Chapter 1 LGMT 536

LGMT 536
Purchasing for Logistics and Supply Chain Management

Chapter 1

Introduction to Purchasing and Supply
Chain Management

Chapter Overview
 A new competitive environment
 Why purchasing is important
 Understanding the language of purchasing and supply chain management
 Achieving purchasing and supply chain benefits

2

Chapter Overview
 The supply chain umbrella
 Four enablers of purchasing and supply chain management  The evolution of purchasing and supply chain management  Looking ahead

3

A New Competitive Environment
 Increasing numbers of world class global competitors  Sophisticated customer base
● More performance at lower cost
 Widely available information sources
 Balance of power between buyers and suppliers
 Greater levels of outsourcing

4

Factors Driving SCM
 Low cost and wide availability of information more closely links members of a supply chain
 Competition in domestic and international markets requires greater quickness, agility, and flexibility

5

Factors Driving SCM
 Customer expectations and requirements are constantly changing and more demanding
 Major supply disruptions require the ability of a supply chain to react rapidly
 Competition is now between supply chains, not just between companies

6

Why Purchasing Is Important
 Increasing value and savings
 Building relationships and driving innovation
 Improving quality and reputation
 Reducing time-to-market
 Generating economic impact
 Contributing to competitive advantage

7

Increasing Value and Savings

 Suppliers have substantial impact on a firm’s total cost  Many product features originate from suppliers
 In manufacturing, purchased content is more than
55% of revenues
 Avoiding costs through early involvement in product design stage

8

Building Relationships and Driving Innovation

 Traditional approach is to bargain hard for price reductions  New approach is to conduct joint cost reduction with suppliers
 Both buyer and supplier must