Slide 1.

What is purchasing?
Perspectives on purchasing

1 As a function – To perform specialised tasks

2 As a process – To achieve an output

3 As a link in the supply chain – With production and warehousing

4 As a relationship – Internal and external focus

5 As a discipline – Knowledge based

6 As a profession – Demonstrable skills and knowledge

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.2

What is purchasing?
Definitions
The classic definition
To buy materials of the right quality , in the right quantity,
from the right source, delivered to the right place, at the
right time at the right price.

To be contrasted with
Modern definition
The process undertaken by the organisational unit which, either as a
function or a part of an integrated supply chain, is responsible for
procuring or assisting users to procure in the most efficient manner
required suppliers at the right time, quality, quantity and price and
the management of suppliers, thereby contributing to the competitive
advantage of the enterprise and the achievement of its corporate strategy.

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.3

What is purchasing?

Definition of procurement

Procurement is the process of acquiring goods, works and services,

covering both acquisition from third parties and from in-house providers.
The process spans the whole life cycle from identification of needs,
through to the end of the useful life of an asset. It involves options
appraisal and the critical ‘make or buy’ decision.

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.4

What is purchasing?
The evolution of purchasing
The Reck and Long model
Stage Characteristics
Concerned with the five rights which concentrate
1. Product centred exclusively upon the purchasing of tangible products and
outcome dimensions.
Moves beyond a concern with outcomes and begins to
2. Process centred measure the process through which the outcome is
delivered.

3. Relational Process and relationally focused, expanded to include

purchasing – supplier relationships.
Focused on best product management methods. Employs
4. Performance
an integrated methodology to manage relationships,
centred
processes and outcomes.

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.5

What is purchasing?
The evolution of purchasing
Period 1 The early years (1850–1900)
Period 2 Growth of fundamentals (1900–1939)
Period 3 The war years (1940–1949)
Period 4 The quiet years (1947–mid 1960s)
Period 5 Materials management comes of age (mid-1960s–late
1970s)

Period 6 The global era (late 1970s–1999)

Period 7 Integrated supply chain management (beyond 2000)

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.6

What is purchasing?
Purchasing and change

Information Chasing production &

Globalisation impact technology management
impact philosophies impact

•Transgression of •Slicker transactions •Competitive advantage

national boundaries
•Quality of management •Outsourcing
•Advantage of cost data
•Supply chain
•Specialised labour skills •Strategic link with management
suppliers
•Emerging economies
•Paperless environment

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.7

What is purchasing?

Purchasing in the future

Increase in strategic importance

Automated tactical activities

Master contracts

Electronic purchasing

Strategic purchasing competency centres

Shared supply chain resources

Profit contribution

Changed emphasis on individual skills

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.8

What is purchasing?

Must accommodate World-class purchasing

TQM
JIT
Total cycle time reduction
Long range planning
Supplier relationship engineering
Strategic cost management
Performance accountability
Professional flexibility and development
Service excellence
Corporate social responsibility

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012
 Slide 1.9

What is purchasing?
The status of purchasing and supply management

Status Influenced by:

Leverage •Power of purchasing to enhance profitability

Focus •Is it transactional, commercial or strategic?

Professionalism •Perception of influencers

•Academic activity
•Depth of knowledge and skill
•Future focus?

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition © Pearson Education Limited 2012