Six elements of purchasing management theory

1. Quality

Quality means different things to different people, high quality products and services is to meet or exceed customer requirements or expectations of products and services. The meaning of quality is different from person to person, depending on each person”s position in the supply chain. For customers, for example, high quality products mean in terms of performance, appearance and price to meet the need of the products; For product design personnel, the quality is the nature of the products meet the functional requirements; For manufacturing personnel, quality means with the minimum cost to produce products that meet the order specifications. The definition of other relevant quality include:
(1) products or services to meet the specific needs of all of the features and properties.

(2) suitable for use.

(3) meets the requirements.

(4) product features to meet the requirements of its should reach, including reliability, maintainability, and safety.
If the definition of quality to meet or exceed customer requirements or expectations, also figure out how to measure quality. “Total quality” (TQM) concept built on the basis of all the relevant personnel to actively participate in, it pay more attention to the system procedure and process, rather than focusing on providing goods and services. Total quality shows that in the supply chain, suppliers, customers and employees will enter decided the quality of the link. Inspection and evaluation of suppliers, for example, replaced by the following methods: common to eliminate defects, focus on prevention rather than detection and correct mistakes. Supplier must be as “Allies” at this stage, it needs as well as its customers have enthusiasm, their obligations to quality management, rather than to “review” supplier by the buyer.

2. Quantity and delivery time

Different departments within the enterprise when faced with a number of problems, because of the different department interests, they have different requirements for each number. As production department put forward the demand for purchase or inventory quantity can meet the requirements of production, production will not happen because of the shortage; Inventory management attention is how to improve the level of products and services as much as possible, reserve more goods to meet the needs of the production department; Procurement staff is more concerned about the economy of each time order, the order number whether economy, how to reduce the order cost; The financial department is concerned with how to reduce the inventory goods to tie up money, for them, the lower the inventory, the better.
On the demand quantity, inventory quantity and ordering quantity is balance between the challenge every procurement staff, because do not always need the number of orders. It is suitable for individual requirements, such as change or replace a new machine tool factory, but most of the procurement activities are for regular regular demand. Order the application of some order again and again in the policy. Although the amount of the purchase from the point of view of long-term and need the same number, but different procurement policy will lead to different order quantity.

3. The prices of the goods

Commodity is the price of the commodity value of currency performance, it comprehensively reflects the quality of the goods, design, service, performance and settlement, transportation condition, is concerned about the focus of the seller and the buyer. In the traditional procurement, seller want to sell a good price, in order to obtain high profit; The buyer want to lower prices, reduce procurement costs, reduce the purchasing cost. So for purchasing enterprises, purchasing price decision-making is an important content of purchasing decisions, in “the purchasing cost management” section will in detail in this paper, the purchase price.

4. Purchase quality system

Is the purpose of the quality system in order to measure a product, process or machine to meet customer needs. The concept of quality associated with the functions of industrial organization, in the organization, all the departments in close cooperation to achieve and maintain the required quality standards. Quality assurance system in various tissues in whole or in part in the may include the following functions:

  • (1) product quality assurance;
  • (2) product reliability assurance;
  • (3) quality planning;
  • (4) supplier quality control;
  • (5) products and orders to check;
  • (6). Quality control testing equipment;
  • (7) personnel training;

End to the management to provide feedback about quality problem, quality assurance system of comprehensive management; Pet-name ruby quality guarantee system of evaluation; Attending the maintenance and improvement of the quality assurance system. To make production activities to achieve a successful, it must establish a reliable quality assurance system, as well as between the various functional departments to establish effective communication mechanisms.

5. Supplier management 

the enterprise supplier management to ensure material supply, to ensure the quality of procurement, and an important part of the purchase money saving. Supplier management has long been brought to the attention of the enterprise, as the change of economic environment, the emergence of new content unceasingly, now supplier management has a lot of new achievements of theory and practice. From the traditional supplier management to supply chain supplier management, supplier management is the main content of the two supplier selection and supplier relationship management. Therefore, supplier management includes not only to distinguish the level of suppliers, to choose material supply channels, and from the aspects such as quality, price, after-sales service, delivery time, an integrated, dynamic evaluation of suppliers, including how to manage the relationship with suppliers. On this basis, we can determine the supplier management goals and strategy.

To build relationships with suppliers:
from the point of view, the development trend of purchasing management mode of modern procurement activities attached great importance to cultivating enterprise, the relationship between the choice of the relationship between retailers and suppliers are purchasing management to give priority to solve the problem.
The relationship between the enterprise generally there are three basic types: one is trade relations. There is a close relationship between enterprises on the deal, and gradually formed in the long-term market stability, the relationship between the establishment of this relationship and continue to rely mainly on lower transaction costs, both concerned with its own interests, have contradictory emotions. The other is the partnership. With the continuous development of trade relations, building trust between the two parties, gradually formed a partnership. Under the partnership, the two sides attaches great importance to the coordination and trustworthy, pay attention to maintain the balance of interests, thus to improve the quality of the products, technology innovation and reducing distribution costs. Third, the alliance. Relationship between enterprises is the advanced form of alliance, it refers to the purchaser and the supplier, based on the strategy of sustained development, the cooperation business relationship, their common mission centered on business support each other, comprehensive utilization of the resources of enterprise and organization skills. The particular form of alliance including the mutual use of enterprise resources, joint investment, etc. The formation of the alliance between the need to meet certain conditions:
(1) both companies with unique business resources, advantages can be complementary;

(2) the possibility of resources and advantages with each other using;

(3) to predict the future of new business and growth prospects, etc.

6. Procurement performance evaluation of purchasing

It can be defined as coming up from quantity and quality assessment of functional departments and their staff to achieve procurement regulation goal and specific goals. Many enterprises and institutions, to now still the procurement staff as “administrators”, on their job performance or in the “quality”, “ability”, “job knowledge”, “work”, “cooperation” or “diligence” and other general items to the inspection, make the professional function of the procurement staff and performance, and can not get the respect they deserve and fair measure. In fact, if can of purchasing job performance evaluation, it is usually possible to achieve the following objectives:
(1) purchasing performance measurement can produce better decisions. This can be identified in the result of a plan after implementation of the difference of different; Through the analysis of these differences, can judge the reasons of the differences, and take timely measures to prevent future incidents.
(2) can be very good communication with other departments. For example, through the analysis of the need to check invoices in particular, can make the payment process more reasonable arrangement, thus enhance the purchasing department with coordination between management departments.
(3) strengthen the transparency of the business. Periodically report the content of the plan and the results of the actual, can enable customers to verify their opinion is adopted, and provide constructive feedback to the customer. At the same time, through to the management department to provide individual and department performance, is conducive to enhance the recognition degree of the purchasing department.
(4) can produce better incentive effect. Reasonable design of the evaluation system can meet the needs of individual incentives, can be effectively used to determine the constructive, goals, and personal development plan and the reward mechanism. Taken together, these assessment about purchasing behavior can improve the status of purchasing department in the company, reduce the operation cost and material procurement price, reduce the amount of waste, produce better decisions.

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