Purchasing Structure and Design Environmental Factors and Purchasing Structure

Slide 5.1

Four Factors Impacting on Structure

1
Downsizing

2
E-commerce

3
Global Sourcing

4
Partnering & Outsourcing

NB: The two strategies in (4) above may in some circumstances be unrelated.

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Purchasing is a Functional Department Characteristics

Work is tasks Prime focus of the individual and his/her job Chain of command goes up the functional ladder Managers job to match people to tasks Physical location together in the department

Slide 5.2

Advantages
Specialists available High morale

Disadvantages
More concerned with reporting and authority

Guards the big picture

Ease of supervision and control Simplification of training Operational efficiency Actual to budget matrices a focus Perceives goal setting to be top down Prefers one-on-one problem solving

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design

Slide 5.3

Horizontal organizations and Processes, Principles and Characteristics

1 2 3 4 5 6

Organize around process not task.

Minimize sub-division of work flows.

Assign ownership.

Link KPIs to customer satisfaction.

Make teams the building blocks. Combine managerial and non-managerial activities if possible.
7

Multiple competences should be the rule.

8

Train on just-in-time to perform basis.

9

Maximize customer/supplier contact.

10

Reward skill development and team performance.

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Cross Functional Purchasing Involvement of purchasing in strategic decisions Concept of supply chain Vastly increased information available Development of, for example, ERP, MRP and JIT

Slide 5.4

Purchasing needs expert advice and support with some decision making Teams outperform individuals acting alone

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Centralised Purchasing Economies of Scale

Slide 5.5

Centralised Purchasing Enables Leverage of Purchasing Power because: Forecasts can be made for the whole organisation

Quantity facilitates negotiation, including price/cost

Suppliers compete for preferred status Suppliers can adopt a marginal costing strategy Supplier rationalisation is easy to implement Facilitates appointment of purchasing professionals

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Purchasing is a Functional Department Advantages

Closer to users Rapid response Closer supplier relationships Support of local suppliers Profit centers have own purchasing Geographical, cultural appropriateness

Slide 5.6

Disadvantages
Reduced leverage Lack of strategic direction Reports to lower level Limited expertise Lack of standardization Restricted careers Cost of purchasing is relatively high

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Multi-plant Organisations

Slide 5.7

Centralised and Decentralised Options

Could Centralise
Determination of strategy and policy

Could Decentralise
Small value orders

Purchase of strategic products

Purchase of capital equipment Negotiation of bulk contracts Purchase research

Items that are plant specific

Emergency purchases Local buying Staff purchases

Control of group inventory

Staff development Purchase of IT systems

Those purchases offering a local

community prosperity

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Purchasing Structure and Design Organisational Change

Slide 5.8

Making Change Stick Lewin

Establish a sense of urgency Create the guiding coalition Develop a vision and strategy Communicate the change vision Empower broad-based action Generate short-term wins Consolidate gains Anchor new approaches in the culture

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005