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Ch 4: Purchasing Integration, Push vs Pull, and Just-In-Time Supply; Ch 5: Centralized vs Decentralized Purchasing
Terms in this set (24)
The process of bringing together different groups, functions or organizations to work jointly on a common business-related assignment.
- Internal = Operations, Quality Assurance, Engineering, Accounting & Finance, Marketing & Sale, Legal, and Environmental Management
- External = Local Communities, Government, Suppliers
What are some Internal Integrations? What are some External Integrations?
- Suppliers = One of a few suppliers for each major item;
- Cost Sharing = Win-win, shared reward;
- Joint Improvement Efforts = Joint improvement driven by mutual needs;
- Dispute Resolution = Existence of conflict resolution mechanisms;
- Communication = Open exchange of information;
- Marketplace Adjustments = Both work together to adapt market changes;
- Quality = Designed into product;
What are 7 ways to have better collaborative buyer-seller relationships? Describe each
mutual trust, long-term contracts, joint development of technology, joint cost reduction efforts
What are some factors that are needed in order to have collaborative buyer-seller relationships?
Confidentiality, limited interest by suppliers, legal barriers, resistance to change
What are some obstacles for closer relationships?
- forecast stock
- seasonal items
Describe Push SCM.
When would this strategy be needed?
- actual customer demand
Describe Pull SCM.
- anticipated usage's
- large lots
- high inventories
- poor communication
Does the push or pull strategy have the mentality to "make all we can just in case"?
List some factors for this.
- actual consumption
- small lots
- low inventories
- waste reduction
- better communication
Does the push or pull strategy have the mentality to "make what's needed when we need it"?
List some factors for this.
produces or provides only what is needed and when it is needed?
Just-in-time supply scheduling
A philosophy of scheduling where the entire supply channel is synchronized to respond to the requirements of operations or customers.
Who created this?
• Close relationships with a few suppliers and transport carriers
• Information that is shared between buyers and suppliers
• Frequent production/purchase and transport of goods in small quantities with resulting minimal inventory levels;
• Elimination of uncertainties wherever possible throughout the supply channel;
• High-quality goals
What are some characteristics of Just-in-time supply scheduling?
Not efficient system for dealing with the unexpected
Risk of running out of stock
More planning required
What are some drawbacks for JIT?
corporate headquarters (Chief Purchasing Officer) has the authority for purchase expenditures.
Leverage Purchase volumes (spend analysis identifies items purchased in common among divisions or business units);
More uniform consistent performance standards across all locations;
Reduce duplication of purchasing effort;
Development of specialized expertise
What are some advantages of Centralized Purchasing?
business units/branches have the authority for purchase expenditures.
Speed and responsiveness;
Understanding unique operational requirement
What are some advantages of Decentralized Purchasing?
combines central approach for purchases common to several business units and decentralized approach to unique requirements.
Is this a centralized or decentralized business strategy structure? "Competitive advantage is built on being more efficient than the competition"
Is this a centralized or decentralized business strategy structure? "Competitive advantage is built on responsiveness to customer needs"
Is this more centralized or decentralized? "Purchases are very different across business units" (like General Electric)
Is this more centralized or decentralized? "Purchases are fairly similar across the organization" (like Walmart)
- Large purchase expenditure
- Management philosophy is more to control the operations from a central location
What factors influence the centralized structure?
- Branches are geographically dispersed
- Upper management is committed to operating in a decentralized mode
What factors influence the decentralized structure?
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