Lecture Purchasing and supply chain management (3rd/e): Chapter 2 - W. C. Benton
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Chapter 2:
Purchasing Decisions
and Business Strategy
Purchasing and Supply Chain Management
3rd edition
Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Purchasing and Supply Chain Management, 3rd edition, W.C. Benton, Jr.,
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Previously…
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In most industrial firms,
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material constitutes 60–80 percent of the total revenue dollars.
Competitive leverage can be developed through
purchased inputs
Link the competitive strategy with the purchasing policy
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Components of
Purchasing Strategy
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Purchasing actions are determined by
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the firm’s competitive priorities
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its resource capabilities
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the environment
Purchasing strategy must consider
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competitive priorities
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organization’s strengths and weaknesses
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competitive environment
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Example
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Purchasing/Buying Criteria
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Must reflect firms’ competitive priorities
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Example:
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Cost priority
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high priority to purchasing costs
Flexibility priority
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high priority to lead time in buying material
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
External Environment
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Environmental Factors
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Inflation rate
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Monetary policy
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Fiscal policies
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Technological development
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Industry capacity
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Market growth
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Global stability
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Supply Chain Strategy
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Reasons for the emergence of supplier partnerships as a
competitive weapon:
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Increased competition
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Deregulation
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Relaxed antitrust requirements
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Increased use of electronic data interchange (EDI)
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Increased justintime (JIT) manufacturing
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
Supplier Partnerships
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Companies participate in a variety of supplier
relationships and roles
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A supplier
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A customer
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An enduser of products
Supplier partnerships can be categorized using five
factors:
(1) degree of risk/reward
(2) type of relationship
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
The Integrated Buying Model
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In buying decisions,
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multiple goals must be satisfied
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within the constraints
Cost
Supplier
Lead Time
Quality
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
The Strategic Sourcing Plan
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The purchasing function must be integrated into the
firm’s overall strategic plan.
A strategic sourcing plan requires:
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A complete understanding of corporate strategies and marketing
plans
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An extensive evaluation/study of current suppliers, how
performance is measured, and the expectation of suppliers
relative to the industry
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Study of the degree of global purchasing opportunities
Identification of total costs associated with current purchasing
department/ function, budgets, staffing, and so forth
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
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Questions?
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Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.
