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My name is Americo Cunha, Ph.D., Professor of Operations and Supply Chain Management and Project Management in Colleges and Universities in Canada. We are focused on educational videos in Operations Management, Supply Chain Management, Procurement Management, Project Management, Business Analysis, and Business Process Modeling.
Corporate purchasing is different from personal buying! Let’s break down the puzzle of how individuals decide, choose, and buy things. And then, trace a parallel with the corporate purchasing.
You’ve learned in the marketing classes that there is a buying process that most consumers follow. It starts with the need recognition. Then, usually, people search for information about products. They identify alternatives
and then make the decision which product they will buy. After using the product, they may like it or be frustrated with their choice.
The purchasing process and procedures intend help purchasing professionals to find the most suitable solution for the company.
Let’s next check the main activities of the corporate purchasing process.
The needs usually arise from sales forecast and production plan.
Then, there is a very critical step, to identify, sort, and define the requirements that will be fulfilled by the purchasing.
After, the purchasing department should look for a
What are the SCM Supply Chain Management and Purchasing Management main functions?
When we talk about supply chain, we are talking about several things, how materials arrive in the company. How companies receive, handle, and storage. How supply orders are processed. How the inventory is managed. How materials are stocked. What pace they are used in the production process. And then, how end products are packed, shipped and delivered to customers.
The question is, where is the purchasing work in the SCM umbrella? I would say, all over. But, before going deeper in the purchasing, let’s define better the diffrences between supply chain and purchasing.
In this lesson, we will be reviewing the language of the supply chain management and, inside it, the purchasing work. Let’s understand the releanthiship and differences.
This video is part of the online course Introduction to Procurement Management for university undergraduate programs. The videos were designed to be used as a preparato
Purchasing strategy: let’s discuss 7 critical strategic dimensions in purchasing management. Learn quickly, get a job in corporate purchasing, and succeed in Supply Chain Management.
The strategic vision on purchasing is mainly related to supply continuity, quality, and costs. Supply assurance has a special attention and the five right portraits very well the challenges to be managed.
You may wonder what kinds of purchasing issues are grabbing the attention of the executives, VPs, CEOs. Certainly, they are always interested because of the purchasing importance for the business.
This video is part of the online course Introduction to Procurement Management for university undergraduate programs. The videos were designed to be used as a preparatory activity before classes.
The course covers the following topics:
• Procurement, purchasing and supply management
• Strategic Supply chain and procurement
• Procurement processes and purchasing types
• Sourcing strategies
• Supplier and ve
We can divide the supply types into materials, services, investment, and situations. in this lesson, we will be evaluating different supply materials and purchasing situations. Learn quickly, get a job in corporate purchasing, and succeed in Supply Chain Management.
Let’s check some examples.
- Raw materials are commodities usually applied as an input to the production process.
- Semi finished products and components include all items that went through manufacturing process before being applied in the production process.
- The finished products are items that usually don’t require major processing before resale to the end customers.
- The Maintenance Repair and Operating MRO items include anything that does not go directly into the final product. They are applied to support production and operations such as machine spare parts, computer, office, and cleaning supplies.
- The production support items are materials the go together with the final product but are not part of them such a
This is a general view of the purchasing process. Forecast, requirements, requisition, supplier selection, contract, purchase order, receipt, inspection, payment, and performance measurement.
The cycle begins with the identification of needs. The needs can be defined during the planning, during a product development, in projects, or from the production process.
In the production planning, the sales forecast drives the aggregate and material requirement plan -MRP. Based on the MRP, it is possible to determine the quantity and dates for raw material, components, and semi-finished goods needed to meet the production plan.
The requisitioning involves the specification, describing material characteristics, quantity, and date in which the material is required. When it involves services, a statement of work should be elaborated to guide the contracting process. The business units inform the needs and descriptions through a purchase requisition.
Do you want to learn more, watch the video?
SCM sourcing is a key activity in procurement an purchasing processes. A good logistic and supply chain professional should know the sourcing alternatives available when selecting suppliers! Watch and learn quickly! A good SCM job is waiting for you.
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Summary of video transcript
One of the most important activities of the purchasing process is the sourcing. What is sourcing? What are the alternatives? How to select suppliers professionally?
Sourcing is the process of identifying, selecting, and developing suppliers. In this video, you have to answer four questions. What are the materials required? How the company can obtain these materials? In the case of purchasing, who and where are the suppliers?
The what question lead us to the requirements. The how, if the company will be producing or purchasing the material. Alternatives for location, type, size, quantity are the answers to the quest
In my time in Purchasing, I learned that Supply Chain and Purchasing Management are intensely correlated, and they have two fundamental objectives:
1) Bring resources to the business at a competitive price. Acquire materials and components also at a competitive price
2) Keep supply continuity, keep the company running, keep the operations and production doing their work.
Therefore, PURCHASING is an indispensable function to achieve Supply Management goals and at the end the business goals.
What is the challenge here? the challenge is to formulating strategies against supply disruption at ra competitive price point. Peter Kraljic developed a matrix to simplify how the purchasing organization should approach the procurement process.
Purchasing should assess supply challenges to achieve:
1) long-term availability of critical materials and components
2) mitigate supply complexity and uncertainty
To make it simple:
1) pay attention to item's relative value in the production process an
Request for Proposal (RFP), Request for quotation (RFQ), Request for Information (RFI) are key documents in the purchasing process. In this lesson, we cover 3 main points about what is called RFx.
1 – we define RFI, RFP and RFQ
2 – we will be learning when to apply them
3 - we will see a basic work flow for each of them
This is a strange story but may help the learning. Our friend here is a manager in a sunny and hot day. He wants to buy something to give to his team but has no idea how to solve the problem.
He prepared a Request for Information and sent out to suppliers. The supplier replied with some alternatives, water balloons can help with heat, also Ice creams, or why not some drinks!
The manager, thought, thought, and then decided for ice creams, the other solution does not seem to be appropriate for the workplace.
Once, he has an idea about the product, he issued and sent a Request for Proposal because he was open for different product features.
If he knew all details be
Request for Proposal (RFP) is a critical document in the purchasing management process. Do you want to succeed in Purchasing Management? Watch this video! In this lesson, we cover 3 main points about an RFP.
1 – what is a Request for Proposal RFP
2 – what is the RFP workflow
3 – The RFP main sections and template
The purchasing process has three main groups of stakeholders, The company’s departments, the purchasing department, and the suppliers. Once there is a product or service need in one or more business units. They contact the purchasing department to start the purchasing process.
The needs, specifications, and requirements are defined by the internal stakeholders and consolidated in a document called RFP.
The purchasing department makes public or selects some vendors to receive the RFP.
The vendors return proposals that include products and services detail specifications, what requirements can be delivered, which ones they cannot. And in some cases, alternatives to fulfill
Purchasing and Project contract management and the 3 main contract types: fixed price, time and materials, and cost based contracts. This is an important knowledge in Project Procurement, Supply Chain, and Purchasing Management. In this video, you learn:
Why and when do companies need contracts in purchasing management?
What are the main contract types used by companies?
What are the ADVANTAGES and risks of each contract type?
Would you like to understand contract management in corporations? If yes, keep watching.
Fixed price is a contract in which the price of the product or service is fixed during the contract duration. In these contracts, buyer and seller should know very well the specifications and, therefore, the costs can be estimated with accuracy.
In a cost-based contract, the buyer agrees to reimburse the supplier for the expenses incurred plus a dollar amount of profit, usually a percentage of the contract’s full price. To protect against cost overruns, some companies def
Learn fast the weighted scoring method, a.k.a. weighted criteria matrix, decision-making matrix, ranking matrix, prioritizing matrix. It is an important decision-making technique in business analysis.
The weighting and scoring method can be explained in 5 five easy steps:
1- define the objective and requirements.
2- grade each requirement importance with weights
3- identify alternatives to achieve the objective
4- give scores to each option and calculate total weight score
5- rank options and interpret the results
Therefore, watch this video if:
Do you have to prioritize business alternatives?
Do you have to rank different business solutions?
Do you want to learn how to use decision matrix criteria?
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Break-even is decision-making tool very important for business professionals. Break-even analysis is not just a mathematical formula, it is an important technique, that combined with others, can provide support to the decision-making process.
In this video, we learn how to do the breakeven analysis. How to calculate the breakeven point (BEP) in financial analysis, buy or make a decision, and production process selection.
Learn here, quickly, and succeed in university assignments, job interviews, and get a good job. That's why we are doing these videos.
The 3 most important applications of break-even analysis on business decisions are:
(1) Determine the quantity of sold units at which the costs equal revenues
(2) Find the quantity demanded at which the buying costs equal the internal production costs
(3) Compare business processes and determine the lowest cost for requested quantity range.
By Americo Cunha, PhD
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