analysis
Environment Management, Health and Safety – Purchasing has to consult with the department when ensure that suppliers are employing Occupational Safety and Health Administration (OSHA) and safety regulations.
