Dedication	5
	Contents	6
	Preface	8
	Foreword	11
	Acknowledgments	13
	I FROM BUYING TO STRATEGIC CONTRIBUTOR	15
	1 THE ROLE OF THE PURCHASING AND SUPPLY FUNCTIONS	16
	1. PURCHASING OBJECTIVES	19
	2. IMPACT ON PROFITABILITY	20
	3. CONTROLLING THE PROCESS	23
	4. THE BUYING JOB	24
	4.1 The Accountability Concept	25
	4.2 Buying Influences	25
	5. CHANGING DEMANDS ON THE JOB	30
	5.1 Socioeconomic Programs	30
	6. PURCHASING REDEFINED	31
	2 EVOLUTION OF PURCHASING AND SUPPLY MANAGEMENT	33
	1. SPAN OF CONTROL	37
	2. CENTRALIZED VERSUS DECENTRALIZED DEPARTMENT	38
	2.1 Advantages of Centralization	38
	2.2 Advantages of Decentralization	39
	2.3 Titles Used in Purchasing	40
	2.4 Where Should Purchasing Report?	41
	3. THE MATERIALS MANAGEMENT ORGANIZATION	41
	3.1 Why Do Some PMs Not Embrace MM?	43
	4. REENGINEERING THE PURCHASING ORGANIZATION	44
	4.1 Organizational Structure and Relationships	45
	4.2 Authority to Commit Independent of the Organization	46
	5. DAY-TO-DAY VERSUS LONG-RANGE BUYING	49
	6. “PURCHASING AND SUPPLY MANAGEMENT” COMES OF AGE	51
	3 STRATEGIC PURCHASING SUPPLY INITIATIVES	55
	1. SELECTION OF STRATEGIES LEADS TO ACTION	57
	2. SUPPLY BASE MANAGEMENT STRATEGY	60
	3. SUPPLY PLANS TO CONTROL MAJOR COMMODITIES	63
	4. SEEK LEVERAGE WITH BUYING TEAMS	64
	5. TACTICS TO CARRY OUT STRATEGIC PLANS	68
	6. EMERGING STRATEGIC OPPORTUNITIES	69
	II CREATING THE VISION	71
	4 THE PURCHASE ORDER PROCESS	72
	1. FUNDAMENTAL STEPS TO COMPLETE A PURCHASE	73
	1.1 Editing the Requisition	73
	1.2 Issuing the Purchase Order ( PO)	74
	1.3 Blanket Orders.	75
	1.4 Use of Blanket Orders for Repetitive Purchases	78
	2. TERMS OF PURCHASE	79
	2.1 Shipment Terms	80
	2.2 Change Notices	80
	3. COMPLETING THE PURCHASE	81
	3.1 Follow Up and Expediting	81
	3.2 Receiving and Price Checking	82
	4. ADDITIONAL CONSIDERATIONS FOR INTERNATIONAL PURCHASES	83
	5. ELECTRONIC PURCHASE ORDER PROCESS	86
	5.1 Purchasing Cards/ Procurement Cards	87
	5.2 E- Procurement or e- Commerce	88
	5.3 Direct Purchases and e- Commerce	92
	5 BUYING FROM THE RIGHT SUPPLIER	95
	1. SOURCE SELECTION	95
	1.1 Request for Quotation ( RFQ)	96
	1.2 Buyer’s Checklist for Selecting New Suppliers	97
	2. TEAMWORK AND COOPERATION	100
	3. QUALIFICATION OF NEW SUPPLIERS	100
	3.1 How Many Sources of Supply?	101
	4. SOURCES OF SUPPLIER INFORMATION	104
	5. SUPPLIER FINANCIAL STABILITY	106
	5.1 Credit Rating Reports	107
	5.2 Financial Statements	108
	5.3 Ratios as Guides	110
	6. SEARCH FOR LOW-COST SUPPLIERS	112
	6.1 Computing Total Landed Cost of Acquisition	113
	6.2 Post- Selection Supplier Evaluation	115
	6.3 How Valid Are These Ratings?	119
	6 CREATING A GLOBAL VISION	121
	1. THE UNITED STATES AND WORLD TRADE	122
	1.1 The U. S. Trade Deficit	123
	1.2 North American Free Trade Agreement	123
	2. BILATERAL AND MULTILATERAL TRADE AGREEMENTS	125
	2.1 Regional Trade Agreements	126
	3. THE PURCHASING ROLE	127
	3.1 The Expanded Role into Global Purchasing	127
	3.2 Emergence of the Global Corporation	128
	3.3 Expansion of Countertrade	128
	3.4 Offshore Sourcing Issues	129
	4. HOW TO CONDUCT A GLOBAL BUYING EFFORT	130
	5. ENTRY STEPS TO CLEAR CUSTOMS	133
	5.1 Immediate Delivery ( I. D.) Entry	134
	5.2 Types of Transportation Entries	135
	5.3 Customs Duty Valuation	135
	5.4 Examination	136
	5.5 Country of Origin Marking	136
	5.6 Certificate of Origin	136
	5.7 Appraisement	137
	5.8 Liquidation	137
	5.9 Methods of Payment	137
	5.10 Letter of Credit	139
	5.11 Banker’s Acceptance	141
	6. GENERALIZED SYSTEM OF PREFERENCES	141
	6.1 Harmonized Tariff Schedule of the U.S. Annotated (HTSUSA)	142
	7. PROGRAMS BENEFITING THE IMPORTING BUYER	144
	7.1 Benefits from Foreign Governments	144
	7.2 Foreign “ Free Trade” Zones and Sub zones	145
	7.3 Duty Drawback Savings	145
	8. THE INTERNET AND GLOBAL INFORMATION NETWORKS	146
	7 BUILDING RAPPORT WITH SUPPLIERS	149
	1. SUPPLIER PARTNERING RELATIONSHIPS	152
	1.1 Implications to the supply organization	154
	2. CHANGE “BACKDOOR” SELLING TO “FRONTOFFICE” COLLABORATION	156
	2.1 Overcoming “ Backdoor” Behavior	158
	3. CONFLICT RESOLUTION: WORKING WITH OTHERS	159
	3.1 Taking positive action	160
	3.2 A Time to Do Nothing!	162
	4. ETHICAL ISSUES IN BUYING	162
	4.1 Where to Draw the Line	163
	4.2 Buying Practices	165
	4.3 Gifts from Suppliers	167
	4.4 Lunches and Entertainment	168
	4.5 The Ethical Double Standard	168
	5. DO’S AND DON’TS OF DEALING WITH SUPPLIERS	169
	8 QUALITY AS A COST IMPROVEMENT TECHNIQUE	171
	1. QUALITY DEFINED	172
	2. SIX-SIGMA AND TOTAL QUALITY MANAGEMENT	173
	2.1 Cost of Quality	174
	3. STATISTICAL PROCESS CONTROL	176
	4. SPECIFYING WHAT TO BUY	180
	4.1 Efforts to Ensure Quality Through International Standards ( ISO 9000 Series)	182
	4.2 Cooperation with the Quality Function Pays Off	183
	5. WORKING WITH SUPPLIERS TO MANAGE QUALITY	185
	5.1 Certification Clause	185
	5.2 Quality and Reliability Clause	185
	5.3 Early Supplier Involvement	186
	5.4 Qualification and Pre- qualification	187
	9 PURCHASING’S STRATEGIC APPROACH TO INVENTORY MANAGEMENT	189
	1. DRIVERS OF INVENTORY	189
	1.1 Types of Inventory	191
	1.2 Who controls inventory?	192
	2. GOALS OF INVENTORY CONTROL	192
	3. ASSET MANAGEMENT ( CONTROL OF INVENTORY COST)	193
	3.1 Record Keeping Systems	194
	3.2 Methods of Inventory Valuation	195
	3.3 Financial Analysis of Inventory	196
	3.4 Inventory Turnover	196
	3.5 Physical Control of Inventory	198
	4. DECIDING WHEN AND HOW MUCH TO BUY	200
	4.1 Economic Order Quantity	201
	4.2 Order Quantity Methods	202
	4.3 Statistical Reorder Point	203
	4.4 Time- Phased Order Point	204
	4.5 Materials Requirement Planning	205
	5. LEAN MANUFACTURING AND JUST-IN TIME	206
	6. PROCESS IMPROVEMENT AND INVENTORY	207
	6.1 Leadtime as an Inventory Driver	207
	6.2 Quality and Lot Size as Inventory Drivers	208
	6.3 Information Provides Opportunity	209
	7. PURCHASING’S ROLE IN SUPPORTING INVENTORY OBJECTIVES	210
	7.1 Supplier- Managed Inventory	211
	10 PROACTIVE TECHNOLOGY MANAGEMENT STRATEGY FOR COMPONENT OBSOLESCENCE	213
	1. THE CHALLENGE OF OBSOLESCENCE	214
	1.1 Obsolescence as an Incurable Disease	215
	1.2 The Ideal Obsolescence Management System: “Clean Sheet of Paper” Design	216
	1.3 Conflicting Challenge: Managing Obsolescence and Change Issues while Optimizing Inventory	218
	2. OBSOLESCENCE MANAGEMENT SOFTWARE: HOW IT WORKS	218
	3. THE LIFE CYCLE CONCEPT	222
	4. BENEFITS OF A SOUND OBSOLESCENCE MANAGEMENT PROCESS	223
	5. SO WHO NEEDS OBSOLESCENCE MANAGEMENT TOOLS?	224
	5.1 The Old Way Versus the New Way...	225
	5.2 How to Win a Spares Contract and Lose your Shirt!	225
	5.3 How to Win a Spares Contract and Win Big!	226
	6. THE FUTURE AND THE WAY FORWARD... HOW TO SELECT THE RIGHT TOOLSET	227
	11 BUYING AT THE “RIGHT” PRICE	228
	1. HOW PRICES ARE SET	229
	1.1 Market- based and cost- based prices	231
	2. PRICE AND COST ANALYSIS	232
	2.1 An Exercise to Compute Price of Paint	234
	2.2 Cost analysis	234
	2.3 Cost Analysis Tips for Buyers	235
	2.4 Break- even Analysis	239
	3. MEETING TARGET COSTS FOR NEW DESIGNS	241
	3.1 Price, Cost, and Value Relationships	241
	4. PRODUCER PRICE AND CONSUMER PRICE INDEXES	242
	4.1 Your Company Market Basket Index	244
	5. USE OF STANDARD COST	244
	6. PRICE FORECASTING	246
	7. STRATEGY OF HEDGING VERSUS FORWARD BUY	249
	7.1 Ways to Minimize Risk	250
	7.2 How a Futures Hedge Works	251
	12 NEGOTIATIONS	253
	1. CREATING THE NEGOTIATION ENVIRONMENT	254
	2. NEGOTIATION STRATEGY	255
	2.1 Address Alternative Solutions to Gain Concessions	257
	3. IMPLEMENTING TACTICS AND NEGOTIATION CHECKLIST	259
	3.1 Negotiation Checklist (“ Do’s and Don’ts”)	259
	4. NEGOTIATION FUNDAMENTALS FROM A GLOBAL PERSPECTIVE	260
	4.1 Canadian Culture	262
	4.2 Mexican Culture	263
	4.3 Negotiation Sensitivity	264
	4.4 Avoiding the Pitfalls — How to Blow It!	265
	5. A NEGOTIATION SETTLEMENT	267
	13 GLOBAL SUPPLY DEMANDS TECHNICAL BUYING COOPERATION	269
	1. ORGANIZING TO ACHIEVE TECHNICAL COMPETENCE	270
	2. THE DESIGN ENGINEERING PROCESS	271
	2.1 Need for Follow-up of Design Programs	272
	3. THE REENGINEERING PROCESS	273
	4. STRATEGIC TECHNICAL SUPPORT ACTIVITIES	275
	4.1 Manage Conflict with Design Engineers	276
	5. REVIEW OF THE TECHNICAL BUYER AND PURCHASING ENGINEER JOBS	280
	5.1 The Role of Purchasing Engineers	280
	6. MAKE-OR-BUY STUDIES	281
	6.1 Purchasing’s Role in Make-or-Buy	287
	14 USING COST REDUCTION TECHNIQUES	289
	1. SIX-SIGMA METHODOLOGY	292
	1.1 Value and Engineering Analysis	295
	1.2 Overcoming Resistance to Change	297
	2. REDUCING COMPLEXITY - STANDARDIZATION AND SUBSTITUTION	299
	2.1 Simplification	300
	3. OUTSOURCING AND LEASE- VERSUS- BUY	300
	3.1 Lease- Versus- Buy	302
	3.2 Methods of Acquisition	303
	3.3 Other Leasing Considerations	304
	3.4 Tax Advantages	305
	4. USE OF THE LEARNING CURVE	305
	4.1 How the Learning Curve Works	306
	5. TRACKING COST SAVINGS RESULTS	310
	15 LEGALITIES IN BUYING	313
	1. KEY ELEMENTS OF EVERY CONTRACT	313
	2. THE UNIFORM COMMERCIAL CODE	314
	3. CONTRACT TERMS AND CONDITIONS	315
	3.1 Word Processing Templates	315
	3.2 Warranties	315
	3.3 Epidemic Failure Clause	316
	3.4 Liability Insurance	317
	3.5 Force Majeure	317
	3.6 Contract Cancellation or Termination	318
	3.7 Indemnification of Buyer	318
	3.8 Patents, Proprietary Information, and Disclosure	319
	3.9 Other Suggested Purchase Order Clauses	321
	4. SOCIOECONOMIC AND ENVIRONMENTAL LAWS	322
	5. ANTITRUST LAWS	323
	6. UNITED NATIONS CONVENTION	324
	7. GENEVA AGREEMENT ON TARIFFS AND TRADE	325
	8. GLOBAL TRADE BARRIERS	325
	8.1 Boycotts	325
	8.2 Cartels and Closed Countries	326
	8.3 Counterfeiting and Piracy of Property	326
	8.4 Import Customs Laws and Regulations	327
	8.5 Unfair Pricing and Protectionism	327
	8.6 Antidumping Duties	328
	8.7 Countervailing Duties	329
	9. BATTLE OF THE FORMS	330
	9.1 Dispute Settlements	330
	9.2 Alternative Dispute Resolution	332
	9.3 Mediation	333
	10. FOREIGN CORRUPT PRACTICES ACT	335
	11. THE BUYER AND LEGAL ISSUES	336
	16 SERVICES AND MRO BUYING	338
	1. BUYING IN SERVICE ORGANIZATIONS	338
	1.1 Distribution Buying	340
	1.2 Merchandise ( Retail) Buying	341
	1.3 Hospitals and Health Maintenance Organizations	341
	1.4 Schools and Educational Buying	342
	1.5 Government Procurement and Military Buying	342
	2. CO- OP AND CONSORTIUM BUYING	343
	2.1 Consortium Purchasing	343
	3. BUYING FOR MAJOR PROJECTS	345
	3.1 Construction Contracting	346
	3.2 Recycling and Trash Removal	346
	3.3 Use of Bids	346
	4. SYSTEMS CONTRACTS FOR MRO SUPPLIES	347
	5. INSTANT CASH AND THE PROCUREMENT CREDIT CARD	348
	5.1 The Procurement Card	349
	5.2 “ Smart Cards”	350
	17 TRANSPORTATION STRATEGIES TO REDUCE LOGISTICS COSTS	351
	1. DEVELOPMENTS WITH A PROFOUND IMPACT ON TRANSPORT	352
	2. SIGNIFICANT BUYING ISSUES	354
	2.1 Freight Consolidation	356
	3. MODES OF TRANSPORT	357
	4. TRANSPORTATION CONTRACT CONTENTS	359
	4.1 Ocean Carriage Contracts	361
	4.2 Containers	362
	4.3 Insurance	363
	4.4 Cost Analysis of Motor Carriage Transportation	364
	4.5 Negotiating Rates with Deregulated Carriers	364
	5. COMMERCIAL TERMS OF SALE	365
	6. CLAIM SETTLEMENTS AND ADJUSTMENTS	370
	7. AUDITS OF FREIGHT BILLS	371
	8. THIRD PARTY LOGISTICS	372
	III LEADING AND MANAGING TO FULFILL THE VISION	375
	18 IMPROVING MANAGEMENT OF THE PURCHASING FUNCTION	376
	1. APPLICATION OF MANAGEMENT PRINCIPLES TO PURCHASING	377
	1.1 Theory “ X” and “ Y”	379
	1.2 Theory Z	380
	2. APPLY SOUND THEORY TO PURCHASING	381
	3. EFFECTIVE COMMUNICATIONS, BOTH EXTERNAL AND INTERNAL	382
	3.1 Productive Work Habits	385
	4. NEED TO SUPPORT EDUCATION AND BUYER DEVELOPMENT	386
	4.1 Pursue Buyer Development Programs	388
	4.2 Certified Purchasing Manager Program	389
	4.3 Accredited Purchasing Practitioner Program	389
	5. USE OF JOB DESCRIPTIONS AND A PURCHASING MANUAL	390
	5.1 Develop and Use a Purchasing Manual	391
	19 MEASUREMENTS OF PURCHASING PERFORMANCE	398
	1. VARIOUS KINDS OF MEASUREMENTS USED	401
	1.1 Internal Audit	402
	1.2 Management by Objectives	403
	2. INDICATORS OF PURCHASING EFFICIENCY	404
	3. BENCHMARKING	408
	4. THE TREND MEASUREMENT SYSTEM	409
	5. STANDARD COST AS A PERFORMANCE MEASUREMENT	412
	6. HOW THE PURCHASING DOLLAR IS SPENT	412
	6.1 Computing a Company’s Productivity	413
	7. REPORTS TO MANAGEMENT	416
	8. SUPPLY MANAGEMENT PROCESS MEASUREMENT	418
	20 A LOOK INTO THE FUTURE	422
	1. SIGNIFICANT TRENDS	423
	1.1 The Realities of a Global Economy	424
	1.2 Buyers Should Avoid Chasing Low Cost Labor	425
	2. CHANGES IN THE PROFESSION	426
	2.1 Strategic Development Becomes Critical	427
	2.2 Tactical Methods Remain Important	428
	3. FULFILL THE VISION!	429
	Appendix	432
	Index	439
	More eBooks at www.ciando.com	0