MNP2601 CHAP2

MNP 2601 Purchasing Management
Chapter 2: The task of purchasing and supply
management
Supply management is the process of planning, implementing, evaluating and controlling strategic and
operational purchasing Decisions for directing all activities of the purchasing function toward opportunities
consistent With the firm’s long-term goals.

Purchasing and supply management as part of business management
Executed as an integrated part of the firm’s broader management.

Purchasing and supply planning his style of offence general planning, mainly because the continuous flow of
raw materials, materials, components and services is of strategic importance to the enterprise.

The organizational structure of the purchasing and supply function should be aimed mainly at linking into the
firm’s overall structure in the most effective way.

The firms P&S function should be compatible with the firm’s organizational structure.

P&S coordination should be ended harmonizing and the lining the activities of the P & S function with those of
other business functions.

Control is that in element of management which ensures the activities are executed according to plan.


Planning for purchasing and supply management

The nature of purchasing and supply planning
P & S planning is the first responsibility of P & S management. At the task can only be executed after the
planning task has been completed.

The following general factors headed to what is called the ‘resource crisis’ which has made P & S planning
increasingly more crucial over the past two decades:

 Energy crisis
 Scramble for commodities
 Shortages or semi finished products
 Inflation
 Fluctuating exchange rates
 Government control in producer countries


Levels of P & S planning and objectives
P & S management can be involved at three levels and the organization:

 Organizational planning – strategic planning
 Functional or tactical planning – middle management level
 Operational planning – lowest level

An important part of P & S planning is the formulation of objectives.

Overall objectives are part of a strategic or long-term objectives. Tactical and operational objectives and
should support strategic objectives.

Lower levels of objectives will transform the strategic or long term objectives into more specific feasible ones.


See the table on page 24 of the study guide
Strategic purchasing and supply planning
Strategic purchasing and supply planning is planning for the long term and should take place at top
management level.


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, One of the aims of strategic purchasing and supply planning is to plan purchasing and supply pro-actively
and move away from reactive purchasing.

The following factors will determine whether the purchasing and supply function can play a proactive or
reactive role in the strategic planning process:

 Extent to which the enterprise depends on purchased products, raw materials and services
 Importance that top management attaches to the P & S function.
 Extent of the evolutionary development of the purchasing and supply function within the enterprise
 Ability of the P & S manager to fit a shift in emphasis from tactical to strategic purchasing
 Importance of supplier relations and long term contracts
 Willingness of top management to invest in integrated systems.

Examples of areas for which supply management can develop strategies:

 Assurance of supply strategies
 Cost reduction strategies
 Supply chain support strategies
 Environmental change Strategies
 Competitive edge strategies
 Risk management strategies

See figure 2.1 in the textbook




See page 27 in the study guide.




Tactical purchasing and supply planning
Executed at functional or middle management level.

P & S management has a dual role to develop existing and supply strategies as part of the broad strategy of
the enterprise at top management level and to implement in the middle management level.


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