Purchasing (BMK 3748) Diploma in Business Management

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Chapter 6: People in The Purchasing Function
Skills required for Purchasing Staff.
1. Coordination: Adjusting actions in relation to others' actions.

2. Active Listening : Giving full attention to what other people are saying, taking time to understand
the points being made, asking questions as appropriate, and not interrupting at inappropriate
times.

3. Speaking : Talking to others to convey information effectively.

4. Critical Thinking : Using logic and reasoning to identify the strengths and weaknesses of
alternative solutions, conclusions or approaches to problems.

5. Persuasion : Persuading others to change their minds or behavior.

6. Negotiation : Bringing others together and trying to reconcile differences.

7. Social Perceptisaveness: Being aware of others' reactions and understanding why they react as
they do.

8. Management of Personnel Resources : Motivating, developing, and directing people as they
work, identifying the best people for the job.

9. Judgment and Decision Making : Considering the relative costs and benefits of potential actions
to choose the most appropriate one.

10. Monitoring : Monitoring/Assessing performance of yourself, other individuals, or organizations to
make improvements or take corrective action.

11. Active Learning : Understanding the implications of new information for both current and future
problem-solving and decision-making.

12. Learning Strategies : Selecting and using training/instructional methods and procedures
appropriate for the situation when learning or teaching new things.

13. Management of Financial Resources : Determining how money will be spent to get the work
done, and accounting for these expenditures.

14. Systems Analysis : Determining how a system should work and how changes in conditions,
operations, and the environment will affect outcomes.

15. Complex Problem Solving : Identifying complex problems and reviewing related information to
develop and evaluate options and implement solutions.

16. Systems Evaluation : Identifying measures or indicators of system performance and the actions
needed to improve or correct performance, relative to the goals of the system.

17. Management of Material Resources : Obtaining and seeing to the appropriate use of equipment,
facilities, and materials needed to do certain work.
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18. Quality Control Analysis: Conducting tests and inspections of products, services, or processes to
evaluate quality or performance.

19. Operations Analysis: Analyzing needs and product requirements to create a design.


A. Purchasing Position within the Organizational Structure
Purchasing position or placement in an organizational structure is important since it usually indicates
organizational status and influence.
The trends shown in recent research support the fact that purchasing is gaining more visibility in the
corporate hierarchy.
CEO had the most power to indicate whom was to be selected as the CPO as well as to whom the
person reported in the corporate hierarchy.


B. To Whom Does Purchasing/Supply Management Report

During 1950s and early 1960s, a high percentage of the purchasing departments reported in a second-
level capacity to the functional managers, most commonly production and operations.
A study by the Center for Advanced Purchasing Studies (CAPS) revealed a change in the reporting level
of purchasing during 1980s.
The study found that in almost 35 percent of the organization surveyed, the highest
purchasing executive reported to a senior or group vice president or higher.
The percentage CPOs reporting to a top five executive position category has continued to
increase.
In a study of a smaller firm, it was found that 90 percent of purchasing personnel report to the
highest executive or one level from the highest executive.
In the same study, almost 65 percent of purchasers working for medium and large firms
reported to the highest executive or one level from the highest executive.

a) Purchasing as an upper-level function


President/CEO
Executive Vice
President
Vice President
Marketing
Vice President
Finance
Vice President
Purchasing
Vice President
Engineering
Vice President
Manufacuring
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b) Purchasing as a second-tier function



c) Purchasing as a lower-level function





President/CEO
Executive Vice President
Vice President
Marketing
Vice President
Finance
Vice President
Engineering
Vice President
Manufacturing
Director of
Purchasing
President/CEO
Executive Vice President
Vice President
Marketing
Vice President
Finance
Vice President
Engineering
Vice President
Operations
Director of Materials
Management
Purchasing Manager
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C. Scope of The Purchasing /Supply Management Job Function

The scope of P/SM in larger organization can be grouped under four (4) major areas:

1. Sourcing and Negotiating
This task involves identifying potential suppliers, negotiating with selected suppliers and
performing the buying of goods and services.
Buyers will work in teams that have responsibility for negotiating contracts for the entire
organization.

2. Market Analysis and Research
Purchasing market analysis and research involves developing long-range materials forecasts,
conducting value analysis programs, assessing supplier capabilities and analyzing the cost
structure of suppliers.
More organization recognizes the benefit of having specialized personnel.
The development of product and material plans requires detailed and accurate research.

3. Operational Support and Order Follow-Up
This group includes the activities supporting day-to-day operations of the purchasing or materials
function.
There are two (2) categories of purchasers:-
a) Strategically oriented: buyers focus on the company and industry future by managing total
cost, enhancing value and minimizing risks.
b) Tactical oriented: focus more on day-to-day challenges required to meet the organizations
current needs.

4. Administration
This group is responsible for developing:-
a) the policies and procedures that purchasing personnel follow
b) administer and maintain the purchasing information system and database
c) determine required staffing levels, developing departmental plans
d) develop measurement system to evaluate purchasing performance.
This group concern itself with making sure the purchasing departments runs smoothly and meets
its targeted goals within budgets, and fulfils its responsibilities to both internal and external
customers.


D. Recruiting and Hiring staff
Managers are generally responsible for selecting and hiring competent individual or professionals
for their team.
Most of the organization, managers of particular department work together with Human
Resources representative in order to recruit candidates via news paper, advertisement, personal
network and so forth.
To begin the recruitment process, managers are required to specify the scope of the job duties
and the level of skill required.
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List the knowledge, skills, and abilities to perform the task of the job-specific industry or product
knowledge, level of negotiation responsibility, acquisition amounts, supplier development and
management abilities, analytical skills, project management expertise, presentation and
communication skills, and specific computer-based knowledge.

i. Evaluation
To evaluate years of experience and level of experience, manager should conduct a reference
check.
Speak with several previous managers who actually reviewed the individuals work performance-
you can ask questions regarding the level of performance and how the individual was ranked in
relations to peers.

ii. Interview
A structured interview process is designed to assess past behaviours and accomplishments.
Focus on the questions; some well-defined, important areas of knowledge, which will be needed
to perform the key job duties.
Ask candidates to indicate how they perform specific duties that require the knowledge you want
to assess.

iii. Selection
Final selection process should follow organizational hiring policies and procedures in order to
ensure fairness and met regulatory obligations.
From the evaluation, select the candidate whose abilities are most closely associated with solving
your department and organizations problems or challenges.
It is recommended that list the strength and weakness as discovered in the selection process and
consider each as objectively as possible.
Remember to base the evaluation on the needs of the job and always refer back to the original
job specification.


E. Training and developing the staff
Training is the key to individual job performance improvement.
Training consists of expanding knowledge developing and improving skill sets, and providing
opportunities for professional development.
Begin the assessment of training need analysis by analyzing any anticipated organizational
changes and development to determine which skills will be needed in the future and to what
degree.
Training requirements often developed through personal needs analysis involves assessing each
individuals developmental requirements and interest and agreed plan for accomplishment.
For training to be effective, employees should be convinced that it is important to them, so
explain the goals of the training and provide training that is clearly relevant to the individuals
work environment.
Commonly employed training methods include:
i. On-the-job training (OJT), where individuals learn from actually performing job duties
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ii. Job rotation, where individuals are cross-trained to enhance departments staffing
flexibility.
iii. Instructor-led classroom training, formal approach learning new skills
iv. Lecture
Periodic evaluation of the training is a key element in developing a successful and effective
training program.


F. Purchasing Ethics
Ethics: the set of moral principles or values guiding our behaviour.
Being ethical means following a code viewed as fair by those within the profession as well as the
community.
A study on purchasing education and training requirements indicated ethics was the number one
knowledge requirement for purchasers now and in the future.

Three (3) rules of purchasers ethical behaviour:-
1. Buyers must commit their attention and energies for the organizations benefit rather than
personal enrichment at the expense of the organization.
2. A buyer must act ethically toward suppliers or potential suppliers. Treat each supplier
professionally and with respect.
3. Buyer must uphold the ethical standard set forth by their organization and the purchasing
profession.

Types of Unethical Purchasing Behavior.

1. Reciprocity: This action involves giving preferential treatment to suppliers that are also customers of
the buying organization. Refer to purchasing arrangement that dictates Ill buy from you if you buy
from me.

2. Personal Buying: this occurs when purchasing department purchases material for the personal needs
of its employees.

3. Accepting supplier favors: these gifts and favors can affect a buyers judgement to evaluate and
select the most capable suppliers.

4. Financial conflicts of interest: when a buyer award business to a supplier because the buyer, the
buyers family, or relatives of the buyer have a direct financial interest in a supplier.

5. Personal conflicts of interest: arise in cases where the buyer is dealing with a company that a buyer
has approached or been approached for future employment.





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ISM Professional Code of Ethics
The Institute for Supply Management is the largest organization representing the purchasing
profession.
In 1959, the ISM officially adopted its initial Standards of Conduct.
The Standards of Conduct specifies three (3) guiding principles of purchasing practice:
(1) loyalty to company,
(2) justice to those with whom a buyer deals, and
(3) faith in the purchasing profession