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Chapter 4 Purchasing and facilities management

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Chapter 4 Purchasing and facilities management Program The role and position of purchasing in a facilities environment Key success variables for purchasing in a ... – PowerPoint PPT presentation

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Title: Chapter 4 Purchasing and facilities management


1
Chapter 4 Purchasing and facilities
management
2
Program
  • The role and position of purchasing in a
    facilities environment
  • Key success variables for purchasing in a
    facilities environment
  • Measures aimed at improving the effectiveness of
    purchasing
  • How to classify services that are contracted by
    organizations
  • What it takes to buy indirect products and
    services

3
Purchasing and facilities management
  • Purchasing-to-sales turnover ratio is relatively
    low
  • Purchasing for the primary process is usually
    absent (since there is no physical production
    process)
  • Purchasing saving have a limited effect on return
    on assets
  • Management will spend most of the time on value
    added and people-related issues and activities,
    they will put little effort in support activities
    (purchasing)

4
Purchasing and facilities management
Major categories of expenditure
Adapted from Rietveld, 1995
5
Purchasing and facility management
  • The service sector is changing from a traditional
    and local arena to an international arena. As a
    result, service companies strive to improve their
    services for the end user whilst reducing
    operational costs.
  • Increased outsourcing of support activities
  • Integration of support activities in a facility
    management organization
  • Increased scale of operations

6
Effective purchasing for facilities
Perceived by purchasing department
Perceived by internal departments
  • Low price
  • Good contract
  • Objective supplier
  • selection
  • Delivery reliability
  • On time
  • Right quantity
  • Right quality
  • Fast response time
  • and feedback
  • 4. High accessibility

Expectations levels with regard to purchasing are
not always identical
7
Effective purchasing for facilities
Customer product group matrix
a) Total purchasing volume b) Purchasing
expenditure c) Market share purchasing d)
Expected volume
8
Improve customer orientation (1)
  • Analyze and document internal customer /product
    categories
  • Determine the total purchasing spend per
    department
  • Determine which fraction of this is purchased
    through the purchasing department
  • Assess internal customer satisfaction
  • Find out what bottlenecks there exist in the
    relationship
  • Target setting (detailed action plan)
  • What customer/product category combinations the
    purchasing department will reinforce its
    position, i.e. market share
  • The actions necessary to make this happen
  • The results that can be expected from these
    actions

9
Improve customer orientation (2)
  • Cross functional buying teams and organizational
    structure
  • Teams with specialists from user departments
    should be formed to develop specific sourcing
    plans.
  • Develop sourcing strategies
  • Use purchasing portfolio
  • Detailed action plan per purchasing category
  • Implementation
  • Careful monitoring and results in terms of
  • Savings generated
  • Customer satisfaction
  • Administrative lead time

10
Effective purchasing in facility environment
  • Different approaches for an optimal structure
  • Focused on the internal customer
  • Product focused orientation (most used)
  • Supplier focused orientation
  • How can an effective internal customer focused
    approach be achieved in combination with
    knowledge of products and markets?
  • Make the internal customer responsible for going
    through the purchasing process
  • Solving internal communication problems by
    pointing out an account manager of the purchasing
    department for each specific customer department

11
Buying indirect goods and services
  • Indirect goods and services that are required for
    those activities that do not belong to the
    companys primary processes.
  • Distinction on destination
  • Buying of general goods and services
  • Buying of investment goods
  • Buying of trade items
  • Distinction on character
  • IT, marketing and communication, professional
    services, human resource management, facility
    management, transport and logistics, technical
    maintenance

12
Buying indirect goods and services
  • Spend on indirect goods is sometimes higher than
    spend on direct goods and services
  • Outsourcing of processes
  • Average 5050
  • Indirect purchasing generally uses a big supplier
    database
  • Suggestions for cost savings
  • Reduction of number of suppliers
  • Introducing category sourcing
  • Analyze user pattern end of year fever
  • Product standardization
  • Supply base reduction
  • Reviewing current contracts and agreements
  • Reducing transaction costs
  • Outsourcing the purchase of small items and
    contracts

13
Breakdown purchasing spend
Breakdown Supplier Base Non-Production Related
635
422
Number of suppliers
213
154
148
132
126
112
92
86
78
68
54
48
43
39
35
28
25
18
21
14
10
7
IT
RD
CATERING
BANKING
MARKETING
UNKNOWN
TELECOM
PROPERTIES
AUTO LEASE
RECRUITMENT
INFORMATION
CONSULTANCY
MEMBERSHIPS
MISCELLANEOUS
STAFF FACILITIES
OFFICE SUPPLIES
PRINTED MATTER
WASTE-DISPOSAL
POSTAL SERVICES
TRAVEL AGENCIES
PATENT AGENCIES
INDUSTR. CLOTHING
COMP. OWNED CARS
TEMPORARY LABOUR
14
Conclusion
  • Services companies represent a growing share of
    economic activity in most European countries.
  • Developing a professional purchasing approach in
    service organizations is a far from simple matter
  • For reasons of effectiveness buyers should be
    primarily service driven rather than cost driven.
  • Facility goods and services are part of indirect
    sourcing.
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