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Whatisthesupplymanagement process?
Aprocessisasetofactivitiesthathasabeginningandend,occursina specific
sequenceandhasinputsandoutputs aswearegoingto explain.
Needofprocessviewinpurchasing – Aneedtounderstandwhere,why,when, and
howpurchasingcontributetotheentireorganizationratherthanfocusingon the
functionofpurchasing only..
Whatisthereasonsfordevelopingastrong process?
1 •Largenumberof items
2 •Largedollarvolume involved
3 •Needforanaudittrail.
4 •Severeconsequencesofpoor performance
5 •Potentialcontributiontoeffectiveorganizationaloperationsinherentinthe function
StrategyandgoalAlignment: -
Thefirststepinoptimizingthesupplyprocessisbuildinginternalconsensusaround the
opportunities.
•Aligningpurchasingprocesstotheorganization’sgoalsandstrategies:weneed it
to:- – Aneedtoverticalandhorizontalalignmentofpurchasingactivities to
organization’sgoalsandstrategies.
– Useofcross-functionalteams.>>>•Harmonizingpurchasingorganization and
purchasing process.
– Useofsupplycouncilorsupplysteeringcommittee>>>•Matchingpurchasing process
tocorporateculture.
– Reductionofmaverick buying
However:- supplytakestheleadroleinanalyzingandselectingthesuppliers and
determiningpriceandothertermsandconditionssuchaspayment,delivery, quality,
services.Eachstakeholderhasgoalsandobjectivesrelativestothepurchase,and to
avoid conflictthereisaneedtocreateandshareacommongoalsbetween all.
Ensuringprocesscompliance: -
Increasingtherateofinternalcompliancewiththesupplyprocesscanbe challengeable.
Because,centralizedorganizationsmustfacehighlevelsofnoncompliance. Process
improvementandconsistentdeliveryofresultstointernalbusinesspartnersmy increase
compliance.Organizationalculturealsoinfluencesprocesscompliance, and
informationsystemsmaycompelcompliancebyeliminatingalternative purchasing
paths,reducingprocesscycletimeandinstillingconfidenceinusersthatdelayswill be
minimal.
INFROMATION FLOWS :
There are four basic information flows involving supply:-
Inward flows (1) Information internal sources to supply.
(2) Information from external sources to supply
Outward flows : (1) Information from supply to others in The organization (2)
Information from Supply to external sources.
Supply must manage The flows effectively. So Information systems can support
effective decision making.
Steps in the supply process:
The supply process is basically a communications Process It is about the needs ,When,
Where, how to satisfy customers.
Now we will discuss the nine essential steps in the supply Process.
Step 1. Recognition of Need:
A Purchase appears when a person or a system identifies a definite need in the
organization _ what , how much ,and when is needed.
The supply helps anticipate the needs of using departments. It encourage
Standardized items , deals With Special or unusual orders.
Since the greatest opportunity to affect value is When needs are recognized and
described, the supply manager and supplier can contribute more in these steps than
later
Step 2. Description of Need:
The purchaser must know exactly what the internal customers want In the same time,
understanding the external customer s needs (a)Purpose and flow of requisition
A requisition is the document used to communicate needs internally between
users Specifies and supply management
A requisition is a gatekeeping tool to manage the flow of Information
Gate 1: Authority Does the requisition have the authority to make the request
Gate 2:Internal clarity Is the need described in a clear and unambiguous way?
Uniform terms or standardized commodity or service codes should be used to
describe required articles If adequately planned , coding reduce the number of
items requisitioned , and facilitate accounting and inventory procedures
Gate 3: Internal clearance Descriptions should be reviewed before preparing
documentation to communicate externally with potential suppliers.
(b)Routing :lsimportanttounderstandtheflowofinformation. Whoneedsaccessto purchase orderinformation, andwhy? IsitonpaperorelectronicfileExternally, thesupplierneeds the informationonaPO. Thenconfirming acceptance. Step6. Follow-upandExpediting :- AfterissuingaPO, thebuyermay followup and/or expeditetheorder. Follow-up isaroutineordertrackingtoensurethesuppliercanmeet delivery promises. Itcanbedoneviaseveralways. Itisessentialforstrategicitems. But, itmightnot occur forlower-valueitems. Responsibilityforfollow-upmaybebytheuserdepartment, ora joint responsibilityforthesupplymanagerand others. Expediting :istheapplicationof pressureonasuppliertomeettheoriginaldeliverypromise to deliveraheadofscheduleorspeedupdeliveryofdelayed order. AssessCostsandBenefits :-Oneofthecostshereisthefollow-upandexpeditingcostsoneform of riskassessmentismatchingdegreeoffollowupwiththemoneyspend. Follow-upand expediting costmorethanitsbenefitsisawasteorganizationaldecisionareresponsibleforexpnotthe supplier Step7. ReceiptandInspection:- Theproperreceiptofgoodsandservicesisofvital importance. Theprimepurposesofreceivingare to
- Confirmingthearrivaloftheorder. 2. Theorderisinagood condition.
- Ensuringthequantity. 4. Itgoestoitsdestination. 5. Ensureproperdocumentation. Shortage mayoccurforseveralreasons. Accurateamountsenteredmeanstheorderisclosed out. 8 .AligningSupplyandAccountsPayable :- often, paymenttermsarenot metforseveralc auses oneofthemispaper-basedprocesses. So, informationsystemsandelectronicfundtransfers may helpaddresstheproblemsbyshorteningthecycle time, *EliminateorReduceInspection :Onegoalofsupplymanagementisqualitybuiltinboth the organizationandthesupplierThisreduceoreliminateinspectionInaJITsystem, partsgo directly fromthereceivingpointto production. 8.1 InvoiceClearingandPayment :-Aninvoiceisaclaimagainstthebuyingorganization. invoice clearancearenotuniform. Adecisionrulemybeusedthatstipulatepaymentoftheinvoice as submitted, aslongasthedifferenceiswithinprescribedlimitsthe organization. 8.2CashDiscountsandlateinvoices:- Sometimessuppliersareslowtoinvoice, and supply requesttheinvoice. Becauselateinvoicesandreceivingmaterialsmightcausetheriskoflosing cash discounts. Step 9 MaintenanceofRecordsandRelationships : - Thebasicrecordstobemaintained, eithermanuallyorelectronically: arelike,(1) POlog,(2) PO file,(3) commodityfile, and(A) adatabaseofsuppliers, Additionalrecordfilesmayinclude: (1) laborcontractsandminorityandsmallbusinesspurchases. 9.1LinkingDatatoDecisions :Data are collectedthroughoutthesupplymanagementprocess. Toturnitintousableinformationto enable betterdecisions. 9.2ManageSupplierRelationships :Internalandexternalrelationships are affected.
Applications software: programs that manipulate data for a specific purpose, such as analyzing supplier performance statistics and formatting a performance scorecard. Bill of material (BOM): includes all materials and parts, including allowance for scrap, to make one end unit, for example one two-slice toaster. Blank check purchase order : a signed, blank check is sent to the supplier along with the PO, the supplier ships the full order, completes the check, and deposits it. Blanket purchase order : covers a variety of items such as maintenance, repair and operating (MRO) supplies and production line requirements, and reduces costs by reducing the number of purchase orders issued. Effectiveness: doing the right things. Efficiency: the number of tasks performed in a set amount of time. Electronic or e-catalog or online catalog: a digitized version of a supplier's catalog which allows buyers to use a Web browser to view detailed buying and specifying information about the supplier's products and/or services. Electronic data interchange (EDI): allows computer-to-computer exchange of business documents between two organizations using agreed standards to structure the message data. Electronic marketplace: a virtual shopping mall; business-to-business e-marketplaces are network services on which member companies buy and sell their goods and exchange information. Electronic procurement system: An e-procurement system is an applications software package that allows the requisitioning, authorizing, ordering, receiving, invoicing, and paying for goods and services over the Internet. Enterprise Resource Planning (ERP) systems : provide a corporate platform for information technology and include a suite of applications such as financials, channel revenue management, human capital management and project management. Examples: SAP and Oracle. Expediting : the application of pressure on a supplier to meet the original delivery promise, to deliver ahead of schedule, or to speed up delivery of a delayed order. Extranet: a private Intranet that is extended to authorized users outside the company, such as suppliers. Follow-up : routine order tracking to ensure the supplier can meet delivery promises. Functional-orientation: considers the process steps for which the individual's department is responsible. Horizontal strategy alignment : when strategy between and among functional areas (e.g., supply, marketing, finance, etc.) is in sync. Intranet: a private, secure internal Web for authorized users only set up to share information and communicate with company employees. Invoice : a claim against the buying organization. Just-in-time (JIT) : system where production parts go from the receiving dock to production requiring consistent quality, and small, frequent deliveries. Maintenance, repair and operating (MRO) supplies: A variety of items, all of comparatively low value, needed immediately when any kind of a plant or equipment failure occurs. Master service agreement (MSA): the supplier(s) provides predetermined services over a specified period of time with total costs not to exceed an amount previously agreed upon. Maverick buying: When non-supply staff make unauthorized buying decisions, also known as rogue
Systems Contracting: Systems contracts rely on periodic billing procedures; allow non-supply personnel to issue order releases; employ special catalogs; and require suppliers to maintain minimum inventory levels. Traveling requisition : used in a manual purchasing process used for recurring requirements and standard parts to reduce operating expenses. Vendor/supplier-managed inventory (VMI/SMI) : inventory management system in which the supplier manages the inventory at the buyer's location(s); typical for MRO items. Vertical strategy alignment: when supply strategy at the functional or business unit level is in sync with organizational strategy and supply decisions contribute to the achievement of organizational goals.
