1. Purchasing Organization
Chapter 5
Purchasing Organization
Chapter 4

2. Organizational Structure
Why important
Tier 1 Reporting
Tier 2 Reporting
Tier 3 Reporting

3. Tier 1 or 2 or 3
CEO

4. A typical “materials” structure

5. Factors effecting purchasing’s position in the organization hierarchy
The nature of the firm, products, and services
The material/sales ratio
The importance of the supply management function to senior management
The talent of purchasing staff and the extent to which they market their value-adding contributions
The overriding consideration in a progressive firm is the ability of purchasing to influence market and financial performance.

6. Organizing the purchasing function into four major areas:
Sourcing and Negotiation
Operational support and follow-up
Administrative Support
Purchasing Research
(Analysis to support better purchasing)

7. Purchasing organization with four major areas

8. In Smaller organizations
Purchasing usually has two functional areas
Buyers
Administrative support
Is there an advantage to a buyer doing her own follow-up?

9. Getting the Strategic Stuff done—the Long-term responsibilities
Small organizations: Dichotomize
Larger organizations: Dichotomize + a formal “Purchasing Research” branch

10. Centralization vs. Decentralization
Reasons to centralize
Reasons to decentralize

11. Tendency today is toward a Hybrid Structure
Corporate Level
Develop Corporate-wide policies and buying practices
Develop purchasing strategies to support overal strategic planning within the firm
Purchasing research
Set-up e-procurement systems
Recruiting and Training
Maintain pool of expert negotiators
Establishing contracts for corporate-wide requirements
Manage relationships with critical suppliers
International sourcing

12. Tendency today is toward a Hybrid Structure
Division (Operating) Level
Manage all sourcing unique to that division
Issue order releases against company-wide contracts
Follow-up, expediting, managing the supplier base and all other activities in support of value-adding purchasing at the division level

13. When Purchasing is Decentralized
Purchasing Councils are a good idea

14. Organizing the Buying Activity
By Commodity or Commodity Group
By End Item

15. Supply Management by Commodity Groups

16. Supply Management by Project or End Item

17. Advantages if the sourcing and negotiation group is organized . . .
by Commodity
by End item

18. Organization of the Future
Authority and
Control
In a Hierarchy
Sharing information
Trust
Teams
“First” names
Flattened hierarchy
Co-locations
“Titles”
Vertical Focus

19. Teams
Critically important

20. Co-locations Suppliers within the firm Buyers with operations
Requirements
Supplier performance
Buyers with engineering
Material specifications
New product requirements
Buyers with marketing
Promotions
New product ideas

21. The Future: Horizontal focus and teams

22. Let’s move on