102purchasing systems

Purchasing systems

Purchasing system

• Procedures, manual or computerized, followed by an organization to achieve the following basic objectives: – to determine the quality and quantity needed and

the time when an item is needed; – to obtain the best possible price; and – to maintain information on sources of supply.

Concepts

• The system should utilize such concepts as – Economic Order Quantity (EOQ) optimal reorder

point, – Quantity Discounts, and – Material Requirement Planning (MRP)• Detailed planning of production

Material requirement planning

Systems vs procedures

• A procedure (Page 182)– A system of sequential steps to get a task done– Strategies -> Policies -> Procedures

• A system– A cluster of reliable procedures that provide

information – enabling staff to execute and control those

operations

Two broad types of system

• Traditional purchasing system

• Electronic purchasing system

Traditional purchasing procedures

1. Identify– Requisition

2. Order– Request for quotation (RFQ)– Quotation– Purchase order– Order acknowledgement

3. Post-order– Delivery, receipt, invoice etc

Useful when

• The order is small• E-procurement system is not available• Non-standard items• Urgent needs

Inefficiency

• Non-value-adding activities• Excessive documentation• Excessive time• Excessive cost of transactional activities

Discuss

• To what extent is traditional purchasing procedures are applicable to IBM?

• What are its weaknesses?

Electronic purchasing

• E-commerce– Business transaction carried out electronically over

telecom systems• E-business– Business transaction + other electronic

communication, e.g. CRM, MRP • E- SCM– Internal purchasing system that links to industrywide

electronic marketplace • EDI

Exchange data Interchange(EDI)– Creating and approving purchasing requisitions,

placing purchase orders and receiving goods and services by using a software system based on Internet technology.

• e-MRO (Maintenance, Repair and Overhaul)– The same as web-based ERP except that the goods

and services ordered are non-product related MRO supplies.

• e-sourcing– Identifying new suppliers for a specific category of

purchasing requirements using Internet technology.

E-procurement

• Using the Internet to operate the buying process– Requisition against contract– Authorisation– Order– Receipt– Payment

Types of e-procurement

• Web-based ERP (Enterprise Resource Planning)

• e-MRO (Maintenance, Repair and Overhaul)– The same as web-based ERP except that the goods

and services ordered are non-product related MRO supplies.

• e-sourcing– Identifying new suppliers for a specific category of

purchasing requirements using Internet technology.

Types of e-procurement

• e-tendering– Sending requests for information and prices to

suppliers and receiving the responses of suppliers using Internet technology.

• e-reverse auctioning: – Using Internet technology to buy goods and

services from a number of known or unknown suppliers.

Types of e-procurement

• e-informing– Gathering and distributing purchasing information

both from and to internal and external parties using Internet technology.

• e-marketsites– Expands on Web-based ERP to open up value chains.– Buying communities can access preferred suppliers'

products and services, add to shopping carts, create requisition, seek approval, receipt purchase orders and process electronic invoices with integration to suppliers' supply chains and buyers' financial systems.

Discuss

• To what extent does e-procurement system contribute to IBM’s buying objectives?

• Any limitation to the use of e-procurement?

• http://www.sixhills-consulting.com/Documents/Understanding_the_benefits_of_e-Procurement-Gueritz_Jan01.pdf