Slide 1.

Procurement Management
 Intro to Procurement Management MGMT224-EC00
 Class Intro
 Why and How
 Textbook
 Covered Chapters (Student-oriented)
 Chapter 1: The scope and influence of procurement

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.2

Plan of the Textbook

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.3

Part 1
Introduction, strategy, logistics, supply
chain, policies and procedures

Chapter 1
The scope and influence of procurement

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.4

Learning Outcomes
This chapter aims to provide an understanding of:
 The scope and influence of procurement.
 The stages of procurement development and future trends in
procurement development.
 Factors influencing the internal and external status of procurement.
 The strategic dimensions of procurement.
 Demands for change in the strategic business role of procurement.
 Characteristics of world-class procurement.
 Future challenges for procurement.

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.5

Key Ideas
 Procurement as a function, process, supply or value chain link, a relationship,
discipline and profession.
 Definitions of purchasing and procurement.
 The evolution of procurement and supply management (PSM) from a reactive
transactional to a proactive strategic activity.
 Globalisation, information technology, changing production and management
philosophies as factors in the evolution of procurement.
 Characteristics of world-class procurement.
 Leverage, focus and professionalism as factors contributing to the status of
procurement within an organisation.
 Procurement as a business change agent.
 Procurement as a key influencer on business decisions.

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
 Slide 1.6

Scope: Holistic View of Logistics in a

Supply Chain: Sustainable FMCG model

Copyright © 2018 El Mteyni, Environmentally-

Sustainable SC Recovery in the FMCG Sector:
Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
A Critical Knowledge Map
Slide 1.7

The scope and influence of procurement

How to define procurement

The classic definition

To buy materials of the right quality in the right quantity
from the right source delivering to the right place at the
right time at the right price. (Also called the Rs of Logistics)

To be contrasted with
Modern definition

Procurement exists to explore supply market opportunities and to

implement resourcing strategies that deliver the best possible supply
outcome to the organisation, its stakeholders and customers.

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.8

Scope of Procurement
 Why Procurement ?
 Procurement in Daily Life
 Procurement in Businesses
 Local Procurement vs. Global Procurement
 Procurement vs Purchasing

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.9

Procurement vs Purchasing

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.10

The scope and influence of procurement

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

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.11

The scope and influence of procurement

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

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
 Slide 1.12

The scope and influence of procurement

The evolution of purchasing through to procurement

The Reck and Long model

STAGE
1. Product centred
2. Process centred
CHARACTERISTICS
Concerned with the five Rights which concentrate
exclusively upon the procurement of tangible products
and outcome dimensions
Moves beyond a concern with outcomes and begins to
measure the process through which the outcome is
delivered

3. Relational Process and relationally focused, expanded to include

procurement–supplier relationships
Focused on best product management methods. Employs
4. Performance
an integrated methodology to manage relationships,
centred
processes and outcomes

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.13

The scope and influence of procurement

The evolution of purchasing through to procurement
The Reck and Long model’s four strategic stages of P. development

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.14

The scope and influence of procurement

The evolution of purchasing through to procurement

(Continued)
Period 1 The early years (1850–1900)
Period 2 Growth of fundamentals (1900–1939)
Period 3 The war years (1940–1949)
Period 4 The quiet years (1947–mid-1960s)
Period 5 Materials management comes of age (mid-1960s–late 1970s)

Period 6 The global era (late 1970s–1999)

Period 7 Integrated supply chain management (beyond 2000)

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.15

The scope and influence of procurement

Procurement and change

Information Changing 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

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.16

The scope and influence of procurement?

Must accommodate World-class procurement

Total quality management (TQM)

Just-in-time (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

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.17

The scope and influence of procurement

The status of procurement and supply management (PSM)

PSM 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

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.18

The scope and influence of procurement

The status of procurement and supply management (PSM)

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.19

The scope and influence of procurement

The status of procurement and supply management (PSM)

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016
Slide 1.20

Thank You

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of the publisher.

Lysons & Farrington, Procurement and Supply Chain Management, 9e © Pearson Education Limited 2016