Chapter 1 LGMT 536
LGMT 536
Purchasing for Logistics and Supply Chain Management
Chapter 1
Introduction to Purchasing and Supply
Chain Management
Chapter Overview
A new competitive environment
Why purchasing is important
Understanding the language of purchasing and supply chain management
Achieving purchasing and supply chain benefits
2
Chapter Overview
The supply chain umbrella
Four enablers of purchasing and supply chain management The evolution of purchasing and supply chain management Looking ahead
3
A New Competitive Environment
Increasing numbers of world class global competitors Sophisticated customer base
● More performance at lower cost
Widely available information sources
Balance of power between buyers and suppliers
Greater levels of outsourcing
4
Factors Driving SCM
Low cost and wide availability of information more closely links members of a supply chain
Competition in domestic and international markets requires greater quickness, agility, and flexibility
5
Factors Driving SCM
Customer expectations and requirements are constantly changing and more demanding
Major supply disruptions require the ability of a supply chain to react rapidly
Competition is now between supply chains, not just between companies
6
Why Purchasing Is Important
Increasing value and savings
Building relationships and driving innovation
Improving quality and reputation
Reducing time-to-market
Generating economic impact
Contributing to competitive advantage
7
Increasing Value and Savings
Suppliers have substantial impact on a firm’s total cost Many product features originate from suppliers
In manufacturing, purchased content is more than
55% of revenues
Avoiding costs through early involvement in product design stage
8
Building Relationships and Driving Innovation
Traditional approach is to bargain hard for price reductions New approach is to conduct joint cost reduction with suppliers
Both buyer and supplier must
Purchasing for Logistics and Supply Chain Management
Chapter 1
Introduction to Purchasing and Supply
Chain Management
Chapter Overview
A new competitive environment
Why purchasing is important
Understanding the language of purchasing and supply chain management
Achieving purchasing and supply chain benefits
2
Chapter Overview
The supply chain umbrella
Four enablers of purchasing and supply chain management The evolution of purchasing and supply chain management Looking ahead
3
A New Competitive Environment
Increasing numbers of world class global competitors Sophisticated customer base
● More performance at lower cost
Widely available information sources
Balance of power between buyers and suppliers
Greater levels of outsourcing
4
Factors Driving SCM
Low cost and wide availability of information more closely links members of a supply chain
Competition in domestic and international markets requires greater quickness, agility, and flexibility
5
Factors Driving SCM
Customer expectations and requirements are constantly changing and more demanding
Major supply disruptions require the ability of a supply chain to react rapidly
Competition is now between supply chains, not just between companies
6
Why Purchasing Is Important
Increasing value and savings
Building relationships and driving innovation
Improving quality and reputation
Reducing time-to-market
Generating economic impact
Contributing to competitive advantage
7
Increasing Value and Savings
Suppliers have substantial impact on a firm’s total cost Many product features originate from suppliers
In manufacturing, purchased content is more than
55% of revenues
Avoiding costs through early involvement in product design stage
8
Building Relationships and Driving Innovation
Traditional approach is to bargain hard for price reductions New approach is to conduct joint cost reduction with suppliers
Both buyer and supplier must