Purchasing and ordermanagementMaterialsflowSuppliersOperationsDistributionProcurementCustomersRequirements information flowOutbound logisticsInbound logistics
Purchasing and order management Customers Materials flow Suppliers Procurement Operations Distribution Requirements information flow Inbound logistics Outbound logistics
Purchasing and ordermanagementThe objective of purchasing is:to secure optimal supplier performancewith respect to optimum qualitytimely deliveryminimum costs? Purchase, procure, source, buypurchasing manager / chief buyer
Purchasing and order management The objective of purchasing is: to secure optimal supplier performance with respect to optimum quality timely delivery minimum costs. Purchase, procure, source, buy purchasing manager / chief buyer
Situations which can give riseto inter-departmental conflictsFinanceSubsystems goalPurchasingProductionMarketingLogistics·Bulk purchases ofAd:largerDd: working capitalDd: warehousingtiedupmaterialsdiscountscosts increasedLong productionDd:working capitalDd: narrow pdtDd:warehousingAd:lowcoststiedupcosts increasedrunsrangeAd: higher costsDd: discountsAd:more salesthrumore.Broad productDd:short,highDd: finished goodssmallonlowthru wideradministration&volumestocks highcostsrunsrangemore warehousingcustomer appealpurchasedspace.Tighter creditDd: possiblyAd:greateruse ofcontrolworking capitalloss of salesDd:systemcostsAd: more sales?Short timeDd: higherincreased in orderwith betterdeliveryto meet serviceoperating costsservicerequirementsAd:system costsDd:loss ofAd:loweroperatingcan be lowered by.Unit loadssales to smalleliminatingcostscustomersuneconomic calls
Situations which can give rise to inter-departmental conflicts Subsystems goal Purchasing Production Finance Marketing Logistics •Bulk purchases of materials Ad:larger discounts Dd: working capital tied up Dd: warehousing costs increased • Long production runs Ad: low costs Dd: working capital tied up Dd: narrow pdt range Dd: warehousing costs increased • Broad product range Dd: discounts small on low volume purchased Dd:short,high costs runs Dd: finished goods stocks high Ad: more sales thru wider customer appeal Ad: higher costs thru more administration & more warehousing space • Tighter credit control Ad: greater use of working capital Dd: possibly loss of sales • Short time delivery Dd: higher operating costs Ad: more sales with better service Dd: system costs increased in order to meet service requirements • Unit loads Ad: lower operating costs Dd: loss of sales to small customers Ad: system costs can be lowered by eliminating uneconomic calls
Relationships with otherfunctionsProduction controlPhysical distributionReceiving and storesFinanceDesign engineeringIndustrial engineering
Relationships with other functions Production control Physical distribution Receiving and stores Finance Design engineering Industrial engineering
The purchasing processRecognizeaneedSelect suppliersIssuetheorderTrack and receive the order
The purchasing process Recognize a need Select suppliers Issue the order Track and receive the order
Other important issues? Centralized and decentralized purchasing Decision-making as to making or buying(corecompetency)Supplierrelationship?Supplier selection
Other important issues Centralized and decentralized purchasing Decision-making as to making or buying (core competency) Supplier relationship Supplier selection
Order managementOrdercycle Seller: the time when an order is received from acustomer to when the goods arrive at thecustomer'sreceiving dockBuyer:from whentheorder is sentoutto whenthegoods arereceivedThe shorter and more consistent the ordercycle is, the less inventory is needed by one'scustomers
Order management Order cycle ◼ Seller: the time when an order is received from a customer to when the goods arrive at the customer’s receiving dock. ◼ Buyer: from when the order is sent out to when the goods are received. The shorter and more consistent the order cycle is, the less inventory is needed by one’s customers
Sales forecasting?There is a link between ordermanagement and sales forecastingA firm does not simply wait for orders toarrive. Forecasts are made of sales andinventory that must be stocked so that thefirm can fill the orders in a satisfactorymanner
Sales forecasting There is a link between order management and sales forecasting. A firm does not simply wait for orders to arrive. Forecasts are made of sales and inventory that must be stocked so that the firm can fill the orders in a satisfactory manner
Order management?OrderplanningOrdertransmittalOrderprocessingOrder picking and assembly?Orderdelivery
Order management Order planning Order transmittal Order processing Order picking and assembly Order delivery
Orderplanning? The problem of bunching happens whena high percentage of customers maketheir orders at the same time.? If customers' ordering schedules can beinfluenced, a firm can balance them outand minimize the peaks and valleys ofthe workloads
Order planning The problem of bunching happens when a high percentage of customers make their orders at the same time. If customers’ ordering schedules can be influenced, a firm can balance them out and minimize the peaks and valleys of the workloads