1-Introduction to Purchasing Warehousing and Distribution

8/14/2019 1-Introduction to Purchasing Warehousing and Distribution

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PURCHASING,

WAREHOUSING ANDDISTRIBUTION

Do. Dr. Blent Sezen


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Suppose you are a car manufacturer..

You would buy materials, manage inventories and

distribute the final product.


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PURCHASING AND MATERIALS

MANAGEMENT A widely used organizational approach to purchasing

management involves a concept known as materialsmanagement.

This concept recognizes purchasing as one ofseveral activities dealing with the planning for,acquisition of, and utilization of materials.

In this approach, organization is structured so that allactivities bringing materials into and through the plantare combined under one person known as thematerials manager.


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PURCHASING AND MATERIALS

MANAGEMENT The basic rationale for this type of organization is

that, taken alone, the functions of purchasing haveconflicting objectives.

For example, purchasings concern that supply becontinuous may conflict with inventory control' semphasis on minimizing inventory levels, or withtraffic's objective of shipping in full loads.

The expanded use of computers has made it possiblefor the materials manager to coordinate thisincreased level of operations.


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Physical Distribution

Physical distribution takes the output-finished goods-from the end of the firm's production process to thecustomer.

This transaction may involve packaging, finished goods warehousing, outbound transportation, delivery to customers,

customer complaints, and accounting for all product costs since the product left

the production line.


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Delivery to customers

Do we carry only the final products?

What if our final product is a sub-material for another

product?


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Logistics

Logistics contributes to both the materialsmanagement and the physical distributionfunctions.

Logistics function manages the shipment ofall incoming goods from suppliers and alloutgoing goods to customers.

The firm's traffic manager typically carries outthese activities.


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Purchasing Objectives

Purchasings responsibility is to buy materials of the

right quality, in the right quantity, at the right time, at

the right price, from the right source, with delivery at

the right place.

In most concerns continuity of operations is of critical

importance.

The purchasing function must not allow production to

be disrupted by a lack of needed materials.


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Furthermore, this objective must be achieved with a

minimum investment in inventories.

Achieving this objective of security with a minimuminvestment demands a fine balancing of various

factors: risk of shutdown, the cost inherent in forward

buying, and the economies of quantity purchases.

Weighing these factors calls for experience and a

high order of professional judgment.


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Another objective is the maintenance of

adequate quality.

Quality refers primarily to the suitability of anitem for its intended purpose.

The objective is to procure the goods that arebest suited rather than those of highest

absolute quality.


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In addition to product quality, the services

offered by the suppliers must be evaluated in

the light of the organization's own needs.

An initial low cost quoted by one supplier may

legitimately be rejected in favor of a supplier

with a higher initial cost balanced by valuable

service factors.


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A further objective of purchasing is to avoid

duplication, waste, and obsolescence of the various

items purchased.

The purchasing department can do much to eliminate

these risks by considering each purchase in relation

to long-range operating plans as well as the short-

range considerations of the immediate purchase.


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What are we going to learn?

Purchasing Topics:

Purchasing Strategy & Forecasting

Purchasing Procedures and Techniques

Supplier Selection & Evaluation

International Purchasing Currency Issues in International Purchasing


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What are we going to learn?...

Warehousing and Distribution Topics

Inventory Management

Warehouse Management

Material Handling

Transportation Management Management of Distribution Channels


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Purchasing Strategy & Forecasting

How to make a make-or-buy decision.

What is vertical integration?

How many suppliers do you need?

Which suppliers should be selected?


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Purchasing Strategy & Forecasting..

How do we forecast the quantity to be

purchased?

What kind of forecasting methods should be

used?

What is time series forecasting?


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What are the basic steps of purchasing?

Purchasing documentation and forms.

What is a blanket order?


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Some recent trends in procurement:

Electronic Ordering

Stockless Purchasing

Standardization, and

Just in Time Purchasing.


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Supplier Selection & Evaluation

How do we find the suppliers?

What are the differences between local,

national and foreign suppliers?

What are the advantages of buying direct andbuying from distributor?


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Supplier Selection & Evaluation..

What are the issues when buying from a

developing country?

Single vs. Multiple sourcing

What are the supplier evaluation factors?


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Supplier Selection & Evaluation..

Supplier evaluation methods:

Categorical Method

Weighted Point Method

Cost-Ratio Method


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International Purchasing

How does the buyer locate the best sources

internationally?

Differences in currency, language and

culture.

What is culture?


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What are the cultural characteristics of

countries?

What is the effect of these cultural issues in

purchasing?

What are the differences in legal systems?


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What is Case law and Code law?

What are the types of agreements?

What are the ways of protection in

international purchasing?


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Currency Issues in International

Purchasing

Why do we have

so many different

currencies?


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Purchasing

What is the currency problem in purchasing?

What is Bretton Woods Agreement?

What is exchange risk?

Why do we take this risk?


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Purchasing

Three methods to reduce the risk of buying in

a foreign currency :

Forward contracts

Futures contracts

Currency options


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Why do we haveinventories?

Why this army stocksthese tires?

What is ABC Analysis?

What is Just-in-Time Inventory?


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What are the inventory related costs?

What to answer?

a) When to place an order for an item, and

b) How much of an item to order.

What is Economic Order Quantity and how do

we calculate it?


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Basic Inventory Models:

Economic Order Quantity Model

Production Order Quantity Model

Backorder Inventory Model

Quantity Discount Model


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Is it only a storage facility?


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What are the benefits of warehousing?

How do we design a warehouse?

What are the design factors that should be

considered?


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What are the alternative warehousestrategies?

Warehouse alternatives include:(1) Private warehouses,

(2) Public warehouses, and

(3) Contract warehouses.

What are the differences between andadvantages of these strategies?


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What are the issues in planning a

warehouse?

Site Selection

Product-Mix Considerations

Expansion Selection of Material-Handling System

Warehouse Layout


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What are the issues related to the security

of warehouses?

Pilferage Protection

Product Deterioration


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Material Handling

What are the handling activities?

Receiving

In-storage handling Shipping

What are the special considerations indesigning a material handling system?


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Material Handling

What kinds of equipment are used in material

handling systems?

What are the considerations in equipment

selection?

What are the advantages and disadvantages

of each type of material handling equipment?


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Material Handling

New developments in material handling:

Semi-automated material handling

Automated material handling

Information directed systems


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Packaging

Consumer packaging vs. industrial packaging

Damage protection in packaging

Increasing the efficiency in packaging throughunitization

Alternative materials used for packaging


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Transportation Management

Choosing from Transportation Alternatives

Transportation Rate Determination

Factors Affecting the Freight Rates


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Transportation Management

Quantity discounts in transportation

Evaluating the carrier alternatives


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Management of Distribution

Channels

Relationship management with channel

members

Trust, dependence and commitment

Learning from successful relationships

Documents

1-Introduction to Purchasing Warehousing and Distribution