IMPROVING MANAGEMENT OF THE PURCHASING FUNCTION

IMPROVING MANAGEMENT OFIMPROVING MANAGEMENT OF
THE PURCHASING FUNCTIONTHE PURCHASING FUNCTION
CREATED BY
ABDUL RIZAL
MAGISTER OF INDUSTRIAL ENGINEERING - TRISAKTI UNIVERSITY
LECTURE : DR. DADANG SURJASA, SSi MT

PREFACE
 Purchasing is input into the management of the production process
organization..
 Purchasing function is often considered as part of the most important and
influential, one could even say most business processes come from
purchasing activities. A very fundamental reason to discuss the
purchasing function is because in this field waste easily occur, either due
to dysfunctional behavior or lack of knowledge in various aspects of the
purchase of materials, facilities, infrastructure and spare parts needed by
the company.
 .Basically, the role of purchasing function is to provide goods and services
required by the company at the time, the right price and quality.y.
 Basically, the role of purchasing function is to provide goods and services
required by the company at the time, the right price and quality...

 The role of Purchasing Manager here to deal
effectively with that help the workers achieve the
best results. Where a Purchasing Manager to be
authoritative, democratic or participatory,
according to the needs and circumstances of their
subordinates.
 So suppliers or supply problems can be overcome
by employees who handle the purchase.
1. APPLICATION OF MANAGEMENT
PRINCIPLES TO PURCHASING

‘’X ‘’ & ‘’Y ‘’
THEORY Created by Douglas McGregor, for Managers.
 Manager X mode by McGregor is assuming the managers or leaders that
its staff are people who do not like the job and try as much as possible to
avoid work. Type X believes most people should be forced by the threat of
punishment in order to work and meet organizational goals. It's believed
that people prefer to be directed and not given too much authority.
Employees considered to avoid responsibility, relatively unambitious, and
wants job security above all else.
 Type Y managers believe workers are basically diligent work. The
underlying assumption is considered to be introspective employees and
want to move to realize the goals of the organization without the need
threatened. Employees are considered to have the commitment to achieve
the goals and motivated by the reward associated with achievement. Type
Y managers assume employees are happy to accept responsibility.
Employees thought to have intellect, imagination, intelligence, and
creativity in solving organizational problems.

Z THEORY
 Theory Z is a management approach based on a combination of
management of American and Japanese management.
Management philosophy is characterized, among others, long-
term relationship permanent job, consensus decision making and
individual responsibility in the context of the group as well as a
review of performance on a regular basis and firm, which provides
feedback that required most employees.
 Theory Z highlight the role and position of employees in the
company who can make the worker to be comfortable, at ease,
happy and feel an important part of the company. Thus, the
employee will work more effectively and efficiently in his work. This
theory considers security (security) in particular has an important
meaning.

’X ‘’ & ‘’Y ‘’ & ‘’Z‘’
THEORY
 Theory X and Y McGregor focused on
the management and motivation of
managers in the organization's
perspective.
While Theory Z put more reliance on
attitudes and responsibilities of workers /
employees.

2. APPLY SOUND THEORY
TO PURCHASING
 The point here is that the use of Theory X and Y are indispensable for
the Purchasing Manager to its employees in terms of the purchasing of
goods.
Where If Theory X Managers apply to the employee that the goods which
are sourced or purchased has a low price with the quality of unsightly, so
that led to the loss - a big loss if use goods - goods.
 If Theory Y Managers apply to employees it will be the opposite of the
theory of X, now where to get the goods - goods with high price but the
quality is very good, so it does not inhibit the production process or a
process - a process to another.
 so that the friction sound - sound between Managers and employees
can be avoided.

 Communication is something that is always needed basis
and carried out by every human being, because
communication is the basis of human interaction to obtain
agreement and understanding are built to achieve a goal
that is maximal between both of his. To reach businesses in
communicating effectively, then we should have to know the
number of the understanding and the problems that occur in
the process of communication itself.
 Effective personal communication is necessary here
between Managers and Employees. Similarly, between
Buyers and Suppliers. Company Organization for the
purpose is achieved..
3. EFFECTIVE COMMUNICATIONS,
BOTH EXTERNAL AND INTERNAL

 The primary basis for the manager to perform tasks in carrying out
the functions of management in order to achieve objectives.
Information should be communicated to staff or subordinates them
to know the basis for planning and for the plan - the plan can be
implemented effectively and efficiently..
 In a briefing Managers must be able to communicate well with
subordinates to achieve organizational goals. And in the regulatory
process requires communication Managers in ascertaining
whether the implementation of the tasks in accordance with the
plan.
 For Buyers Employees need to connect and communicate with
suppliers need to be improved to further streamline costs, and get
the best supplier and purchase the best results.
3. EFFECTIVE COMMUNICATIONS,
BOTH EXTERNAL AND INTERNAL

3.1 PRODUCTIVE WORK HABITS
 Managers are required to employees berkebiasaan work productive.
 For that you need to do so that our employees work berkebiasaan
 productively :
1. Work provides a good environment to do the job.
2. Provide adequate training to employees.
3. Convincing them that they can do a good job.
4. Convincing them that we always support them in doing their jobs.
5. Define Objectives and Targets Clear
6. Listen to them and do not be stingy to give a compliment.
7. Reward if the work is very good.

4. NEED TO SUPPORT EDUCATION
AND BUYER DEVELOPMENT
 Purchasing Manager to be a good person should have a broad scope of business
acumen and understanding that comes from education and experience. Such as
negotiation skills and legal aspects of purchasing, supply management
professionals.
 According to the authors Farney, there are six different areas that the Purchasing
Managers should seek to develop and maximize the value:?
1. The ability to understand the total value of the supply chain holistically and set the
entire acquisition process.
2. Technical know-how, especially in manufacturing-previously-party relations Third,
now the team relationship
3. Ability to Analytical strategic outlook that focuses on customers and on the
process
4. Ability to work with the Information Technology that is using Internet to complete
the process and workflow to save time and money and avoid their mistakes.
5. A global perspective to understand how cultural differences affect the business
relationship
6. Skills - Interpersonal ability to sell an idea, to actively, to influence and lead

4. 1 PURSUE BUYER
DEVELOPMENT PROGRAMS
 The skills of the purchasing managers both mirrors
general management skills, as applicable supply
managers responsible for the overall business results of
the company's suppliers.
 Purchase a good employee will develop with proper
guidance and training. So that they can be motivated
Purchasing Manager.

4. 2 CERTIFIED PURCHASING
MANAGER PROGRAM
 Since 1974 the existing Purchasing Manager certification
whose name Certified Purchasing Manager (C.P.M.) issued
by the Institute for Supply Management, Association of
Purchasing Managers (NAPM).
 Where the CPM has four modules:
- Purchase Process,
- Environmental Supply,
- Value Enhancement Strategies, and management

4.3 ACCREDITED PURCHASING
PRACTITIONER PROGRAM
 1996, ISM then NAPM implement the program and
the Accredited Purchasing Practitioner / Process
Accredited Purchasing Practitioner (A.P.P.).
 With certificate A.P.P. can be applied to achieve
C.P.M.
 The requirements for A.P.P. is that the need to pass
the exam Module 1 and 2 of A.P.P.
 Interest ISM is to increase participation and
encourage professionalism in the purchase and
supply of the community.

 Managers often easier to break down a job into parts of the job done by
people - people who are different.
 Purchasing Manual serves as a guide to policy documents and procedural
reference. Where the Purchasing Manual is an important enterprise for the
purchasing department
 Manual purchasing system can be applied to companies on manufacture and
retail.
 The difference lies in how transactions are authorized, ie manufacturing
company purchasing raw materials for production and afford decisions
authorized by the planning and production control.
 While retail companies buy finished goods for resale and the decision to buy
authorized by inventory control functions.
5. USE OF JOB DESCRIPTIONS AND
A PURCHASING MANUAL

 Most Purchasing Manual stored in the
form of electronic files, so it can make
changes, additions, deletions and timely
distribution. So its use can be placed on
the company intranet, so it can be used
for anyone who needs it..
5.1 DEVELOP AND USE A
PURCHASING MANUAL

BELOW IS AN OUTLINE OF SAMPLES
THAT MAY BE USEFUL IN CREATING A
USER PURCHASES:

PART 1. RESPONSIBILITIES AND
OBJECTIVES OF PURCHASING
MAJORMAJOR
RESPONSIBILITIESRESPONSIBILITIES
PRIMARYPRIMARY
OBJECTIVESOBJECTIVES
• Formulate buying policies, plans, and procedures.
• Gather and disseminate market intelligence.
• Handle procurement and expediting.
• Other (e.g., surplus disposal, receiving, traffic).
• Exceptions, if any (e.g., buying advertising,
insurance).

PART 1. RESPONSIBILITIES AND
OBJECTIVES OF PURCHASING
MAJORMAJOR
RESPONSIBILITIESRESPONSIBILITIES
PRIMARYPRIMARY
OBJECTIVESOBJECTIVES
• Serve the company economically and contribute to profits.
• Procure materials at the lowest total cost consistent with quality and
service.
• Maintain world-class sources of key supplies.
• Support lean manufacturing methods and inventory management efforts.
• Keep management informed of market conditions and procurement risks.
• . Collaborate with other company units to improve internal and supplier
processes
• Search for new and improved sources and materials.
• Lead six-sigma, value analysisand standardization efforts.
• Keep abreast of leading purchasing methods and practices.

A. General policies (Kebijakan umum)
• Overall strategies in support of business
strategies. (Strategi keseluruhan dalam
mendukung strategi bisnis).
• Determination of need; specifications,
quantities. (Penentuan kebutuhan; spesifikasi,
kuantitas).
• Standard process workflows. (Proses standart
alur kerja).
• Purchase commitments. (Komitmen
pembelian).
• Supplier contacts. (Kontak Pemasok)
PART II. POLICIES
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies

B. Buying policies
•Central or local procurement
•Selecting sources of supply
•Multiple versus single sources
•Trade relationships
•Buying from stockholders
•Consideration of small and disadvantaged business
•Negotiation
•Competitive bids
•Trial orders and samples
•Classified purchases
•Speculative purchases
•Foreign purchases
•Interplant buying
•Employee purchases
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies
PART II. POLICIES

C. Pricing and payment :
•when it may be used, when preferred, and
special conditions.)
•Target cost or cost analysis requirement
•Unpriced orders
•Estimated prices
•Escalation
•Liquidated damages
•Deferred payments
•Progress payments
•Cash discounts
•Use of forward buy or hedging action
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies
PART II. POLICIES

D. Relationships with other departments
•Collaboration with internal customers
•Delegated authority
•Emergency orders
•Dissemination of price information
•Inspection, receiving and traffic
•Legal assistance
•Credit assistance
•Make-or-buy
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies
PART II. POLICIES

E. Supplier relationships
•Tracking supplier performance
•Supplier relations
•Handling complaints and rejections
•Visiting suppliers’
•Accepting suggestions from suppliers
•Receiving and interviewing sales
•Evaluating suppliers’ prospects
•Advising unsuccessful
•Dealing with cancellations
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies
PART II. POLICIES

F. Ethics
•Courtesy and fairness
•Security of confidential information
•Entertainment
•Gifts and gratuities
•Conflict of interest
C. Pricing and
payment
D. Relationships
with other
departments
E. Supplier
relationships
F. Ethics
B. Buying
policies
A. General
policies
PART II. POLICIES

PART III. DUTIES AND
ORGANIZATION
A. Specific duties of the purchasing
• Select and manage suppliers.
• Make purchase commitments.
• Track supplier performance.
• Expedite open orders.
• Audit invoices and payments.
• Maintain supplier and order files.
• Maintain source information (catalog) files.
• Maintain price and cost history information.
• Disseminate supplier product offering information.
• Report supplier performance and supply risks to management.
• Prepare statistical reports to support management needs.
A. Specific duties
of the purchasing
B. Organization C. Position guides

B. Organization
•Position of the purchasing department in the company
•Organization chart
ORGANIZATION
A. Specific duties
of the purchasing

ORGANIZATION
A. Specific duties
of the purchasing
C. Position guides
•Guide for each key position: director of purchasing, purchasing
manager,
•Buyers or buyer/planners,
•Administrators, analysts, and so on.
•To whom does the manager report?
•Whom does the CPO supervise?
•Specific duties of each position
•Authority: its limits and extent

A.Buying procedures
• Requisitions
• Inquiries
• Purchase orders
• Cash orders
• Blanket orders
• Invoices
• Receiving reports
• Change orders
• Cancellations
PART IV. PROCEDURES
A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics

PART IV. PROCEDURES
A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics
B. Filing practice
•Order files
•Inquiry files
•Catalog files
•Price files
•Part history files

C. Contracts (This section should
describe the various kinds of contracts:
•When they should be used; how they
should be prepared.)
•Subcontracts
•Service contracts (outsource
agreements)
•Construction contracts
PART IV. PROCEDURES
A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics

A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics
D. Special procedures
•Supplier partnerships and joint
improvement efforts
•Buying raw materials
•Commodity buying
•Buying capital equipment
•Disposing of scrap and surplus
PART IV. PROCEDURES

PART IV. PROCEDURES
A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics
E. Reports (Define each report: who
gets it, what it contains, when it is due.)

A. Buying
procedures
B. Filing practice
C. Contracts
D. Special
procedures
E. Reports
F. Statistics
F. Statistics (Explain where to
get them, how to organize them,
what to do with them.)
PART IV. PROCEDURES

Step - by step that is in this book
is very good for the success of a
Purchasing Manager.
CONCLUSION

IMPROVING MANAGEMENT OF THE PURCHASING FUNCTION

IMPROVING MANAGEMENT OF THE PURCHASING FUNCTION

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IMPROVING MANAGEMENT OF THE PURCHASING FUNCTION

Editor's Notes