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WELCOME TO

WELCOME TO. Measuring Purchasing Performance THIS IS A MOST USEFUL MODULE AS IT HIGHLIGHTS THE BENEFITS OF PROCUREMENT TO THE REST OF THE ORGANISATION 2011_Course Code 0052D-1/1. Measuring Purchasing Performance. WHAT IS Purchasing Performance?. Measuring Purchasing Performance.

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WELCOME TO

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  1. WELCOME TO • Measuring Purchasing Performance • THIS IS A MOST USEFUL MODULE AS IT HIGHLIGHTS THE BENEFITS OF PROCUREMENT TO THE REST OF THE ORGANISATION • 2011_Course Code 0052D-1/1

  2. Measuring Purchasing Performance • WHAT IS • Purchasing Performance?

  3. Measuring Purchasing Performance • Effectively achieving general or specific objectives assigned to the function and those employed within it

  4. Measuring Purchasing Performance • Objectives of the function are based on activities that will support the goals of the organisation

  5. Measuring Purchasing Performance • Purchasing can ensure improvements at all stages in supply chain • including:

  6. Measuring Purchasing Performance • For example • Inbound: Time, Quality, Cost, Continuity, Supplies, processes, inventory, SRM

  7. Measuring Purchasing Performance • For example • Outbound: CRM, processes, services, logistics

  8. Measuring Purchasing Performance • “What gets Measured gets • done” TOM PETERS • Measurable improvements for Purchasing can be listed as:

  9. Measuring Purchasing Performance • For example • Cost reduction of: transactions, inventory, supply base management, expediting

  10. Measuring Purchasing Performance • For example • Improvement:processes, outputs, projects, communication

  11. Measuring Purchasing Performance • Both quantitative and qualitative assessment

  12. Measuring Purchasing Performance • Quantitative Measures: Keeping within given department budget • Number of purchase orders • Contract savings (whole life • Remove carriage charges Reduce supplier base

  13. Measuring Purchasing Performance Quantitative Measures • Reduction in lead times • Price savings • Reduction in administration costs • Reduction in stock holding

  14. Measuring Purchasing Performance Quantitative Measures • Orders placed • Reduction of carriage charges • Cut out duplication of effort • Reduce supplier base

  15. Measuring Purchasing Performance • Qualitative Measures: Supplier relationship management (SRM) • Customer relationship management (CRM) • Internal Client relationship management (ICRM)

  16. Measuring Purchasing Performance Qualitative Measures • The process of supplier development, and long-term collaborative relationships • The introduction of JIT systems • The observance of quality standards • Implementation of e-procurement systems • Financial performance from a total sales perspective

  17. Measuring Purchasing Performance • Qualitative Measures: • Environmental & Ethical • Corporate Social Responsibility (CSR)

  18. Measuring Purchasing Performance • What is a simple, quick & cheap improvement your Purchasing department could make, now?

  19. Measuring Purchasing Performance • Functions/Departments need to know they are performing well to survive and thrive in the longer term and not get outsourced

  20. Measuring Purchasing Performance • ‘If you can’t measure it you can’t manage it’ • CIPS Study Guide

  21. Measuring Purchasing Performance • There will be an overall goal for the organisation to reach over the next few years

  22. Measuring Purchasing Performance • For example? • Increase market share • To go international or global • To be market leader • Be top brand

  23. Supply chain excellence and MARKET LEADERSHIP are strongly correlated

  24. Measuring Purchasing Performance • Top 10 brands by value • Apple, 2. Google, 3.IBM, 4.McDonalds, 5.Microsoft, • 6.Coca Cola 7. at&t, 8. Marlboro, • 9. China Mobile, 10.GE

  25. Measuring Purchasing Performance • The overall organisation goal is then broken into chunks of smaller goals/objectives for functions and individuals to reach

  26. Measuring Purchasing Performance • Performance will be evaluated in line with the business VISION, MISSION, OBJECTIVES & PLANS

  27. Measuring Purchasing Performance • Hierarchy of objectives VISION MISSION STATEMENT GOALS & OBJECTIVES STRATEGY TACTICS OPERATIONS

  28. Measuring Purchasing Performance • Overviewing Performance jargon • Performance Management • Value add & Non-Value add • SMART(ER) • Stakeholders

  29. Measuring Purchasing Performance • Differentiate between • Value add • and • Non-Value Add

  30. Measuring Purchasing Performance Qualitative • “QUOTE: • Strive not to be a success, but rather to be of value” Albert Einstein

  31. Measuring Purchasing Performance • Value add

  32. Measuring Purchasing Performance • Adding Value to the Business • Improving the way you do something • Stop doing something that has no value

  33. Measuring Purchasing Performance Reduced Supply Base Buy/Lease/ Outsource Decisions Delighting the Customer CRM Reduced Supplier Base Good communitcation channels Cost Savings 80/20 rule Governance: Policy and Procedures Value add Supplier Appraisal SRM Maverick Spend Control Vendor Rating Intelligent Customer Role OwnTerms & Conditions Related Research Competitive Pricing Control CSR Joint Ventures/ Partnering Green Logistics Low carbon footprint

  34. Measuring Purchasing Performance • Adding Value to the Business • Issues investors/shareholders care about: In Neely, et al • *Strategy, *Earnings per share growth, *FCF, *Management Experience, *R&D spend, *Short/Long term debt, *Products, *Bad news, *Market leadership, *Challenges & risks

  35. Measuring Purchasing Performance • Non-Value Add

  36. Measuring Purchasing Performance • Don’t measure for measurement’s sake • Computers can create masses of data but is it all necessary?

  37. Measuring Purchasing Performance • Does this next quote ring any bells? • Do you know of any measurement in your organisation like this?

  38. Measuring Purchasing Performance • The Measurement Mantra • “We now had an accounting department full of people who only stopped cranking out numbers to pick up their paychecks.

  39. Measuring Purchasing Performance • The Measurement Mantra • “We had so damn many numbers, inside so many damn folders, that no one was looking at them. But no one would admit it.

  40. Measuring Purchasing Performance • The Measurement Mantra • “Everyone just bluffed their way through meetings, pretending to be familiar with every detail”. • Ricardo Semler, CEO of Semco, in his book ‘Maverick’

  41. Measuring Purchasing Performance Damage & Theft Chasing Too many Suppliers/same products Unnecessary Movement Obsolescence Non-Value add Scrap Duplication of effort Costs to store: 80/20 Maverick Spend Queries/ Complaints/ returns/re-work Not fit for purpose Unnecessary processes Waiting, queuing Duplication of data storage Absenteeism/ High Staff turnover Zero/Poor Terms & Conditions

  42. Measuring Purchasing Performance SMART • “QUOTE: • It’s not that I am so smart, it’s just that I stay with problems longer” Albert Einstein

  43. Measuring Purchasing Performance • Overviewing Performance jargon • SMART(ER)

  44. Measuring Purchasing Performance • Overviewing Performance jargon • SMART(ER) Objectives are projects • (having start and end date)

  45. Measuring Purchasing Performance • SMART(ER) • Specific • Measurable • Achievable • Relevant • Timebound • Evaluation • Responsible

  46. Measuring Purchasing Performance • Overviewing Performance jargon • SPECIFIC • clear & defined outputs/ results required

  47. Measuring Purchasing Performance • Overviewing Performance jargon • MEASURABLE • Solid, visible evidence

  48. Measuring Purchasing Performance • Overviewing Performance jargon • ACHIEVABLE/ AGREED • Within capability and timescales

  49. Measuring Purchasing Performance • Overviewing Performance jargon • REALISTIC/ RELEVANT • In organisation/ business scope

  50. Measuring Purchasing Performance • Overviewing Performance jargon • TIMEBOUND • Must have start and end date

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