purchasing and materials management

purchasing and materials management

1. Describe how Purchasing interacts with other functional areas of the company. The strategic role of purchasing is to perform source-related activities in a way that supports the overall objectives of a business. It can make many contributions to the success of that organization through its key role as one of the organizations’ boundary-spanning functions. Purchasing can gain important information about new technologies, potential new materials or services, new source of supply, and changes in market conditions through external contact with the supply market.

To take dvantage of market opportunities by communicating this competitive intelligence, purchasing can help reshape the business’s strategy. Purchasing can help the supplier development and relationship management team by supporting the organization’s strategic success by identifying and developing new and existing suppliers. Getting suppliers involved early in the development of new products and services or modifications to existing offers can reduce development times. Virtually every department relies on the purchasing function within an organization for some type of information or support.

Purchasing role ranges from a support role to a strategic functions. Purchasing often has some of the same functions of reporting relationship as logistics. This can helpful for coordinating management. Purchasing and logistics need to work closely in coordinating inbound logistics and associated material rows. 2. What is the impact of Purchasing Strategy on manufacturing inventory? If an organization purchases from suppliers and uses those products to make a products and sale them, then you have a supply chain.

Some are simple yet some can be more complex depending on the size of the business and the intricacy and umbers of items that are manufactured. The purchasing department receives a list of raw materials and services required by the production department to complete the customer’s orders. Then they send purchase order to selected supplier to deliver the necessary raw materials to the manufacturing site on the required date. Then the raw materials are received from the suppliers, checked for quality and accuracy and then again moved into a warehouse.

The supplier with then send an invoice to the company for the items they delivered. The raw materials are stored until they are required by the production department. If the purchasing strategy is wrong from the very beginning then the wrong materials could be sent out or stocked in the inventory. It all relies and reflects back on the purchasing strategy. 3. Discuss the legal liability issues associated with Purchasing Agent’s actions. Qualities of a good supplier would be one who can meet all customer expectations, with respect to delivery time, quality of goods and dependability.

A good supplier is someone who keeps up to timely delivery of goods and supplies. From the placing of an order to the actually buying of an order involves a ton of paperwork. A good upplier will find way of reducing the amount of paperwork involved. Being that the world of business is highly unstable, and often the gap between demand and supply can be hard to predict, a good supplier will always be prepared to meet such a contingency. Lastly, transportation and delivery often involves a lot of wear and tear.

A good supplier is someone who recognizes these limitations and takes proactive steps to help reduce or avoid the damage involved. 5. List and briefly discuss the various Inventory Costs. There are several different types of inventory cost. Purchas Costs is the most basic ype of inventory cost and is the purchase price. Some businesses, such as retailers, buy finished goods inventory that is ready for resale as soon as they receive it while other companies purchases component parts and assemble them into new products for sale.

Either way they all purchase raw materials directly or either resell the materials or assemble materials into semi-finished or finished goods before sale. Processing is another type of inventory cost and is when businesses perform work on inventory they purchase before it is ready for sale. An example would be a computer manufacturer. The manufacturer is likely to buy component parts such as microchips, displays, and input devices, then assemble various components into individual machines. Several other types of inventory costs are distribution, inventory holding costs, and shrinkage.

A distribution is when inventory items have to be shipped a number of times before they turn into sales revenue. Purchased inventory must be shipped from the supplier to a company, which, while usually covered by the warehouse or distribution center before shipping is usually done by larger businesses. Storing inventory either in a warehouse or in a sales outlet incurs dditional costs with inventory holding costs. Holding inventory incurs labor costs for handling duties, additional utilities and rent/mortgage costs due to the physical spaces required.

Last is shrinkage. Shrinkage refers to anything that renders inventory unfit for sale or return to a supplier. Inventory that has already been paid for can disappear due to theft from employees or consumers. The perishable items can spoil if they are not sold on time. 6. Discuss the specific objectives of Purchasing and Supply Management. Objectives of Purchasing and Supply Management can be viewed different levels. Two of them would be top management and operational level.

Some of the objectives from the top management would be first to buy the right quality and from the right supplier in the right quantity at the right time and definitely at the right price. These can also be known as the five rights of purchasing and should be the general objectives of all purchasing personnel. From the operational level would be more specific in that they want to support company operations with an uninterrupted flow of materials and services to buy competitively of course, which is the cost factor and o buy wisely which means value plus quality plus service plus price.

They would also keep inventory investment and inventory losses to a minimum. This is very important because the average for most firms for inventory cost is twenty-five to thirty-give percent of the value of the inventory. One way to do this is through a JIT inventory system. Also it’s important for them to find suppliers who are willing to work with buyers. 7. List and briefly describe the four outcomes of an Offer. Purchasing function? Every time work is redone, the cost of quality increases.

The “cost of quality’ is not the rice of creating a quality product or service. It’s not the cost of creating a quality product or service. Some examples of work redone and cost of quality increasing are: the reworking of a manufactured item, the retesting of an assembly, the rebuilding of a tool, the correction of a bank statement, the reworking of a service such as the reprocessing of a loan operation or the replacement of a food order in a restaurant. In other words, any cost that would not have been expended if quality were perfect contributes to the cost of quality.

Quality costs are the total of the cost incurred by nvesting in the prevention of nonconformance to requirements, appraising a product or service fore conformance to requirements, and failing to meet requirements. Prevention costs are the costs of all activities specifically designed to prevent poor quality in products or services. Some examples of the cost would be new product review, quality planning, supplier capacity, and process capability evaluations. Appraisal costs are the costs associated with measuring, evaluation or auditing products and services to assure conformance to quality standards and performance requirements.

A few examples are incoming source inspection/test of urchased material, in-process and final inspection/test, and product, process, or service audits. The United States firms are now looking for improved techniques to manage their manufacturing operations. Based on a philosophy of trust and commitment of the entire organization, JIT has evolved as a novel manufacturing concept. JIT is often referred to as lean production, which in its simplest form “the manufacturing process” is a composition of the material flows. Below is a list and description of the elements of JIT Implementation.

First is Uniform Production, also known as heiJunka. This uses a repeating sequence. They create a uniform load on each workstation that constantly produces the same mix of products day in and day out. Meet demand fluctuations through end-item inventory rather than through fluctuations in production level. Second is quick setup time. This element aims for shorter setup times and it can be done through better planning, process redesign, and product redesign. Airline industry is a good example of this. Small lot sizes are the third element.

A close cooperation with suppliers is necessary with this element to achieve reduction in order lot sizes for purchases raw materials and component parts since his will require more frequent deliveries. This element reduces setup times which allow economical production of smaller lots. Next is fourth lead time. By applying group technology and cellular manufacturing concepts, reducing queue length, improving the coordination and cooperation between downstream processes, and moving workstation closer together production lead times can be reduced.

Preventive maintenance is a fifth element and uses machine and workers to idle time to maintain equipment and prevent breakdowns. Sixth is multifaceted workface which require workers to be trained to operate several machines, to perform maintenance asks, and to perform quality inspections. The last two elements are supplier development and kanban production control. Being there are no buffers of excess parts, all defective items must be eliminated with supplier development.

A quality at the source program must be implemented to give workers the personal responsibility for the quality of the work they do and the authority to stop production when something goes wrong. To convey parts between workstations to small quantities one can use a control system such as a kanban system in kanban production control. A JIT system is not the same things as a kanban system. A kanban system is not required to implement JIT, although JIT is required to implement a kanban system and the two concepts together are frequently equated with one another. 0. What is meant by ABC analysis? The ABC analysis is often used in materials management. It’s a business term used to define an inventory categorization technique. Polices based on ABC analysis are: A items: very tight control and accurate records B items: less tightly controlled and good records Throughout an overall inventory cost the ABC analysis provides mechanisms for identifying items that will have significant impact. It also provides a mechanism for dentifying different categories of stock that will require different management and controls.

Because the ABC analysis suggests that inventories of an organization are not equal value, the inventory is grouped into the three categories in order of their estimated importance. The “A” items are very important for an organization. The “A” items has high value and because of that there is a frequent analysis is required. Also an organization has to choose an appropriate order pattern, for example JIT, to avoid excess capacity. The “B” items are important but less important than the “A” items. They are intergroup items. Lastly “C” items are marg