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CITATION

Burt, David; Petcavage, Sheila; and Pinkerton, Richard. Proactive Purchasing in the Supply Chain: The Key to World-Class Procurement. US: McGraw-Hill Professional, 2011.

Proactive Purchasing in the Supply Chain: The Key to World-Class Procurement

Authors: David Burt, Sheila Petcavage and Richard Pinkerton

Published:  December 2011

eISBN: 9780071770620 0071770623 | ISBN: 9780071770613
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  • Contents
  • Foreword
  • Acknowledgments
  • Introduction
  • Chapter 1 Purchasing: The Foundation of the Supply Chain
  • Supply Management and the Bottom Line
  • Increased Sales
  • Lower Total Cost of Ownership
  • Supply Management and Return on Investment (ROI)
  • The Progression to Strategic Supply Chain Management
  • Supply Chains
  • The Supply and Value Networks: The Next Phase of Supply Chain Management
  • Implementing Strategic Supply Chain Management
  • The Roles of a Supply Management Professional
  • Summary
  • Appendix: An Overview of the Mechanics of Supply Management
  • Endnotes
  • Suggested Reading
  • Chapter 2 Organizational Issues
  • Placement of Supply Management Within the Organization
  • Other Factors Impacting Organizational Structure
  • Classification of Responsibilities and Activities
  • Operational vs Strategic Responsibilities
  • Organizational Authority
  • e-Commerce
  • Organizational Structures
  • The Materials Management Organization
  • The Supply Chain Management Structure
  • Organizing with Cross-Functional Teams
  • Budgeting and Staffing
  • Summary
  • Appendix A
  • Benefits Resulting from Cross-Functional Teams
  • Challenges and Problems with the Cross-Functional Approach
  • Prerequisities to Successful Cross-Functional Teams
  • Team Development and Training
  • Appendix B: The Professional Organizations of Supply Chain Management
  • Endnotes
  • Suggested Reading
  • Chapter 3 Supply Management: An Organization Spanning Activity
  • Supply Management's Relations with Other Departments
  • Supply Management and Engineering
  • Supply Management and Manufacturing and Operations
  • Supply Management and Quality
  • Supply Management and Marketing
  • Supply Management and Finance
  • Supply Management and Information Technology (IT)
  • Supply Management and Logistics
  • Supply Management and Accounts Payable
  • Supply Management and Lawyers
  • Supply Management in Non-Manufacturing Organizations
  • Supply Management in Government
  • Supply Management and the External Environment
  • Business Relationships
  • Monitoring the Supply Environment
  • Completing the Supply Chain Linkage: Supplier Integration with the Customer
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 4 A Portfolio of Relationships
  • A Transformation in Relationships
  • Transactional Relationships
  • Collaborative and Alliance Relationships
  • Collaborative Relationships
  • Supply Alliances
  • Which Relationship Is Appropriate?
  • The Supplier's Perspective
  • Questions to Be Addressed Before Proceeding
  • Developing and Managing Collaborative and Alliance Relationships
  • Situations Wherein Alliances May Not Be Appropriate
  • The Role of Power
  • A Portfolio Approach
  • New Skills and Attitudes Required
  • e-Commerce and the "Right" Type of Relationship
  • Relationships of the Future
  • Summary
  • Appendix
  • Institutional Trust
  • Supply Management in Action
  • Endnotes
  • Suggested Reading
  • Chapter 5 New Product Development
  • Overview
  • The Design Process
  • The Investigation or Concept Formation Phase
  • The Development Phase
  • Value Engineering vis-à-vis Value Analysis
  • The Production Phase
  • Engineering Change Management
  • How to Expand Supply Management's Contributions
  • Design or Project Teams
  • Materials Engineers
  • Co-Location
  • Supply Management Professionals Who Interface Successfully with Engineers
  • Appendix
  • Endnotes
  • Suggested Reading
  • Chapter 6 Purchasing Descriptions and Specifications
  • Specifications and Standardization
  • Purposes of Specifications
  • Collaborative Development
  • Categories of Specifications
  • Simple Specifications
  • Complex Specifications
  • Combination of Methods
  • Development of Specifications
  • Organizational Approaches
  • Supply Management Research
  • Writing Specifications
  • Common Problems
  • Standardization
  • History of Standardization
  • Types and Sources of Standards
  • Benefits of Standardization
  • Simplification
  • Developing a Standardization Program
  • Standards Team
  • Importance of Supply Management
  • Materials Catalog
  • Electronic Materials Catalog
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 7 Managing for Quality
  • Evolution of Quality Management
  • Philosophies of the Gurus
  • W. Edwards Deming
  • Philip Crosby
  • Masaaki Imai
  • Genechi Taguchi
  • Joseph Juran
  • Management Approaches
  • Total Quality Management
  • Continuous Improvement
  • Six Sigma
  • DMAIC Cycle
  • Quality Management System
  • Tools and Methodologies
  • Terminology and Usage
  • Implications for Supply Management
  • Common Tools
  • Costs of Quality
  • Loss to Society
  • Process Capability Analysis
  • Statistical Process Control
  • Quality Movement Support
  • Organizations
  • Standards
  • Awards
  • Supply Management Issues
  • Requirements Development
  • Supplier Quality Analysis
  • Inspection Dependence
  • Defect Detection System
  • Supplier Development
  • Certification
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 8 Purchasing Equipment
  • The Nuances of Capital Equipment Procurement
  • Nonrecurring Purchases
  • Nature and Size of Expenditure
  • Building the Foundation
  • Identify the Need for a Procurement
  • Project Management
  • Selection of an Equipment Sourcing Team
  • Build and Train the Team
  • Identify Objectives and Estimate Costs
  • Identifying Objectives
  • Used Equipment
  • Spares
  • Estimating Acquisition Costs and the Total Cost of Ownership (TCO)
  • Develop Specifications and Initiate Sourcing, Pricing, and TCO Analysis
  • Develop Specifications
  • Sourcing
  • Develop Updated Acquisition Cost and TCO Estimates
  • Meet Budget and TCO Objectives?
  • Top Management Approval
  • Negotiation
  • Leased Equipment
  • Types of Leases
  • Factors Favoring Leasing
  • Factors Weighing Against Leasing
  • To Lease or to Buy?
  • Initiate Lease or Contract
  • Post-Award Activities
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 9 Purchasing Services
  • Introduction
  • Hidden Opportunities
  • The Statement of Work
  • Four Formats for Statements of Work
  • Planning the Statement of Work
  • Writing the Statement of Work
  • Artificial Intelligence
  • Tips on Writing an Effective Statement of Work
  • Selecting Service Contractors
  • Tips from a Professional
  • The Ideal Services Supplier
  • Pricing Service Contracts
  • Professional Services
  • Technical Services
  • Operating Services
  • Third Party Contracts
  • So, Your Services Contract Is About to Expire
  • Contract Administration
  • Services Purchases and the Internet
  • Construction Services
  • Conventional Method
  • Design and Build, Firm Agreed Price Method
  • Design and Build, Cost-Reimbursable Method
  • Building Team
  • The Owner as a Contractor
  • Construction Purchasing Entails Unique Problems
  • Performance Contracting
  • The Special Case of Contracting Consultants
  • Qualifying the Consultants
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 10 Production and Inventory Control
  • PART I: THE FUNDAMENTALS OF PRODUCTION PLANNING
  • Modern Production Planning Systems
  • Aggregate Planning and Master Scheduling
  • Material Requirements Planning
  • Capacity Requirements Planning
  • Control of Production Activities
  • Two Management Considerations
  • Evolution of MRP and MRP II Systems
  • Impact on Purchasing and Supply
  • Just-in-Time Production Planning
  • A JIT Illustration
  • JIT's Impact on Purchasing and Supply
  • ERP Systems
  • Radio Frequency Identification System (RFID)
  • Summary
  • PART II: THE FUNCTION OF INVENTORS
  • Definition of Inventories
  • Inventory Analysis
  • Inventory Catalog
  • ABC Analysis—The 80–20 Concept
  • Dependent and Independent Demand
  • Costs Associated with Inventories
  • Carrying Costs
  • Acquisition Costs
  • Economic Order Quantity (EOQ) Concept
  • Other Uses of the EOQ Concept
  • The Weaknesses of the EOQ Formula
  • Types of Inventory Control Systems
  • Cyclical or Fixed Order Interval System
  • The Just-in-Time (JIT) Approach
  • Material Requirements Planning (MRP) System
  • Order Point or Fixed Order Quantity System
  • Summary
  • Appendix: The Fundamentals of Inbound Transportation
  • Endnotes
  • Suggested Reading
  • Chapter 11 Demand Management and Logistics
  • The Key to Supply Chain Management
  • The SCM Triangle
  • Evolution to Strategic SCM
  • Strategic Demand Management
  • The Bullwhip Effect
  • Evolution of Strategic Demand
  • Forecasting Demand
  • Forecasting Fundamentals
  • Planning with Time Fences
  • Implications for Supply Management
  • Strategic Logistics Management
  • Logistics Defined
  • The Role of Logistics in Supply Chain Management
  • Eliminate the Warehouse, If Possible
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 12 Outsourcing
  • Outsourcing: A Growth Industry
  • Strategic Issues
  • Core Competencies
  • Supplier Dominance
  • The Creation of Strategic Vulnerabilities
  • The Dangers of Vertical Integration
  • Horizontal Integration
  • New Product Development and Outsourcing
  • Lean Manufacturing
  • Tactical Decisions
  • Factors Influencing Make-or-Buy Decisions
  • Cost Considerations
  • Control of Production or Quality
  • Technology Risk and Maturity
  • Unreliable Suppliers
  • Suppliers' Specialized Knowledge and Research
  • Small-Volume Requirements
  • Limited Facilities
  • Work Force Stability
  • Multiple-Source Policy
  • Managerial Control Considerations
  • Procurement and Inventory Considerations
  • Netsourcing
  • The Volatile Nature of the Make-or-Buy Decision
  • Insourcing
  • Dangers of Outsourcing
  • Administration of Make-or-Buy Activities
  • Chief Resource Officer
  • Framework for Outsourcing
  • Executive Level Involvement
  • The Special Disadvantages of Outsourcing Business Processes
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 13 Sourcing
  • The Strategic Sourcing Plan
  • Discovering Potential Suppliers
  • Evaluating Potential Suppliers
  • Selecting Suppliers
  • Bidding vs Negotiation
  • Reverse Auctions
  • Two-Step Bidding/Negotiation
  • The Solicitation
  • Weighted Factor Analysis
  • Responsibility for Source Selection
  • Developing Suppliers
  • Managing Suppliers
  • Additional Strategic Issues
  • Early Supplier Involvement
  • Supply Base Reduction
  • Single vs Multiple Sourcing
  • Share of Supplier's Capacity
  • Local, National, and International Sourcing
  • Manufacturer or Distributor
  • "Green" Supply Management
  • Minority- and Women-Owned Business Enterprises
  • Ethical Considerations
  • Reciprocity
  • Consortium Purchasing and Group Buying
  • Disaster Plans
  • Summary
  • Appendix
  • Illustrative Plant Survey
  • Financial Statement Analysis
  • Planning a Facility Visit
  • Endnotes
  • Suggested Reading
  • Chapter 14 Global Supply Management
  • Global Management Perspective
  • Future of Global Supply Management
  • Stages to Global Supply Management
  • Reasons for Global Sourcing
  • Potential Problems
  • Questions Before Going Global
  • Supply Channels
  • Global Trade Intermediaries
  • International Procurement Offices
  • Direct Suppliers
  • Eliminating Intermediaries
  • Identifying Direct Suppliers
  • Qualifying Direct Suppliers
  • Preparing for Direct Relations
  • The Initial Meeting
  • Currency and Payment Issues
  • Exchange Rates
  • Payments
  • Letters of Credit
  • Countertrade
  • Countertrade's Advantages
  • Countertrade's Disadvantages
  • Supply Management's Role
  • Creative Countertrade
  • Political and Economic Alliances
  • European Union
  • North American Free Trade Agreement
  • MERCOSUR
  • Association of Southeast Asian Nations
  • Asia-Pacific Economic Cooperation
  • Summary
  • Appendix
  • Currency Risk
  • Hedging
  • Endnotes
  • Suggested Reading
  • Chapter 15 Total Cost of Ownership
  • Three Components of Total Cost
  • Acquisition Costs
  • Ownership Costs
  • Post-Ownership Costs
  • TCO, Net Present Value (NPV) Analysis, and Estimated Costs
  • The Importance of Total Cost of Ownership in Supply Management
  • Service Providers
  • Retail
  • Manufacturing
  • Supply Chains/Supply Networks
  • Summary
  • Appendix: Supply Management in Action
  • Endnotes
  • Suggested Reading
  • Chapter 16 Price and Cost Analysis
  • Introduction
  • General Economic Considerations
  • Conditions of Competition
  • Variable-Margin Pricing
  • Product Differentiation
  • Six Categories of Cost
  • Regulation by Competition
  • Price Analysis
  • Competitive Price Proposals
  • Regulated, Catalog, and Market Prices
  • Internet/e-Commerce II
  • Historical Prices
  • Supply and Demand Factors
  • Independent Cost Estimates
  • Cost Analysis
  • Cost Analysis Defined
  • Capabilities of Management
  • Efficiency of Labor
  • Amount and Quality of Subcontracting
  • Plant Capacity
  • Sources of Cost Data
  • Potential Suppliers
  • Supply Partners
  • Cost Models
  • Direct Costs
  • Direct Labor
  • Direct Materials
  • Tooling Costs
  • Learning Curves
  • Cumulative Curve and the Unit Curve
  • Target Cost Estimation
  • Indirect Costs
  • Engineering Overhead
  • Material Overhead
  • Manufacturing Overhead
  • General and Administrative
  • Selling
  • Recovering Indirect Costs
  • Activity-Based Costing
  • Target Costing
  • Profit
  • Resisting Arbitrary Price Increases
  • Summary
  • Appendix A: Application of Learning Curves
  • Appendix B: Discounts
  • Endnotes
  • Suggested Reading
  • Chapter 17 Methods of Compensation
  • Introduction to Compensation Arrangements
  • Observation
  • Contract Cost Risk Appraisal
  • Technical Risk
  • Contract Schedule Risk
  • General Types of Contract Compensation Arrangements
  • Fixed Price Contracts
  • Incentive Contracts
  • Cost-Reimbursement Contracts
  • Specific Types of Compensation Arrangements
  • Firm Fixed Price Contracts
  • Fixed Price with Economic Price Adjustment Contracts
  • Fixed Price Redetermination Contracts
  • Incentive Arrangements
  • Fixed Price Incentive Fee
  • Cost Plus Incentive Fee Arrangements
  • Cost Plus Fixed Fee Arrangements
  • Cost Plus Award Fee (CPAF)
  • Cost without Fee
  • Cost Sharing
  • Time and Materials
  • Letter Contracts and Letters of Intent
  • Considerations When Selecting the Method of Compensation
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 18 Negotiations
  • Introduction
  • Objectives of Negotiation
  • Quality
  • Fair and Reasonable Price
  • On-Time Performance
  • Control
  • Cooperation
  • Supplier Relationship Management
  • When to Negotiate
  • Supply Management's Role in Negotiation
  • The Supply Management Professional Acting Alone
  • The Supply Management Professional as the Negotiating Team Leader
  • The Negotiation Process
  • Preparation
  • Establishing Objectives
  • Identify the Desired Type of Relationship
  • Five Powerful Preparation Activities
  • The BATNA
  • The Agenda
  • "Murder Boards" and Mock Negotiations
  • Crib Sheets
  • Draft Agreements
  • Face-to-Face Discussions
  • Fact Finding
  • Recess
  • Narrowing the Differences
  • Hard Bargaining
  • Techniques
  • Universally Applicable Techniques
  • Transactional Techniques
  • Collaborative and Alliance Negotiating Techniques
  • The Debriefing: An Incredible Learning Opportunity
  • Documentation
  • Online Negotiation
  • Advantages to Online Negotiation
  • An Example of a Successful Application of Negotiating Online
  • Drawbacks to Online Negotiation
  • Negotiating for Price
  • Price Analysis Negotiation
  • Cost Analysis Negotiation
  • Characteristics of a Successful Negotiator
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 19 Contract Formation and Legal Issues
  • Litigation Prevention
  • Dispute Resolution
  • Negotiation
  • Mediation
  • Litigation
  • Arbitration
  • Courts
  • Development of Commercial Law
  • Electronic Contract Considerations: Cyber Law
  • Attempts to Revise the UCC
  • Basic Legal Considerations
  • Status of an Agent
  • The Purchase Contract
  • Letters of Intent
  • Special Legal Considerations
  • Inspection Rights
  • Rights of Rejection
  • Title and Risk of Loss
  • Warranties
  • Evergreen Contracts
  • Order Cancellation and Breach of Contract
  • JIT Contracts
  • Honest Mistakes
  • Patent Infringement
  • Restraint of Trade Laws
  • International Considerations
  • Contracts for the International Sale of Goods
  • Foreign Corrupt Practices Act
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 20 Contract and Relationship Management
  • Need for Better Contract Management
  • Preaward Conference: The Stage Has Been Set
  • Monitoring and Controlling Project Progress
  • Operations Progress Reports
  • Gantt Charts
  • CPM and PERT
  • Closed-Loop MRP Systems
  • Monitoring and Controlling Total Supplier Performance
  • Supplier Performance Evaluation
  • Motivation
  • Punishment
  • Rewards
  • Assistance
  • Transformational Training
  • Quality Audits and Supply System Reviews
  • Problem Solving
  • Collaboration
  • Managing the Relationship
  • Summary
  • Appendix A: Supplier Reporting Requirements for Unique Major Projects
  • Appendix B: How Critical Path Scheduling Works
  • Appendix C: Supplier Questionnaire
  • Endnotes
  • Suggested Reading
  • Chapter 21 Ethics and Social Responsibility
  • Ethics in the Supply Management Context
  • Professional Supply Management Ethics
  • Principles and Standards of Ethical Supply Management Conduct
  • National and International Supply Management Conduct
  • Important Areas Requiring Amplification
  • Avoid Sharp Practices
  • Competitive Bidding
  • Negotiation
  • Samples
  • Treating Salespeople with Respect
  • Substandard Materials and Services
  • Gifts and Gratuities
  • Management Responsibilities
  • Written Standards
  • Ethics Training and Education
  • Departmental Environment
  • Miscellaneous Factors
  • Dealing with Gray Areas
  • The Four Way Test
  • Social Responsibilities
  • Summary
  • Endnotes
  • Suggested Reading
  • Chapter 22 Implementing World-Class Purchasing in the Supply Chain
  • Designing an Effective Purchasing/Supply Management Department
  • The Purchasing Planning Function
  • Defining Planning
  • Four Phases of Planning
  • The Organizing Function
  • The Five Basic Steps to Organizing
  • Basic Concepts of Organizing
  • Organizing for Supply Chain Management
  • The Staffing Function
  • The Directing Function
  • Leadership
  • Leadership and the Purchasing Profession
  • The Controlling Function
  • Evaluating the Purchasing/Supply Management Department
  • The Annual Report
  • Risk Management
  • New Focus on Risk Management!
  • Appendix A: The Institute for Supply Management Awards for Excellence in Supply Management
  • Appendix B: From Reactive to Proactive Procurement: A Case Study
  • Appendix C: Raytheon Supply Base Optimization, April 2005
  • Appendix D: At Rolls-Royce North America, an Organizational Shift Is the Driving Force Behind an Innovative New Journey to Engage Its Supply Chain
  • Endnotes
  • Suggested Reading
  • Epilogue: The Future of Supply Management
  • Index