introduction to purchase

WELCOME TO

TRAINING SESSION

By : ISMT- PURCHASE

TOPICSTOPICS

1. Concept of ERP & MRP.

2. Supply Chain Management (SCM)

3. Purchasing.

4. Overview of JIT (Just-In-Time).

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CONCEPT OF ERP & MRPCONCEPT OF ERP & MRP

.

CONCEPTS OF ERP CONCEPTS OF ERP (ENTERPRISE RESOURCE (ENTERPRISE RESOURCE

PLANNING)PLANNING)

Definition of ERP :

Software solution that address all the needs of an enterprise with the process view of an organization to meet the organizational goals and intergrate all the functions of the enterprise.

CONCEPTS OF ERP CONCEPTS OF ERP

What is ERP :

• Facilitates Company – wide integrated Informaion Systems Covering all functional Areas.

• Performs core Corporate activities and increases customer service augmenting Corporate Image.

• Organizes & Optimizes the data input methodologies systematically.


Evolution of Planning Systems

● Materials Requirement Planning (MRP)● Manufacturing Resource Planning (MRP II)● Enterprise Resource Planning (ERP)

Other Terminologies are :

● Money Resource Planning (MRP III)● Supply Chain Management● Value Chain Management


Is It Only Jargaon ?

● No. MRP and MRP II were there for a long time.

● ERP is an enhancement over these● It is true that Year 2000 problem

accelerated the sales and acceptance of ERP.

● Introduction of ERP provides you a chance to have a new look at your working.


● Is It Going to be there long?● Yes and No.● ERP will be there for a long time, if you are

willing to upgrade to new versions with new features as and when they are released in the market

● Your ERP may still work after a long time without enhancements, if your company is not growing!

Moral : Upgrading the systems are a must!

CONCEPTS OF ERPCONCEPTS OF ERP

Do not wait if you have :

● Tough competition in the market ● Multiple location Operations ● Plans to grow Globally


Why ERP ?

Profitability : You have Two Choices :

● Increase in Sales

OR● Reduce Procurement Cost

CONCEPTS OF MRP CONCEPTS OF MRP (Material Requirements Planning)(Material Requirements Planning)

Definition of MRP ?

MRP is a software based production planning and inventory control system used to manage manufacturing processes.

CONCEPTS OF MRP CONCEPTS OF MRP

An MRP system is intended to simultaneously meet three objectives :

● Ensure materials & products are available for production & delivery to customers

● Maintain the lowest possible level of inventory

● Plan manufacturing activities, delivery schedules and purchasing activities.

SUPPLY CHAIN SUPPLY CHAIN

MANAGEMENT MANAGEMENT

(SCM)(SCM) .

SUPPLY CHAIN MANAGEMENT SUPPLY CHAIN MANAGEMENT

Supply Chain Management Strategem is :

• Where business Partners mutually commit to work closely together, with in the supply chain,

• To bring greater value to the consumer and/or their customers

• For the least possible overall supply cost.

• SCM is a Philosophy Where as Logistics is the enabler.

A SIMPLE SUPPLY CHAINA SIMPLE SUPPLY CHAIN

LOGISTICS

TRANSPORT

STORAGE

PACKING

and

HANDLING+

DISTRIBUTION

RAW MATERIALSSUPPLIER

COMPONENT MANUFACTURER

ASSEMBLER

RETAILER

TO FINAL CUSTOMER / CONSUMER

THE GOAL IN SCMTHE GOAL IN SCM

Is to link• The Market place, • The Distribution Network, • The Manufacturing Process and• The Procurement activity in such a way that•

Customers are serviced, at higher levels and yet, at lower costs!

OBJECTIVES OF SCMOBJECTIVES OF SCM

To weave each of the trading partners into Seamless fabric of :

• Information flow, • Physical distribution flow and • Cash flow for the benefit of the end customer.

The trading partners achieve their profit or loss, through their ability to work together.

Better Supply Chain Management Better Supply Chain Management helps a firm to...helps a firm to...

● Reduce total costs

● Ensure continuity of production

● Improve quality

● Innovate

● Respond quickly to market changes

PURCHASING PURCHASING

.

PURCHASINGPURCHASING

Now What Is In Store 4 U?!

• An Outcome Based Learning...... • Delivered by Renouned Institutions• Through various structured Training

Modules designed specially for you, we will walk you through the Art & Science of Procurement !

• Aiming surely, to update U with the latest and proven Tools & Techniques of Procurement.

DEFINING PURCHASINGDEFINING PURCHASING

• Purchasing is the acquisition of needed goods and services at optimum cost from competent reliable sources to maintain a smooth flow of Goods & Services for Manufacturing and or any Business activity.

DEFINITION EXPANDEDDEFINITION EXPANDED

• Needs : Examine need, Timing, Quantity, source, specifications

• Goods & Services: Make or Buy or Lease• Optimum Cost: Best Total cost, not only

lowest acquisition cost: consider also Quality and Service

• Competent sources: Select carefully• Reliable Sources: Monitor Performance

SCOPE OF PURCHASING SCOPE OF PURCHASING

• Involves all of those management processes and operations needed to ensure that an organisation is able to obtain, all of the products and services that it requires as and when & where required, cost-effectively, from outside sources.

PURCHASING TASKSPURCHASING TASKS

• Needs Assessment• Source identification• Contract Negotiation• Supplier Selection• Purchase Order Issuance• Expediting / follow up• Performance Evaluation

PURCHASING AS A PROFIT PURCHASING AS A PROFIT CENTERCENTER

Enlightened companies view Purchasing as :

• A vital meaningful function and not clerical.• A proactive, Strategic player, not a reactive hurdle• A powerful bottom-line contributor and no more a

cost-center • A Team member and not a necessary evil.

SAVINGS CAN BE EFFECTED BY SAVINGS CAN BE EFFECTED BY PURCHASING IN FOLLOWING WAYS!PURCHASING IN FOLLOWING WAYS!

• Moving to lower-cost Sources from traditional sources

• Using less expensive substitute materials• Initiating Design Changes that affect cost but

not performance• Suggesting the use of standard, off-the-shelf

components instead of expensive Custom –tooled items.

MORE SAVINGS BY PURCHASINGMORE SAVINGS BY PURCHASING !

• Obtaining quantity discounts for larger, consolidated purchases and shipments

• Reducing administrative expenses by issuing and tracking fewer purchase orders

• Pooling purchasing power and effort with other organisations in the form of co-operative buying

• Concentrating all purchases of a particular item with a single source.

STILL MORE SAVINGS BY STILL MORE SAVINGS BY PURCHASING!! PURCHASING!!

• Investigating international sources for quality and prices.

• Getting suppliers (manufacturers or distributors) to assume the storage function for materials purchased from them

• Negotiating for better price and/or more favourable terms from established sources.

RELATIONSHIPS OF PURCHASE RELATIONSHIPS OF PURCHASE IN THE ORGANISATIONIN THE ORGANISATION

• Sources Company

Customers

Suppliers Purchasing Marketing

Quality

Production

Engg.

Legal

Transport

Stores Finance

Accounting

MaintenanceHR

RESPONSIBILITIES PURCHASE RESPONSIBILITIES PURCHASE SHARES WITH OTHER SHARES WITH OTHER

DEPARTMENTSDEPARTMENTS• Obtaining technical information and advice on the quality,

specifications of materials or equipment (Design)• Establishing and developing specifications for materials

(R&D)• Inspection of materials for quality. (Quality Control)• Accounting including payment of bills. (Finance and

Accounts)• Inventory control. (Materials planning)• Receiving, Store keeping and W/Housing, (Stores)• Construction contracts or service contracts and

agreements. (Projects/Maintenance Office Administration)• Sale of scrap and surplus and salvaging. (stores)• Clearing and Forwarding. (Stores)• Deciding whether to Make or Buy or Lease

(Production/Process planning).

ORGANISATION FOR PURCHASEORGANISATION FOR PURCHASE

• As a crucial function in any business, Purchasing has to be well organised to perform its many and varied tasks efficiently and effectively.

• Organisation refers to logical structuring of people and activities that allows them to interact smoothly for optimum performance.

AIM OF ANY ORGANISATIONAIM OF ANY ORGANISATION

To deliver the Functional Responsibility for which it was primarily created –

In Purchasing, it is providing Materials and services efficiently and Cost effectively.

OVERVIEW OF J.I.T.OVERVIEW OF J.I.T.

(JUST-IN-TIME )(JUST-IN-TIME )

OVERVIEWOVERVIEW

• Definition of Just-in-time• Purchasing• Different uses• How it will help• Examples of Just-in-time• Purchasing

BRAINSTORMINGBRAINSTORMING

How can just-in-time purchasing be used in an organization

ADVANTAGES TO JITADVANTAGES TO JIT

• Reduces the need for central warehousing and storage

● Long-term relationships that help to certify suppliers

● Receiving inspection is reduced and in some cases eliminated.

● Lowered variety in suppliers● Reliable delivery schedules● High quality materials used● Reduced waste.

DEMANDS ON PURCHASING DEMANDS ON PURCHASING OF JITOF JIT

• Reduced number of suppliers• Stable and good communication throughout a

firm• Locating suppliers nearby• Long-term relationships• Helping suppliers to increase quality• Not to get hung up by single sourcing• Buying from small firms.

LIMITATIONS OF JITLIMITATIONS OF JIT

• Difficulty to change old ways• Employee commitment• Production levels• Employee skills.

PRESENTATION OVERVIEWPRESENTATION OVERVIEW

JIT Purchasing Traditional

* Smaller lot sizes * Relatively large lot sizes

* More frequent deliveries * Less deliveries at higher

* No rejection from the quantities

Suppliers * Rejection from supplier

* Long-term contracts * Lowest price is main

* Buyer decides delivery objective

Schedule * Time consuming, formal

* Innovation encouraged paperwork

* Minimal paper work * Formal communication

* Less formal

communication

WHY ORGANIZATIONS USE JIT WHY ORGANIZATIONS USE JIT PURCHASINGPURCHASING

• Reduce waste• Higher quality in products• Fewer suppliers• Reduction in warehouses• Dependable delivery

EXAMPLE - FAXBANEXAMPLE - FAXBAN

What is Faxban ?

• It combines production floor fax machines and kanban re-supply signals to lower transaction processing and save money.


• Honeywell started using this with their suppliers.

• Re-supply orders are faxed from the production floor by the workers to suppliers.


What techniques are used in Faxban?

• EDI• Kanban• Blanket Order


What were the outcomes?• Transaction processing reduced • Reduction in accounts payable function• Money saved• Reduced waste• Direct communication resulted in less

ambiguity between supplier and customer• Time reduced.

SUMMARY OF JIT SUMMARY OF JIT PURCHASINGPURCHASING

• Many advantages that lead to reduction in waste , storage and other aspects that lead to saving money and time.

• Long-term relationships with suppliers.

• Many different techniques are used depending on the demand of the company.

• Higher quality material used.

introduction to purchase

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