Purchasing Notes Chap 6 (Autosaved)

8/11/2019 Purchasing Notes Chap 6 (Autosaved)

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Purchasing (BMK 3748) Diploma in Business Management

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Chapter 6: People in The Purchasing Function

Skills required for Purchasing Staff.

1. Coordination : Adjusting actions in relation to others' actions.

2. Active Listening : Giving full attention to what other people are saying, taking time to understandthe points being made, asking questions as appropriate, and not interrupting at inappropriatetimes.

3. Speaking : Talking to others to convey information effectively.

4. Critical Thinking : Using logic and reasoning to identify the strengths and weaknesses ofalternative solutions, conclusions or approaches to problems.

5. Persuasion : Persuading others to change their minds or behavior.

6. Negotiation : Bringing others together and trying to reconcile differences.

7. Social Perceptisaveness : Being aware of others' reactions and understanding why they react asthey do.

8. Management of Personnel Resources : Motivating, developing, and directing people as theywork, identifying the best people for the job.

9. Judgment and Decision Making : Considering the relative costs and benefits of potential actionsto choose the most appropriate one.

10. Monitoring : Monitoring/Assessing performance of yourself, other individuals, or organizations tomake improvements or take corrective action.

11. Active Learning : Understanding the implications of new information for both current and futureproblem-solving and decision-making.

12. Learning Strategies : Selecting and using training/instructional methods and proceduresappropriate for the situation when learning or teaching new things.

13. Management of Financial Resources : Determining how money will be spent to get the work

done, and accounting for these expenditures.

14. Systems Analysis : Determining how a system should work and how changes in conditions,operations, and the environment will affect outcomes.

15. Complex Problem Solving : Identifying complex problems and reviewing related information todevelop and evaluate options and implement solutions.

16. Systems Evaluation : Identifying measures or indicators of system performance and the actionsneeded to improve or correct performance, relative to the goals of the system.

17. Management of Material Resources : Obtaining and seeing to the appropriate use of equipment,facilities, and materials needed to do certain work.


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18. Quality Control Analysis : Conducting tests and inspections of products, services, or processes toevaluate quality or performance.

19. Operations Analysis : Analyzing needs and product requirements to create a design.

A. Purchasing Position within the Organizational Structure

Purchasing position or placement in an organizational structure is important since it usually indicatesorganizational status and influence.

The trends shown in recent research support the fact that purchasing is gaining more visibility in thecorporate hierarchy.

CEO had the most power to indicate whom was to be selected as the CPO as well as to whom theperson reported in the corporate hierarchy.

B. To Whom Does Purchasing/Supply Management Report

During 1950s and early 1960s, a high percentage of the purchasing departments reported in a second-level capacity to the functional managers, most commonly production and operations.

A study by the Center for Advanced Purchasing Studies (CAPS) revealed a change in the reporting levelof purchasing during 1980s.

The study found that in almost 35 percent of the organization surveyed, the highestpurchasing executive reported to a senior or group vice president or higher.

The percentage CPOs reporting to a top five executive position category has continued toincrease.

In a study of a smaller firm, it was found that 90 percent of purchasing personnel report to thehighest executive or one level from the highest executive.

In the same study, almost 65 percent of purchasers working for medium and large firmsreported to the highest executive or one level from the highest executive.

a) Purchasing as an upper-level function

President/CEO

Executive VicePresident

Vice PresidentMarketing

Vice President

Finance

Vice President

Purchasing

Vice PresidentEngineering

Vice PresidentManufacuring


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C. Scope of The Purchasing /Supply Management Job Function

The scope of P/SM in larger organization can be grouped under four (4) major areas:

1. Sourcing and Negotiating

This task involves identifying potential suppliers, negotiating with selected suppliers andperforming the buying of goods and services.

Buyers will work in teams that have responsibility for negotiating contracts for the entireorganization.

2. Market Analysis and Research Purchasing market analysis and research involves developing long-range materials forecasts,

conducting value analysis programs, assessing supplier capabilities and analyzing the coststructure of suppliers.

More organization recognizes the benefit of having specialized personnel.

The development of product and material plans requires detailed and accurate research.

3. Operational Support and Order Follow-Up This group includes the activities supporting day-to-day operations of the purchasing or materials

function. There are two (2) categories of purchasers:-

a) Strategically oriented: buyers focus on the company and industry future by managing totalcost, enhancing value and minimizing risks.

b) Tactical oriented: focus more on day-to- day challenges required to meet the organizationscurrent needs.

4. Administration This group is responsible for developing:-

a) the policies and procedures that purchasing personnel followb) administer and maintain the purchasing information system and databasec) determine required staffing levels, developing departmental plansd) develop measurement system to evaluate purchasing performance.

This group concern itself with making sure the purchasing departments runs smoothly and meetsits targeted goals within budgets, and fulfils its responsibilities to both internal and externalcustomers.

D. Recruiting and Hiring staff Managers are generally responsible for selecting and hiring competent individual or professionals

for their team. Most of the organization, managers of particular department work together with Human

Resources representative in order to recruit candidates via news paper, advertisement, personalnetwork and so forth.

To begin the recruitment process, managers are required to specify the scope of the job duties

and the level of skill required.


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List the knowledge, skills, and abilities to perform the task of the job-specific industry or productknowledge, level of negotiation responsibility, acquisition amounts, supplier development andmanagement abilities, analytical skills, project management expertise, presentation andcommunication skills, and specific computer-based knowledge.

i. Evaluation To evaluate years of experience and level of experience, manager should conduct a reference

check. Speak with several previous managers who actually reviewed the individuals work performance -

you can ask questions regarding the level of performance and how the individual was ranked inrelations to peers.

ii. Interview A structured interview process is designed to assess past behaviours and accomplishments.

Focus on the questions; some well-defined, important areas of knowledge, which will be neededto perform the key job duties.

Ask candidates to indicate how they perform specific duties that require the knowledge you wantto assess.

iii. Selection Final selection process should follow organizational hiring policies and procedures in order to

ensure fairness and met regulatory obligations. From the evaluation, select the candidate whose abilities are most closely associated with solving

your department and organizations problems or challenges. It is recommended that list the strength and weakness as discovered in the selection process and

consider each as objectively as possible. Remember to base the evaluation on the needs of the job and always refer back to the original

job specification.

E. Training and developing the staff Training is the key to individual job performance improvement. Training consists of expanding knowledge developing and improving skill sets, and providing

opportunities for professional development. Begin the assessment of training need analysis by analyzing any anticipated organizationalchanges and development to determine which skills will be needed in the future and to whatdegree.

Training requirements often developed through personal needs analysis involves assessing eachindividuals developmental requirements and interest and agreed plan for accomplishment.

For training to be effective, employees should be convinced that it is important to them, soexplain the goals of the training and provide training that is clearly rel evant to the individualswork environment.

Commonly employed training methods include:i. On-the-job training (OJT), where individuals learn from actually performing job duties


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ii. Job rotation, where individuals are cross- trained to enhance departments staffin gflexibility.

iii. Instructor-led classroom training, formal approach learning new skillsiv. Lecture

Periodic evaluation of the training is a key element in developing a successful and effectivetraining program.

F. Purchasing EthicsEthics: the set of moral principles or values guiding our behaviour. Being ethical means following a code viewed as fair by those within the profession as well as thecommunity.A study on purchasing education and training requirements indicated ethics was the number oneknowledge requirement for purchasers now and in the future.

Three (3) rules of purchasers ethical behaviour :-1. Buyers must commit their attention and energies for the organizations benefit rather than

personal enrichment at the expense of the organization.2. A buyer must act ethically toward suppliers or potential suppliers. Treat each supplier

professionally and with respect.3. Buyer must uphold the ethical standard set forth by their organization and the purchasing

profession.

Types of Unethical Purchasing Behavior.

1. Reciprocity: This action involves giving preferential treatment to suppliers that are also customers ofthe buying organization. Refer to purchasing arrangement that dictates Ill buy from you if you buyfrom me.

2. Personal Buying: this occurs when purchasing department purchases material for the personal needsof its employees.

3. Accepting supplier favors: these gifts and favors can affect a buyers judgement to evaluate and

select the most capable suppliers.

4. Financial conflicts of interest: when a buyer award business to a supplier because the buyer, thebuyers family, or relatives of the buyer have a direct financial interest in a supplier.

5. Personal conflicts of interest: arise in cases where the buyer is dealing with a company that a buyerhas approached or been approached for future employment.


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ISM Professional Code of Ethics The Institute for Supply Management is the largest organization representing the purchasing

profession. In 1959, the ISM officially adopted its initial Standards of Conduct. The Standards of Conduct specifies three (3) guiding principles of purchasing practice:

(1) loyalty to company,(2) justice to those with whom a buyer deals, and(3) faith in the purchasing profession

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Purchasing Notes Chap 6 (Autosaved)