Introduction:
define Purchasing and Supply Chain Management and explain how they are related
Purchasing management
- The management of a firm’s external resources
- Ensuring the supply of goods, services, knowledge, and capabilities
- To perform the firm’s primary and support (HRM) activities
Purchasing today-trends
- From administrative to strategic function
- From buying materials/parts to buying competence
- From cost focus to perform focus
Supply chain management
- The management of upstream and downstream relations with suppliers and
customers to deliver superior customer value at less costs to the SC as a whole
- Customer value: how at the end the product/service is perceived
How does supply chain management differ from purchasing management?
- Shared:
o Relationships
o Management of activities
o Aiming for performance outcomes
- Differences
,Procurement: describes all those processes concerned with developing and implementing
strategies to manage an organization’s spend portfolio in such way as to contribute to the
organization’s overall goals and to maximize the value released and/or minimize the total
cost of ownership
- Procurement is a more comprehensive term than purchasing, which is more focused
on the tactile acquisition of goods and services and the execution of plans rather
than the development of strategies
Outsourcing:
Explain purchasing and supply chain management in relation to concepts as (global)
sourcing and outsourcing
Analyze ‘make, buy or ally’ decisions from different theoretical perspectives
Basis of P&SCM decision to transfer activities, originally based in the organization, to
external suppliers
- Concentrate on unique
- Differentiate from other companies
Outsourcing: the practice of delegating functions or tasks, traditionally internal in an
organization, to a specialized external supplier
- Can apply to manufacturing and service
- Domestic and international market
- A.k.a. make or buy decisions
- Why outsource
o Decrease production costs
o Access to good-quality suppliers
o Gain access to markets/ circumvent trade barriers
o Gain access to scarce resources
- Complex but vital for an organization
- When outsource (underlying theory)
o Transaction Cost Economics (TCE)
o Resource Based View (RBV)
- 4 elements of outsourcing: outsourcing firm, object/process, design and the
partner/supplier
Transaction cost theory
, - Decision based on minimalization of transaction costs
- 2 criteria:
o Asset specificity: extend to which assets are unique to a specific task
o Potential for opportunistic behavior and related costs for reducing uncertainty
- Make or buy?
o High uncertainty: make
o Low uncertainty: buy
Resource based view
- Sources of sustained competitive advantage
o Skills, resources, activities
- Core competencies
o Deliver customer value
o Differentiate firm from competitors
o Can potentially be extended and developed
o Have the following characteristics (VRIN)
Valuable
Rare
Inimitable
Non-substitutable
- Make or buy: closer to the core, the more important to keep in-house
Outsourcing decision (contracting out activities/functions to specialized suppliers)
Leads to purchasing activities (who will provide the activity/function demanded)
And to management of chains and network (how to make sure all work together to deliver
what customers want)
Some outsourcing-related challenges
- Management of purchasing activities
o Supplier selection
define Purchasing and Supply Chain Management and explain how they are related
Purchasing management
- The management of a firm’s external resources
- Ensuring the supply of goods, services, knowledge, and capabilities
- To perform the firm’s primary and support (HRM) activities
Purchasing today-trends
- From administrative to strategic function
- From buying materials/parts to buying competence
- From cost focus to perform focus
Supply chain management
- The management of upstream and downstream relations with suppliers and
customers to deliver superior customer value at less costs to the SC as a whole
- Customer value: how at the end the product/service is perceived
How does supply chain management differ from purchasing management?
- Shared:
o Relationships
o Management of activities
o Aiming for performance outcomes
- Differences
,Procurement: describes all those processes concerned with developing and implementing
strategies to manage an organization’s spend portfolio in such way as to contribute to the
organization’s overall goals and to maximize the value released and/or minimize the total
cost of ownership
- Procurement is a more comprehensive term than purchasing, which is more focused
on the tactile acquisition of goods and services and the execution of plans rather
than the development of strategies
Outsourcing:
Explain purchasing and supply chain management in relation to concepts as (global)
sourcing and outsourcing
Analyze ‘make, buy or ally’ decisions from different theoretical perspectives
Basis of P&SCM decision to transfer activities, originally based in the organization, to
external suppliers
- Concentrate on unique
- Differentiate from other companies
Outsourcing: the practice of delegating functions or tasks, traditionally internal in an
organization, to a specialized external supplier
- Can apply to manufacturing and service
- Domestic and international market
- A.k.a. make or buy decisions
- Why outsource
o Decrease production costs
o Access to good-quality suppliers
o Gain access to markets/ circumvent trade barriers
o Gain access to scarce resources
- Complex but vital for an organization
- When outsource (underlying theory)
o Transaction Cost Economics (TCE)
o Resource Based View (RBV)
- 4 elements of outsourcing: outsourcing firm, object/process, design and the
partner/supplier
Transaction cost theory
, - Decision based on minimalization of transaction costs
- 2 criteria:
o Asset specificity: extend to which assets are unique to a specific task
o Potential for opportunistic behavior and related costs for reducing uncertainty
- Make or buy?
o High uncertainty: make
o Low uncertainty: buy
Resource based view
- Sources of sustained competitive advantage
o Skills, resources, activities
- Core competencies
o Deliver customer value
o Differentiate firm from competitors
o Can potentially be extended and developed
o Have the following characteristics (VRIN)
Valuable
Rare
Inimitable
Non-substitutable
- Make or buy: closer to the core, the more important to keep in-house
Outsourcing decision (contracting out activities/functions to specialized suppliers)
Leads to purchasing activities (who will provide the activity/function demanded)
And to management of chains and network (how to make sure all work together to deliver
what customers want)
Some outsourcing-related challenges
- Management of purchasing activities
o Supplier selection
