Chapter 5 - Purchasing Management
Defining Procurement and Purchasing
- Procurement: selecting and vetting suppliers, negotiating contracts, establishing payment
terms, and actual purchase of goods/services (SOURCE from SCOR model)
- Purchasing: ordering goods/supplies from an external third party; transactional function
- May have a separate department or be part of the SCM department
- Supply Management: includes the function of determining the materials/services needed
- Purchasing Terms:
- Purchase requisition: an internal document that defines the need for
goods/services; can notify purchasing personnel and give authorization to
purchase (not external contract)
- Purchase order (PO): external commercial document; official offer issued by
buyer to seller; becomes legally binding only when supplier accepts contract
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- Primary Objectives of Purchasing:
1) Ensure uninterrupted flow of goods/services at the lowest overall cost
2) Improve quality of finished goods produced
3) Optimize customer satisfaction
- Purchasing Contributes to These Objectives by:
1) Actively seeking reliable suppliers
2) Working with expertise of strategic supplier to improve quality and materials
3) Involving suppliers and purchasing personnel in new product design and
development efforts
Defining Procurement and Purchasing
- Procurement: selecting and vetting suppliers, negotiating contracts, establishing payment
terms, and actual purchase of goods/services (SOURCE from SCOR model)
- Purchasing: ordering goods/supplies from an external third party; transactional function
- May have a separate department or be part of the SCM department
- Supply Management: includes the function of determining the materials/services needed
- Purchasing Terms:
- Purchase requisition: an internal document that defines the need for
goods/services; can notify purchasing personnel and give authorization to
purchase (not external contract)
- Purchase order (PO): external commercial document; official offer issued by
buyer to seller; becomes legally binding only when supplier accepts contract
-
-
- Primary Objectives of Purchasing:
1) Ensure uninterrupted flow of goods/services at the lowest overall cost
2) Improve quality of finished goods produced
3) Optimize customer satisfaction
- Purchasing Contributes to These Objectives by:
1) Actively seeking reliable suppliers
2) Working with expertise of strategic supplier to improve quality and materials
3) Involving suppliers and purchasing personnel in new product design and
development efforts
