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>Chapter 2 is titled “The Purchasing Process” and includes the following topics:

How to set purchasing objectives.

The roles of strategic supply chain managers.

How to improve the procure-to-pay process.

Purchase orders.

Improving the purchase process.

Discuss how an effective purchasing department can affect a large manufacturer’s or retailer’s organizational performance.

The purchasing department is becoming involved in purchasing secondary services and noncritical components for a growing number of manufacturers.  Why is the role of purchasing expanding for so many organizations today?

The pandemic has led to E-procurement growing at a very rapid pace.  What are the key benefits and challenges for buyers and suppliers as organizations move toward increased order management automation?

Please provide an insightful question about improving the purchasing process through technological advances.

Purchasing &
Supply Chain
Management
7th edition
Chapter 2
The Purchasing Process
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1
Chapter Overview
• Purchasing objectives
• Strategic supply management roles and responsibilities
• Improving the procure-to-pay process
• Approval, contract, and purchase order preparation
• Types of purchases
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
Roles and Responsibilities
Overall
Goals
Strategic
Roles
Tactical
Responsibilities
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
Develop Integrated Supply Strategies that
Support Business Goals and Objectives
• Purchasing can directly affect long-term growth, revenue and operating
outcomes, and plans
• Provide critical inputs for improved strategic planning
− Supply market conditions and trends
− Identification of emerging materials and service technologies
− Development of supply options and contingency plans
− Support requirements for a diverse and globally competitive supply
base
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
Strategic Supply Management Roles
and Responsibilities
• Spend analysis
• Demand management and specifications/statements of work
• Category management and supplier evaluation/selection
• Contract management
• Cost management
• Managing the procure-to-pay process
• Supplier relationship management
• Establish a supply management strategy
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5
Improving the Procure-to-Pay Process
• Relative effort spent on P2P differs according to specific sourcing
situation
• Create a superior P2P process to create competitive advantage
• Stages of the P2P process may differ between organizations
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
Stages of the P2P Process
• Forecast and plan requirement
• Need clarification (requisition)
• Supplier identification/selection
• Contract/purchase order generation
• Receipt of materials and services with documentation
• Settlement, payment, and measurement of performance
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
7
Benefits of E-Procurement
• Virtual elimination of paperwork and paperwork handling
• Reduction in time between need recognition and release and receipt of an
order
• Improved internal and external communication
• Reduction in errors
• Reduction in procurement overhead costs
• Reduction in P.O. and invoice processing time
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
Procure-to-Pay High-Level Process Map
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9
Receiving Process
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
10
Receipt and Inspection (2 of 2)
• Invoice settlement and payment
• Records maintenance
− Supplier performance database
• Continuously measure and manage supplier performance
− Purchasing cycle does not end with receipt of goods or services
− Frequency of evaluation and feedback
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
Invoice Settlement and Payment
• Three-way match required to pay supplier’s invoice
− P.O.
− Invoice
− Receiving report with accompanying quality inspection report, if
required
• Electronic funds transfer (EFT)
• Summarized monthly payments vs. paying for each P.O. individually
• Mostly done electronically
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
Types of Purchases
• Raw materials
• Semifinished products and components
• Finished products
• Maintenance, repair, and operating (MRO) items
• Production support items
• Services
• Capital equipment
• Transportation and third-party logistics providers
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
Purchasing &
Supply Chain
Management
7th edition
Chapter 2
The Purchasing Process
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1
Chapter Overview
• Purchasing objectives
• Strategic supply management roles and responsibilities
• Improving the procure-to-pay process
• Approval, contract, and purchase order preparation
• Types of purchases
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
Roles and Responsibilities
Overall
Goals
Strategic
Roles
Tactical
Responsibilities
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
Develop Integrated Supply Strategies that
Support Business Goals and Objectives
• Purchasing can directly affect long-term growth, revenue and operating
outcomes, and plans
• Provide critical inputs for improved strategic planning
− Supply market conditions and trends
− Identification of emerging materials and service technologies
− Development of supply options and contingency plans
− Support requirements for a diverse and globally competitive supply
base
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
Strategic Supply Management Roles
and Responsibilities
• Spend analysis
• Demand management and specifications/statements of work
• Category management and supplier evaluation/selection
• Contract management
• Cost management
• Managing the procure-to-pay process
• Supplier relationship management
• Establish a supply management strategy
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5
Improving the Procure-to-Pay Process
• Relative effort spent on P2P differs according to specific sourcing
situation
• Create a superior P2P process to create competitive advantage
• Stages of the P2P process may differ between organizations
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
Stages of the P2P Process
• Forecast and plan requirement
• Need clarification (requisition)
• Supplier identification/selection
• Contract/purchase order generation
• Receipt of materials and services with documentation
• Settlement, payment, and measurement of performance
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
7
Benefits of E-Procurement
• Virtual elimination of paperwork and paperwork handling
• Reduction in time between need recognition and release and receipt of an
order
• Improved internal and external communication
• Reduction in errors
• Reduction in procurement overhead costs
• Reduction in P.O. and invoice processing time
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
Procure-to-Pay High-Level Process Map
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9
Receiving Process
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
10
Receipt and Inspection (2 of 2)
• Invoice settlement and payment
• Records maintenance
− Supplier performance database
• Continuously measure and manage supplier performance
− Purchasing cycle does not end with receipt of goods or services
− Frequency of evaluation and feedback
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
Invoice Settlement and Payment
• Three-way match required to pay supplier’s invoice
− P.O.
− Invoice
− Receiving report with accompanying quality inspection report, if
required
• Electronic funds transfer (EFT)
• Summarized monthly payments vs. paying for each P.O. individually
• Mostly done electronically
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
Types of Purchases
• Raw materials
• Semifinished products and components
• Finished products
• Maintenance, repair, and operating (MRO) items
• Production support items
• Services
• Capital equipment
• Transportation and third-party logistics providers
©2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13

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