Chapter 1 Part 1 - The Scope of Procurement

Slide 1.
Procurement and Supply Chain

Management
Tenth Edition
Chapter 1_part 1
The scope and influence of
procurement
Copyright © 2020, 2016, 2012 Pearson Education, Inc. All Rights Reserved
This chapter aims to provide an understanding of:
• How to define procurement

• How to define supply chain management
• Strategic roles of procurements
• Procurement as organizational buying
• The strategic scope of procurement
• Integrated supply chain management
• Procurement and change
• World-class procurement
• The status of the procurement and supply chain
management’
• Reflections procurement positioning in business
• The scope of procurement in public sector
Slide 1.3
Definitions
• Procurement
Procurement exists to explore supply market
opportunities and to implement resourcing strategies
that deliver the best possible supply outcomes to the
organisation, its stakeholders and customers.
• Supply chain management

Supply chain management is the management and
oversight of a product from its origin until it is consumed.
Supply chain management involves the flow of materials,
finances and information. This includes product design,
planning, execution, monitoring and control.
Slide 1.4
Strategic roles of procurement

• Due Diligence
• Risk management of the supply chain
• Relationship management
• Continuous improvement of supplier performance
• Supplier’s investment in right first time
• Supplier’s investment in inventory
• Supplier’s investment in procurement expertise
Slide 1.5
Procurement as organisational
buying
• The different types of organisations
• Procurement characteristics of each type of
organisation
• Procurement as supplier management
• Procurement as external resource management
Slide 1.6
Indicative areas of financial strategic

considerations for procurement
• Finance
Financial strategic consideration Corporate strategic relevance
1 Supplier payment terms Cash flow
2 Bought in price of goods/services Competitiveness in market place
3 Contract termination costs Provision for termination costs
4 Currency fluctuations Decision to forward buy currency
5 Late delivery Product launch/payment of damages
6 Changes in scope of specification Impact on selling prices
7 Payment of supplier ‘up-front’ Vulnerability if no Guarantee in place
8 Late payment to suppliers Supplier applies ‘stop’ on deliveries
Slide 1.7
Integrated supply chain management

FARRINGTON SEVEN STRATEGIC STEPS
▪ Traditional
▪ Awakening
▪ Implementation
▪ Systems development
▪ Leadership
▪ Global reach
▪ Standards challenge
Slide 1.8
Procurement and change
Information Chasing production &

Globalisation impact technology management
impact philosophies impact
• Transgression of • Slicker transactions • Competitive advantage

national boundaries
• Quality of management • Outsourcing
• Advantage of cost data
• Supply chain
• Specialised labour skills • Strategic link with management
suppliers
• Emerging economies
• Paperless environment
Slide 1.9
World Class Procurement

Must accommodate
• TQM
• JIT
• Total cycle time reduction
• Long range planning
• Supplier relationship engineering
• Strategic cost management
• Performance accountability
• Professional flexibility and development
• Service excellence
• Corporate social responsibility
Slide 1.10
The status of procurement and

supply management
Status Influenced by:
Leverage • Power of procurement to enhance profitability
Focus • Is it transactional, commercial or strategic?
• Perception of influencers
• Academic activity
Professionalism • Depth of knowledge and skill
• Future focus?
Slide 1.11
Reflections on procurement
positioning in business
Key Points
• Why is procurement undervalued in some organisations?
• What performance outputs are required by top management?
• Is there a limit to procurement decision making?
• Which three factors, strategically, are crucial for procurement
to achieve?
• Does risk management failures of the supply chain reflect on
procurement?
• Should procurement have Board of Director representation?
Slide 1.12
The scope of procurement in the

public sector
• Compliance with standing orders
• Compliance with regulatory requirements
• Ethical standards vital
• Visibility of processes and contract awards
• Exposing cost drivers
• Negotiation
• Ministerial advice

Chapter 1 Part 1 - The Scope of Procurement

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Slide 1.

Procurement and Supply Chain

• How to define procurement

• Supply chain management

Strategic roles of procurement

Indicative areas of financial strategic

2 Bought in price of goods/services Competitiveness in market place

3 Contract termination costs Provision for termination costs

4 Currency fluctuations Decision to forward buy currency

5 Late delivery Product launch/payment of damages

6 Changes in scope of specification Impact on selling prices

7 Payment of supplier ‘up-front’ Vulnerability if no Guarantee in place

8 Late payment to suppliers Supplier applies ‘stop’ on deliveries

Integrated supply chain management

Procurement and change

Information Chasing production &

• Transgression of • Slicker transactions • Competitive advantage

World Class Procurement

The status of procurement and

Leverage • Power of procurement to enhance profitability

Focus • Is it transactional, commercial or strategic?

• Should procurement have Board of Director representation?

The scope of procurement in the

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