CHAPTER 16 – STUDY UNIT 11
11.1 Importance of services procurement (purchasing)
(pg 271)
*The service sector is by far the FASTEST GROWING sector
world wide
*DEREGULATION has resulted in the disbanding of
monopolistic protection.
*REDUCE COST – The proven ability of supply management to
reduce cost by increasing the efficiency of the procurement
processes influenced top management to allocate cost
reduction goals in services to purchasing and
supply.
*The introduction of E-PROCUREMENT AND OTHER SOURCING
TOOLS assisted supply managers in performing procurement
activities much more efficiently.
* OUTSOURCING of non-core activities is another management
philosophy that stimulated by the relentless global drive for cost
reduction.
THE NATURE OF SERVICES – DIFFRENCES BETWEEN
BUYING SERVICES AND GOODS
11.2Characteristics of services:
, * The intangibility of services – services are experienced by the
customer and not delivered
* The Heterogeneity of services – The implication for
purchasing is that services are unlikely to be interchangeable
* Simultaneity – In service production there is no lead time in
services delivery since service production and services consumption
are simultaneous
* The perishability of services – Since the production and
consumption of services are simultaneous, services cannot be stored
for later use.
* Entry into the market - For most services entry into the
market is relatively easy in the sense that large amounts of capital
are seldom requires to become a service provider.
PURCHASINGOF SERVICES
11.3 5 Guidelines for purchasing services
1. Have a clear defined scope – supply management must
have a clear vision of what exactly is requires, what the supplier
must accomplish, what the outcome of the service
Delivery must be and how performance of the supplier is
to be measured.
2. Establish a suitable organizational structure – Centralizing
the services purchasing structure will reduce the risk associated
with service buying.
11.1 Importance of services procurement (purchasing)
(pg 271)
*The service sector is by far the FASTEST GROWING sector
world wide
*DEREGULATION has resulted in the disbanding of
monopolistic protection.
*REDUCE COST – The proven ability of supply management to
reduce cost by increasing the efficiency of the procurement
processes influenced top management to allocate cost
reduction goals in services to purchasing and
supply.
*The introduction of E-PROCUREMENT AND OTHER SOURCING
TOOLS assisted supply managers in performing procurement
activities much more efficiently.
* OUTSOURCING of non-core activities is another management
philosophy that stimulated by the relentless global drive for cost
reduction.
THE NATURE OF SERVICES – DIFFRENCES BETWEEN
BUYING SERVICES AND GOODS
11.2Characteristics of services:
, * The intangibility of services – services are experienced by the
customer and not delivered
* The Heterogeneity of services – The implication for
purchasing is that services are unlikely to be interchangeable
* Simultaneity – In service production there is no lead time in
services delivery since service production and services consumption
are simultaneous
* The perishability of services – Since the production and
consumption of services are simultaneous, services cannot be stored
for later use.
* Entry into the market - For most services entry into the
market is relatively easy in the sense that large amounts of capital
are seldom requires to become a service provider.
PURCHASINGOF SERVICES
11.3 5 Guidelines for purchasing services
1. Have a clear defined scope – supply management must
have a clear vision of what exactly is requires, what the supplier
must accomplish, what the outcome of the service
Delivery must be and how performance of the supplier is
to be measured.
2. Establish a suitable organizational structure – Centralizing
the services purchasing structure will reduce the risk associated
with service buying.
