Purchasing and supply chain management

423 Pages·2018·7.256 MB·English

by  Arjan J. Weele

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“Presentation of knowledge and expertise is supported in a logical manner by strong case material that is A
both relevant and interesting. The author builds on historical landmarks in this subject area and offers the n
cornerstone for all students and practitioners of purchasing methodologies or procurement practices; it is the
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first book I suggest to all of our students and my peers.” ArjAn j. vAn WeeLe
Philip Foster, Senior Teaching Fellow, University of Warwick, UK e
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"This is a great book for students, due to the clear learning objectives, assignments, references and integrative L
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cases in each chapter. Based on his extensive experience in industry, van Weele is able to combine theory with
practice in a strong and attractive way. It is a must read for everybody interested in purchasing and supply chain P Purchasing
management."
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Frank Rozemeijer, Professor, Maastricht University, The Netherlands
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"A brilliant textbook for every current and future purchasing professional; this works extremely well for c
university students as well as for professionals in the field of purchasing management. I have used the earlier h
editions with hundreds of students and professionals with powerful results and nice learning experiences." And suppLy ChAin
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Sanna Nieminen, Principal Lecturer, JAMK University of Applied Sciences, Finland
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"If you are only going to purchase one book about purchasing – this is the book! It is comprehensive, yet clear n
and relevant for students at all levels."
g MAnAgeMent
Jenny Bäckstrand, Assistant Professor Logistics, Department of Industrial Engineering and Management,

Jönköping University, Sweden A
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Purchasing and Supply Chain Management provides an introduction to the important principles underlying the d
subject area using a flexible managerial perspective.

This new edition covers the latest developments in purchasing and supply chain management and includes s seventh edition
relevant and engaging case studies to enrich your understanding. Examples from organisations such as Shell, u
Hewlett Packard, Mattel and Nespresso, illustrate the typical challenges that global organisations face every day in p
relation to purchasing and supply chain management. p
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Key Features y

• A trusted resource which includes the latest developments in purchasing and supply chain management, C
including new coverage on the circular economy.
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• Refined coverage of purchasing and business strategy and corporate social responsibility to enhance
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your knowledge.
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• Fully updated to include new case studies and memo features which bring current practice to life.

• Addresses all of the most recent changes in European public procurement directives to ensure you are M
familiar with the latest developments.
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• Provides extended discussion on partnering and collaborative supply chain relationships to further develop
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your understanding.
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• A testbank, PowerPoint slides, additional case studies and examination questions are available on a
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companion website to support your learning.
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About the Author
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Arjan J. van Weele holds the NEVI-Chair in Purchasing and Supply Management at Eindhoven University of
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Technology, Faculty of Industrial Engineering and Innovation Sciences (IE&IS) in the Netherlands. He has published
widely and is a consultant to many large companies on procurement strategy and governance. t

seventh
edition
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300

PURCHASING
AND SUPPLY CHAIN
MANAGEMENT
SEVENTH EDITION
ARJAN J. VAN WEELE
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
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Purchasing and Supply Chain © 2018, Arjan J. van Weele
Management, Seventh Edition
Arjan J. van Weele
ALL RIGHTS RESERVED. No part of this work covered by the copyright
herein may be reproduced or distributed in any form or by any
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ISBN: 978-1-4737-4944-3
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For Ineke
iii
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Brief contents

SECTION I Core concepts  1
1 The role of purchasing in the value chain  2
2 Industrial buying behaviour: decision-making in purchasing  21
3 The purchasing management process  54
4 Buying business services  79
5 Contract management for complex projects  98
6 Public procurement  120

SECTION II Strategy and planning   159
7 Purchasing and business strategy  160
8 Outsourcing and risk management  188
9 Category sourcing: developing effective sourcing strategies  207
10 Purchasing, innovation and quality management  225
11 Purchasing, logistics and supply chain management  251
12 Purchasing organization  278
13 Performance measurement and governance in purchasing  301

SECTION III Special topics  335
14 Supplier management: cost approaches and techniques  336
15 Purchasing, corporate social responsibility and integrity  356
iv
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
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Contents
List of memos x Purchasing process management 28
Acknowledgements xi The linear purchase process model 28
Preface xii The extended purchasing model 32
Introduction xiii Role of the buyer 35
List of abbreviations xviii
The specification phase 36
Supplier selection and supplier
assessment 37
SECTION I

Negotiation and contracting 39
Core concepts 1 Prices and terms of delivery 40
Terms of payment 40
Penalty clauses and warranty conditions 40
1 The role of purchasing in the value
Other arrangements 41
chain 2
The ordering process and expediting 44
Learning objectives 2
Follow-up and evaluation of the
Introduction 2
buying process 45
Case study: Purchasing and supply chain
E-procurement 46
management at Damen Shipyards 3
Major bottlenecks and problems 49
The role of purchasing in the value chain 4
Summary 51
Definition of concepts 7
Assignments 52
Importance of purchasing to business 12
References 53
Classification of purchased goods 15
Challenges and changes in the procurement
context 16
3 The purchasing management
Summary 19
process 54
Assignments 20
Learning objectives 54
References 20
Introduction 54
Case study: Shell Houston 55
2 Industrial buying behaviour: Primary tasks and responsibilities 56
decision-making in purchasing 21 Professionalizing purchasing: a few principles 63
Business alignment 63
Learning objectives 21
Integrated, cross-functional approach 63
Introduction 21
Performance-driven 64
Case study: Buying computer systems in a car
Purchasing management process 65
leasing company 22
Purchasing and supply (market) research 66
Organizational buying behaviour: basic
Purchasing and supply objectives, strategy
characteristics 22
and planning 67
Models of industrial buying behaviour 24 Implementation of purchasing policy 67
Variables that affect the buying process 24 Control and evaluation 70
v
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vi Contents
How purchasing and supply management develops Problems in contract management 104
over time 70 Perspectives on contract management 106
Stage 1 Transaction orientation: serve the factory 71
Contract models 108
Stage 2 Commercial orientation: lowest unit price 72
Contract building blocks: pricing and payment
Stage 3 Co-ordinated purchasing 73
mechanisms in contracts 110
Stage 4 Internal integration: cross-functional
Pricing mechanisms 110
purchasing 73
Payment terms 112
Stage 5 External integration: supply chain management 74
Penalty clauses, liquidated damages and warranty
Stage 6 Value chain orientation 74
conditions 113
Some observations from practice 75
Subcontracting and project execution 114
Summary 76
Contract governance 116
Assignments 77
Summary 117
Assignments 118
4 Buying business services 79
References 119
Learning objectives 79
Introduction 79
Case study: Buying marketing services at a
6 Public procurement 120
European telecom provider 80
Learning objectives 120
The increasing importance of services 81
Introduction 120
Differences between goods and services 82
Case study: What is good procurement? 121
Towards a classification of services 84
The nature of public procurement 121
The pre-contractual stage 86
Public procurement law 125
Specifying: defining the scope of work for service
providers 86 Scope of the European Directives on public
Selecting service providers 90 procurement 126
Contracting for services 91 Scope 126
Framework agreements 127
The post-contractual stage 92
Excluded assignments 128
Involvement of purchasing in contracting
Threshold values 128
for services 95
Notices and public procurement procedures 129
Summary 96
Notice 129
Assignments 97 European procurement procedures 130
References 97 Open procedure 130
Restricted procedure 130
Competitive procedure with negotiation 131
5 Contract management for complex
Negotiated procedure without prior
projects 98
publication 132
Learning objectives 98 Competitive dialogue 132
Introduction 98 Innovation partnership 133
Design contest 133
Case study: What happened at the Amsterdam
Dynamic purchasing system 133
metro project 99
Procurement process 134
Contract management and contracts: agency
Defining specifications 134
theory 100
Supplier selection 135
The contracting process 103
Soliciting bids and awarding contracts 137
Pre-contractual stage 103
Implications for public procurement 139
Contractual stage 103
Contract execution 103 Summary 140
Post-contractual stage 104 Assignments 141
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Contents vii
Integrative case 6.1: Procurement of multi-functionals Definitions and concepts 190
in the Blue Lake Hospital 142 Rationales for outsourcing 192
Appendix 1 145 Success of outsourcing as a business strategy 194
Appendix 2 146 The outsourcing process 195
Strategic phase 195
Integrative case 6.2: Technix 147
The transition phase 197
Appendix 1 150
The operational phase 199
Appendix 2 151
Risk assessment 200
Appendix 3 155
Critical success factors of outsourcing 203
Integrative case 6.3: Fred’s Fresh Supermarket 156
Summary 204
Assignments 205
SECTION II References 206

Strategy and planning 159
9 Category sourcing: developing
7 Purchasing and business strategy 160
effective sourcing strategies 207
Learning objectives 160
Learning objectives 207
Introduction 160
Introduction 207
Case study: Harnessing the power of the network to
Case study: HP shows how to outsource
deliver results 161
production while keeping control
The strategic role of purchasing 162
over suppliers 208
Is purchasing strategic … or not? 163
Reasons underlying cost-savings potential in
Purchasing’s role in strategic management purchasing 209
theory 163
How to identify cost-savings potential 212
Strategic planning and marketing theories 163
Developing a sourcing strategy 214
Competitive strategy 165
Innovation strategy and competence management 166 Category sourcing planning 216
From internal to external resource management 167 Getting better results from suppliers 219
Strategic management thinking: implications for
The myth of partnership 221
purchasing and supply management 168
Summary 223
Towards purchasing excellence 169
Assignments 224
Strategic management processes 169
Enabling processes 172 References 224
Purchasing portfolio analysis: principles 174
Four basic supplier strategies 178
10 Purchasing, innovation and quality
Global sourcing 183
management 225
Summary 185
Learning objectives 225
Assignments 186
Introduction 225
References 187
Case study: Suppliers as a source of innovation:
PSA’s Pluriel project 226
8 Outsourcing and risk
Purchasing and innovation 227
management 188
The role of suppliers in new product development:
Learning objectives 188 early supplier involvement 229
Introduction 188 Purchasing and new product development 233
Case study: Outsourcing of IT 189 Purchasing and quality management 237
Outsourcing as a business concept 189 Definition of terms: quality and quality assurance 237
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viii Contents
The costs of quality 240 Organizational structures within purchasing 284
Structure of purchasing in multi-unit companies 284
Supplier quality assurance 242
Decentralized purchasing structure 284
Assessing supplier quality: diagnostic methods 245
Centralized purchasing structure 285
Implementing SQA: consequences for purchasing 247
Hybrid structure 286
Summary 248 Line/staff organization 287
Assignments 249 Category sourcing structure 289
Centralized versus decentralized purchasing: some
References 250
criteria to consider 292
Purchasing organization in single-unit companies 294
11 Purchasing, logistics and supply
Purchasing job profiles 295
chain management 251
Summary 299
Learning objectives 251
Assignments 300
Introduction 251
References 300
Purchasing, logistics and supply chain
management: definitions and concepts 251
Case study: Li & Fung 252 13 Performance measurement
Materials requirements planning 257 and governance in purchasing 301
Basic logistics structures 260 Learning objectives 301
Just-in-time management 262 Introduction 301
Characteristics of just-in-time management 262 Case study: The introduction of a quality programme
Order quantities and batch sizes 263 by an industrial components manufacturer 302
Quality and zero defects 265
Factors influencing purchasing performance
JIT and the purchasing function 266
measurement 302
Advantages and disadvantages for the supplier 267
Why measure purchasing performance? 304
JIT and supplier selection 270
How to assess purchasing performance 305
Elements of the purchasing information system 271
Measuring purchasing performance: five key
Co-ordination problems between purchasing
areas 306
and logistics 275
Purchasing price/cost dimension 308
Summary 276
Purchasing product/quality dimension 308
Assignments 276 Purchasing logistics dimension 308
Reference 277 Supplier relationship dimension 309
Purchasing’s organizational dimension 309
Purchasing budgets, purchasing savings and other
12 Purchasing organization 278
performance measures 311
Learning objectives 278
Purchasing materials budget 311
Introduction 278 Purchasing budget indirect materials 312
Case study: Building blocks of change 279 The investment and tooling budget 312
Purchasing departmental budget 313
Purchasing organization structure 280
Purchasing cost savings: definitions and measures 313
Factors influencing the location of purchasing
Ratios and key performance indicators 315
in the organization 282
Sarbanes–Oxley and procurement governance 318
Levels of tasks, responsibilities and authority 283
Purchasing audit as a management tool 319
Strategic level 283
Tactical level 283 Summary 322
Operational level 284 Assignments 323
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