Summary book
Chapter 1
Purchasing is a functional group (i.e., a formal entity on the organizational chart) as well as a functional
activity (i.e., buying goods and services). The purchasing group performs many activities to ensure it
delivers maximum value to the organization. Purchasing has been referred to as doing “the five rights”:
getting the right quality, in the right quantity, at the right time, for the right price, from the right source. In
this text we will interchange the terms “purchasing”
and “procurement.”
Supply management is not just a new name for purchasing but a more inclusive concept. We feel supply
management is a strategic approach to planning for and acquiring the organization’s current and future needs
through effectively managing the supply base, utilizing a process orientation in conjunction with cross-
functional teams (CFTs) to achieve the organizational mission. Similar to our definition, the Institute for
Supply Management defines supply management as the identification, acquisition, access, positioning, and
management of resources and related capabilities an organization needs or potentially needs in the
attainment of its strategic objectives.
Supply management requires pursuing strategic responsibilities, which are those activities
that have a major impact on longer-term performance of the organization. Supply management is a broader
concept than purchasing. Supply management is a progressive approach to managing the supply base that
differs from a traditional arm’s-length or adversarial approach with sellers. It requires purchasing
professionals to work directly with those suppliers that are capable of providing world-class performance
and advantages to the buyer. Think of supply management as a progressive and supercharged version of
basic purchasing.
Supply management often takes a process approach to obtaining required goods and services. Supply
management is cross-functional, meaning it involves purchasing, engineering, supplier quality assurance,
the supplier, and other related functions working together as one team, early on, to further mutual goals.
Organizations are effectively forming new types of relationships (sometimes called “partnerships” or
“alliances”) that require shared
resources.
A large set of activities besides
purchasing is part of supply chain
management.
- Purchasing
- Inbound transportation
- Quality control
- Demand and supply
planning
- Receiving, material handling
and storage
- Materials or inventory
control
- Order processing
- Production planning,
scheduling and control
Warehousing/distribution
- Shipping
- Outbound transportation
- Customer service
Chapter 2 The Purchasing Process
A world-class purchasing staff must continuously work to improve the efficiency and effectiveness of what
we call the purchasing process. This is the process used to identify user requirements, evaluate the need
effectively and efficiently, identify suppliers, ensure payment occurs promptly, ascertain that the need was
effectively met, and drive continuous improvement.
Chapter 1
Purchasing is a functional group (i.e., a formal entity on the organizational chart) as well as a functional
activity (i.e., buying goods and services). The purchasing group performs many activities to ensure it
delivers maximum value to the organization. Purchasing has been referred to as doing “the five rights”:
getting the right quality, in the right quantity, at the right time, for the right price, from the right source. In
this text we will interchange the terms “purchasing”
and “procurement.”
Supply management is not just a new name for purchasing but a more inclusive concept. We feel supply
management is a strategic approach to planning for and acquiring the organization’s current and future needs
through effectively managing the supply base, utilizing a process orientation in conjunction with cross-
functional teams (CFTs) to achieve the organizational mission. Similar to our definition, the Institute for
Supply Management defines supply management as the identification, acquisition, access, positioning, and
management of resources and related capabilities an organization needs or potentially needs in the
attainment of its strategic objectives.
Supply management requires pursuing strategic responsibilities, which are those activities
that have a major impact on longer-term performance of the organization. Supply management is a broader
concept than purchasing. Supply management is a progressive approach to managing the supply base that
differs from a traditional arm’s-length or adversarial approach with sellers. It requires purchasing
professionals to work directly with those suppliers that are capable of providing world-class performance
and advantages to the buyer. Think of supply management as a progressive and supercharged version of
basic purchasing.
Supply management often takes a process approach to obtaining required goods and services. Supply
management is cross-functional, meaning it involves purchasing, engineering, supplier quality assurance,
the supplier, and other related functions working together as one team, early on, to further mutual goals.
Organizations are effectively forming new types of relationships (sometimes called “partnerships” or
“alliances”) that require shared
resources.
A large set of activities besides
purchasing is part of supply chain
management.
- Purchasing
- Inbound transportation
- Quality control
- Demand and supply
planning
- Receiving, material handling
and storage
- Materials or inventory
control
- Order processing
- Production planning,
scheduling and control
Warehousing/distribution
- Shipping
- Outbound transportation
- Customer service
Chapter 2 The Purchasing Process
A world-class purchasing staff must continuously work to improve the efficiency and effectiveness of what
we call the purchasing process. This is the process used to identify user requirements, evaluate the need
effectively and efficiently, identify suppliers, ensure payment occurs promptly, ascertain that the need was
effectively met, and drive continuous improvement.
