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PURCHASING AND SUPPLY,
CHAIN MANAGEMENT
PURCHASING AND SUPPLY
CHAIN MANAGEMENT
ANALYSIS, PLANNING AND PRACTICE
THIRD EDITION
Arjan J. van Weele
Professor of Purchasing and Supply Management
Eindhoven University of Technology
Eindhoven, The Netherlands
Nyenrode, The Netherlands School of Business
THOMSON _ _ _ _ _
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Purchasing and Supply Chain Management: Analysis, Planning and Practice
Copyright © 2002 Arjan J. van Weele
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
First edition published by Chapman & Hall 1996
Second edition published 2000 by Thomson Learning
Third edition published 2002 by Thomson Learning
Reprinted in 2002 by Thomson
ISBN 1-86152-978-3
Typeset by LaserScript, Mitcham, Surrey
Printed in Singapore by Seng Lee Press Pte Ltd
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CONTENTS
Preface x
Introduction xiii
PART ONE: Analysis
1 The role of purchasing in the supply chain 3
Case study 3
Introduction 4
Changes in the business context 5
Impact on business strategies and structures 8
The role of purchasing in the value chain 10
Definition of concepts 14
Importance of purchasing to business 17
Purchasing, cost reduction and technological innovation 20
Classification of purchasing goods 22
New developments in purchasing 23
Summary 75
Assignments 26
2 Industrial buying behaviour: decision making in purchasing 27
Case study 27
Introduction 28
Organizational buying behaviour: basic characteristics 29
The purchasing process 30
Major bottlenecks and problems 35
The role of the purchasing department in the purchasing process 36
Models of industrial buying behaviour 39
Buying behaviour considered as an interactive process 44
Summary
Assignments 30
3 The purchasing process: the buyer's role 51
Case study 31
Introduction 31
First step in the buying process: determining on purchase order
specifications 32
VI Contents
Second step in the buying process: supplier selection 54
Third step in the buying process: the purchasing contract 59
Steps four and five: ordering and expediting 63
Follow up and evaluation of the buying process 69
Summary 69
Assignments 70
4 Markets and products 73
Case study 73
Introduction 74
Markets and market structures 75
Purchase of goods 80
Summary 90
Assignments 90
5 The purchasing management process 93
Case study 93
Introduction 94
Primary tasks and responsibilities 94
Policy principles 98
Purchasing management process 99
How purchasing and supply management develops over time 108
Summary 113
Assignments 114
PART TWO: Planning
6 Purchasing market research 117
Case study 117
Introduction Hg
Why purchasing market research? 119
Purchasing market research: definition 120
How to structure purchasing market research 120
Subjects of purchasing market research 124
Purchasing market research and information technology 125
Introduction of purchasing market research 127
Summary 129
Assignments 130
7 Purchasing and business strategy 131
Case study 132
Introduction 232
Purchasing and competitive strategy 233
Cost leadership and differentiation: consequences for manufacturing
and purchasing strategy 236
Lean manufacturing 238
Integrating purchasing into company policy 140
Towards leveraged purchasing strategies 142
Contents Vll
Purchasing portfolio-analysis 145
Summary 151
Assignments 153
8 Sourcing strategy: getting better results from suppliers 155
Case study 155
Introduction 156
Why suppliers do not always think and act in the interest of their
clients ... 157
Main elements of supplier management 160
Getting better results from suppliers 162
The myth of partnership 164
Summary 166
Assignments 168
9 Purchasing and supply strategy, electronic market places and
e-procurement 169
Case study 169
Introduction 170
Investing in purchasing: now or never? 170
Electronic market places and electronic procurement: definitions
and concepts 172
Possible ICT strategies for purchasing 173
Different purchasing solutions for different purchasing objectives 176
Agent technology and the Internet 180
Summary 181
Assignments 182
10 Purchasing, engineering and quality control 183
Case study 183
Introduction 184
Purchasing and engineering 184
Purchasing's early involvement in the engineering process 185
Purchasing and quality control 191
Assessing supplier quality: diagnostic methods 199
Implementing supplier quality assurance: consequences for
purchasing 301
Summary 302
Assignments 303
11 Purchasing and supply chain management 205
Case study 305
Introduction 306
Purchasing and logistics: definitions 206
Materials requirements planning 309
Basic logistics structures 312
Just-in-time management (JIT) 214
Consequences for suppliers . 220
JIT and supplier selection 224
Vlll Contents
Scheduling problems between purchasing and logistics 225
Elements of the purchasing system 226
Summary 229
Assignments 230
12 Getting organized for purchasing 231
Case study 231
Introduction 232
Purchasing organization structure 233
Factors influencing the location of purchasing in the organization 234
Levels of tasks, responsibility and authority 236
Organizational structures within purchasing 238
Centralized versus decentralized purchasing: some criteria to
consider 245
Consequences for purchasing professionals 250
Summary 251
Assignments 252
13 Purchasing performance measurement 253
Case study 253
Introduction 254
Factors influencing purchasing performance measurement 254
Why measure purchasing performance? 256
Problems in measuring and evaluating purchasing performance 257
What should be measured? 258
Purchasing audit as a management tool 263
Establishing a purchasing performance evaluation system 266
Summary 269
Assignments 270
PART THREE: Practice
14 Supplier assessment: cost approaches and techniques 273
Case study 273
Introduction 274
How is the purchase price determined? 274
Pricing methods 278
The learning curve 281
Supplier assessment 283
Summary 288
Assignments 288
15 Negotiating techniques and rules of conduct 291
Case study 291
Introduction 292
Characteristics of purchasing negotiations for industrial purchases 292
Recognizing negotiating situations 293
Factors which can weaken the negotiating position 294
Preparing for negotiations 295
