Leenders−Johnson−Flynn−Fearon: 2.

Supply Organization Text © The McGraw−Hill

Purchasing and Supply Companies, 2006
Management, 13th Edition

52 Purchasing and Supply Management

Case 2–1
Duchess University
In April, the purchasing department at Duchess
University lost 3 of its 14 employees because of death and
personal reasons. Jim Haywood, head of the purchasing
department, saw these unexpected personnel changes as
an opportunity to address an issue that had bothered him
for a while: “Should I reorganize the structure of the
department and, if so, how?”
COMPANY BACKGROUND:
DUCHESS UNIVERSITY
Duchess University was a public institution, with about
3,000 full-time employees and about 25,000 students, that
provided undergraduate and graduate education in all
major academic disciplines. The total university budget
was about $500 million and purchases were about $120
million. Currently, the university faced major challenges:
increased demand for university education; at the same
time many faculty members were nearing retirement and
it was difficult to find replacements at acceptable costs.
Moreover, the government had reduced its grants in
recent years and had put a cap of 2 percent on tuition
increases for the next five years, thus, constraining the
university’s major revenue generators.
THE PURCHASING DEPARTMENT
The Web site of the purchasing department stated its
mission: “Our objective is to look after your needs. We want
to provide you with the right goods or services, at the right
time, at the right price, and on a continuing basis.” To
accomplish its goals, the department (1) purchased goods
and services such as computer and business products, lab
supplies, photocopiers, furniture, and travel for the
university; (2) managed central supplies, which were
bought in bulk, stored, and redistributed, as required;
(3) was responsible for ensuring the economic and timely
delivery of goods and services; (4) maintained an asset
inventory; and (5) managed the disposal of goods.
Exhibit 1 provides the department organization chart.
Junior buyers had a purchasing limit for a single purchase

EXHIBIT 1 Jim Haywood

Purchasing Director of
Purchasing
Department Lyn Ryan
Admin.
Organization Assistant
Chart

Theo Vaslow Vacant

Purchasing Manager Purchasing Manager
Physical Plant General Campus

Recently hired Rick Waters Laurie Hass Peter Jacobs

Senior Buyer Senior Buyer/ Head Central Senior Buyer
Construction Delivery Supplies Computer Printing

Jack Miller Vacant Elvira Castor Tara Stender Clara Saudoin Jasmin Gold
Junior Buyer Junior Buyer Asset Inv./ Central Clerk Junior Buyer
Decor, Cleaning Heating, Electrical Delivery/ Supplies Lab & Scientific
Furniture Plumbing Disposal Supplies, Travel
Leenders−Johnson−Flynn−Fearon: 2. Supply Organization
Purchasing and Supply
Management, 13th Edition
of $2,000; employees at the senior buyer level, $25,000.
Purchasing managers had a purchasing limit of $50,000.
Jim Haywood noted that the current department structure
was a result of “patching up” in the last four years, in
which the department had been extremely busy. In
addition to its daily tasks, the department had to absorb
the continuous introduction of software systems. The
consistent work overload had prevented Jim Haywood
from attending to his nondaily responsibilities, including
a systematic revision of the department structure.
JIM HAYWOOD
Jim Haywood had assumed the position of director of
purchasing six years earlier after working 17 years in the
university’s financial services area. As director of
purchasing, he still reported to the director of financial
services, with whom he had a good relationship. When
Jim took over the purchasing department, it was in
turmoil: The previous director had taken early retirement
after senior management had voiced distrust in the
department, and purchasing agents had strongly resisted
changes to improve the department’s efficiency. Moreover,
the department staff was dispersed in two buildings.
When Jim came in, his goals included the reduction of
the middle management layer (that is, the purchasing
managers), the introduction of an online purchasing
system, the integration of the department in one location,
and the benchmarking of the department’s performance.
For the most part, Jim had achieved these goals. By
January of the current year, through intra-university
transfers, early retirement, and attrition, the number of
purchasing agents had been reduced to two from six, and
the total number of employees was 14, down from 20 in
six years. PeopleSoft, a software package for business
process applications, was in use. So far, however,
PeopleSoft supported the current work processes, but
reengineering to optimize PeopleSoft had yet to get under
way. Moreover, all employees worked now in one location.
Finally, Jim had introduced a Center for Advanced
Purchasing Studies (CAPS) benchmarking system.
THE CURRENT SITUATION
At the end of April, Jim Haywood faced the following
situation:
• In April, one purchasing manager had died;
furthermore, a senior buyer had left after her husband
was transferred, and a junior buyer had left after her
husband retired. Jim had hired a replacement for the
Text © The McGraw−Hill
Companies, 2006
Chapter 2 Supply Organization 53
senior buyer position, but the replacement would not
arrive until late May. He had not yet decided what to
do with the remaining two vacant positions. Right
now, his staff was down to 10 employees.
• CAPS data showed that the purchasing department
had significantly improved over the past six years.
For example, the total revenue per professional
employee of $50 million was above the benchmark
value of $30 million. Similarly, the total amount of
purchases per buyer of $12 million had steadily
improved over time and was now at the benchmark
value. CAPS, however, also indicated that the
department was still performing below average on
several other parameters, such as cycle time and the
number of suppliers per employee.
• After the consistent work overload during the previous
four years, there was now an opportunity for reevaluating
the department and catching up on nondaily respon-
sibilities. Among other things, Jim reevaluated his goals
for the department and its restructuring:
“First, I want to reconsider the people issues in our
department. I need to find a way to foster the careers of
my employees. They have been with me for a long time,
know what they do, and deserve recognition. Second,
I still see room for improving the ‘value added’ in the
department. We do too much work that does not
increase our effectiveness. Third, we have to react to a
current budget cut of 2 percent and future anticipated
budget cuts between 3 percent and 5 percent.”
To share these goals and to get input on how to
achieve them, Jim had already met with his superior.
He also had had meetings with his three remaining
senior employees—Theo Vaslow, Rick Waters, and
Peter Jacobs—both individually and as a group. In
addition, a staff meeting with all employees had taken
place.
• In these meetings, several issues surfaced. Jim, as
well as the purchasing agent Theo Vaslow, felt that
they had to do too much supervising. Despite the
reductions in personnel, the morale in the purchasing
department was good. Most employees had been with
the department for more than 10 years, and generally
employee commitment to their department and their
jobs was high. Jim generally viewed his employees as
high performers who had done their best to keep the
purchasing department running in extremely busy
times because of the introduction of software
systems. Some employees at the junior buyer level,
however, had indicated their frustration about the lack
 Leenders−Johnson−Flynn−Fearon: 2. Supply Organization
Purchasing and Supply
Management, 13th Edition
54 Purchasing and Supply Management
EXHIBIT 2 Task List for the Purchasing Department
Duchess University
Purchasing Organizational/Responsibilities Review
Task
• Eliminate the reprocessing of data.
• Analyze the purchasing data.
• Analyze the data from central supplies.
• Review the supplier master file.
• Eliminate forms (paperwork).
• Update authorizations and limits system.
• Train new university employees.
• Further develop the Web site by integrating
software solutions.
• Train purchasing employees on PeopleSoft.
• Increase the number of systems contracts.
• Review systems contracts that have ended.
• Standardize purchasing processes across buyers.
• Segregate procurement from nonprocurement
activities.
• Rewrite job descriptions.
of promotion opportunities, as promotions to the
senior buyer level led to salary increases of about 25
percent.
• On the basis of the meetings, Jim had generated a task
list for achieving the goals, which is shown in Exhibit 2.
Jim felt that now the goals and the task list were
complete, but he was not sure how to implement them.
He wondered to what extent restructuring the
department would address issues on the task list.
• In September, the purchasing department would face
an upgrade of PeopleSoft. Moreover, the department
would have to gear up for Web-based processing of
Case 2–2
Roger Haskett
On June 26, 2004, Roger Haskett, director of purchasing
for Morrow University in San Antonio, Texas, was
evaluating a proposal negotiated by Professor Kahsay
from the engineering faculty to upgrade computer
equipment in his engineering lab. Roger was concerned
Text © The McGraw−Hill
Companies, 2006
Expected Outcome
• Free up people power; reduce costs.
• Maximize purchasing effectiveness.
• Maximize purchasing effectiveness.
• Save costs because of early payments.
• Reduce costs.
• Ensure functioning of the department.
• Utilize resources outside the department on
purchasing processes.
• Reduce costs and speed up processes.
• Improve effectiveness of personnel.
• Reduce costs.
• Reduce costs.
• Achieve uniform best practices.
• Improve daily operations.
• Reflect past changes. Gain promotion
compensation.
purchase requisitioning that would start within the next
year. Jim stated:
“Like in previous years, it is going to be tough. We
will have to work very hard just ‘to keep the train on
the tracks’ while implementing the new systems.”
WHAT WAS NEXT?
Jim wanted to restructure the department before
September. He asked himself: “What exactly should the
outcome of the restructuring of the department be? And, if
I changed the structure, how should I do it?”
that the proposal involved a capital lease arrangement, and
even though there was no policy to prevent capital leases
from being arranged, the university did not typically enter
into such agreements.