Professional Documents
Culture Documents
5th Ed Chapter 02
5th Ed Chapter 02
5th Ed Chapter 02
Chapter 2
PURCHASING
MANAGEMENT
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
CHAPTER 2
LEARNING OBJECTIVES
You should be able to:
• Describe the role of purchasing and its strategic impact
on an organization’s competitive advantage.
• Describe the traditional purchasing process, e-
procurement, public procurement, and green
purchasing.
• Recognize and know how to handle small value
purchase orders.
• Analyze and evaluate sourcing decisions and the factors
impacting supplier selection, including outsourcing,
make-or-buy, and break-even analysis.
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use. 2
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
Simplified Reduce
Profit & Material
Empty cell
Loss Costs by
Statement $20,000
Gross Sales/Net Revenue $1,000,000 $1,000,000
Cost of Goods Sold (Materials + Manufacturing $500,000 $480,000
Cost)
Gross Profits $500,000 $520,000
General & Administrative Expenses (45% of $450,000 $450,000
Gross Sales)
Profits Before Taxes $50,000 $70,000
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
Issue PO
Materials
Requisition
Purchase Purchase MR 1
Order Order MR 2
PO 1 PO 1 Accounting
PO 2 PO 2
PO 3 MR 2 Information
MR File Issue for charging the
PO 4
Materials
Materials + appropriate
department
DO 3
DO 2
Delivery PO File
Order PO 3
DO 1 MR File
DO 2
MR 2
Ship
Materials
MR 2
DO 2 + Accounts Payable
PO 2
Materials Materials +
PO 2
Delivery
Order Delivery
DO 1 Order
DO 1
INV 2
Invoice
INV 1 Invoice
INV 1
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
Find break-even point Q by setting total cost of both options equal and solving for Q:
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
7. Quality Cost $6,000,000 times 2 Empty cell $120,000.00 $5,976,000 times 3 Empty cell $179,280.00
percent percent
8. Delivery Rating: 12,000 times 1 percent Empty cell $900.00 12,000 times 2 percent Empty cell $1,800.00
Backorder (50 percent) times 50 percent times times 50 percent times
$15 $15
8. Delivery Rating: Lost 12,000 times 1 percent Empty cell $48,600.00 12,000 times 2 percent Empty cell $97,200.00
Sales (50 percent) times 50 percent times times 50 percent times
$4,500 times 18 percent $4,500 times 18 percent
TOTAL COST Empty cell Empty cell $6,126,361.64 Empty cell Empty cell $6,265,287.40
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
Potential Challenges –
Requires additional skills and knowledge to deal
with international suppliers, logistics,
communication, political environment, and other
issues
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
Principles of Supply Chain Management (5e)
End of Chapter 2
© 2019 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or
otherwise on a password-protected website or school-approved learning management system for classroom use.
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