Comex

The Global Business Handbook
The Eight Dimensions of International Management

Edited by DavID J. NEwlaNDs and Mark J. HoopEr

Chapter 9

International purchasing Management
David J. Newlands

Introduction purchasing provides an acquisition service for the company while not requiring the goods itself. The role has changed from the 1980s administrative oriented activity management totoday, with its emphasis on strategic supply chain facilitating and provides value adding activities such as quality improvement and cost reduction. purchasing no longer needs to focus on order placement and economic ordering. Materials management specialists typically now take control of these issues, using advanced planning and control software such as sap or BaaN. with reduced product lifecycles, an ever increasing rate of new design releases and the constant search both internally and within the existing and potential supply base, purchasing must focus on preparing for the next product and improving performance while producing the existing good. purchasing agents must work with process engineering to implement best practices, quality engineers that focus on process verification andstability, cost engineering that focus on efficient operations, transportation and other third party value-adding service providers. Marketing and design have always been managed as projects. purchasing is migrating from repetitive procedures to project-based value-adding services. purchasing must contribute at strategic and tactical levels. purchasing today is required not to be a cost centre. Mostagents’ performance is measured against the aim to reduce costs rather than the function costs. some companies require up to 15 times the agent’s salary in proposed cost reductions, in order to create the budget for their salary for the following year. The aim of this chapter is not to review conventional purchasing. Instead, the emerging challenges and roles purchasing agents face are discussed.Purchasing Perspective Shifts purchasing, like sales and marketing, operates at two levels:1 1. knowing the name of the Target (person or company) in advance that will be involved in the transaction; the goods in question will be created and delivered to fulfil unique order requirements. The lead-time between order and delivery, or the frequency of orders placed, allow for the provision ofsignificant variety and variability (slack et al. 1998, p. 29). Typically, a make-to-order or assemble-to-order contract is established. 2. Not knowing the name of the person or company in advance. as a consequence lower variety or a limited range of goods are provided usually on a make-to-stock basis. Making

1 This insight was provided by kenneth Gervase williams, Founder of Gervase Instrumentsltd, now part of spirax sarco.

148

The Global business Handbook to stock is typically in response to forecasting, which in itself is inherently inaccurate and subject to variables.

purchasers must select and use appropriate strategies that fit with the organization’s needs, current order profiles, development projects and the requirement to be actively involved or operate at arm’s length: •High-value fixed asset investments and tooling management activities include contractor selection, process analysis, benchmarking activities and business process re-engineering, detail design, construction approval, commissioning, process verification, operator training and formal process hand-over, laying roads, pipelines, high voltage electricity lines, constructing purpose-built manufacturingor distribution centres, assembly of customized point-of-sale building (e.g., McDonald’s and other restaurant’s ‘drive thrus’). High performance dedicated tooling may be only sourced from specialized engineering firms. an automotive example is to put a car tyre on a wheel, fit the valve, inflate and balance the assembly in seven seconds. The equivalent operation for tractor tires can take as...