Purchasing Strategy

The objective of the course for MBA students is to understand how purchasing can improve or even determine the global performance of the company and what questions they should ask themselves as professionals to enhance the performance of the purchasing function, be it from a CEO, purchasing manager or board member point of view.

At the end of this module, students will have a deeper understanding of what purchasing can bring to a company, and how the company should manage purchasing to get maximum benefit from it. Through a number of cases and role plays, the students should have integrated the type of behaviours and personal positioning that underlie the success of purchasing within the company.

Topics include:

• Purchasing evolution and its fundamentals
• Purchasing and the other functions of the company, in particular with supply chain
• Why and how to align purchasing strategy with company’s strategy
• Make or buy strategy
• Sourcing strategy
• Organizational and behavioural impacts: how to make purchasing a success

The contribution of purchasing to corporation profitability is now clearly demonstrated and understood. It will be thoroughly described at the start of the module. The lectures and cases presented will emphasize both the value creation and savings at stake through purchasing.

The module will also insist on the human factor, which experience shows as one determining factor of success or failure for purchasing in major corporations today.

At the end of the module, students will be asked to create a global purchasing organization within a multinational industrial corporation.

They will define its purchasing strategy according to their supplier base and will have to demonstrate its added value for the company. Finally, they will be requested to define the change management process associated with the launch of the global function they propose.

Purchasing Operations I

The module will focus on the fundamental issues in purchasing operations, such as purchasing portfolio management, supplier relationship management, supplier selection and development, sourcing strategy and cost management.

The academic approach includes key theory such as Kraljic’s classification on purchasing portfolio and relationship, different approach on cost management such as total cost ownership, activity based cost and target pricing.

The module also presents in-depth look on the sourcing strategy based on product portfolio, the culture influence in supplier relationship management inspired by Japanese companies.

Combined with case study and classroom debate, this module will lead students to comprehend what purchasing organizations expect from suppliers, what the drivers of purchasing performance are, what would be the impact of effective supplier relationship to the profitability of buying firm, how we can setup effective sourcing strategy in terms of different product and relationship portfolio.

The other topics in these modules also include purchasing legal issues such as procurement and outsourcing contract management by introducing to students the different legal system and contract rules. Students are expected to learn different transactional rules and how to draft and perform the purchasing contract, including:

• Incoterms
• UN Convention on Contracts for the International Sales of Goods (1980)
• European contract principles
• Contract disputes: avoiding them and managing them (court litigation, conciliation, arbitration, mediation, etc.)
• Strategic provisions of the procurement contract (force majeure, hardship, termination, confidentiality, etc.)

This session also encourages students to discuss and understand the purchasing competence and skill expected for new supply management. The module also introduces global sourcing to have a thorough understanding of the benefit and risk that offshore sourcing presents, to understand global sourcing as a complex strategic decision which contains more complexity than home sourcing.

Some analysing tools will also be presented such as value stream mapping, process thinking, six sigma.
MBA students just as purchasing professionals need to understand the fundamentals in purchasing operations.

These fundamentals include not only the day-to-day activities but also strategic decisions in supplier relationship and if for instance the organization goes for offshore sourcing. The objective of this course is to introduce the classic theories and practice related to purchasing operation in supplier performance, relationship management, supplier development, purchasing cost management, contract interpretation, drafting and contract dispute management.

In this session the students will go through the roadmap of purchasing operation, learn what is important to supply management, how to manage it not only efficiently but also effectively.

Purchasing Operations II

The third session will continue to focus on the purchasing operation issues, such as purchasing ethics and its management, supplier negotiation (to obtain better prices), internal negotiation (to define and launch productivity plans), and project purchasing (development and innovation).

The Module also introduces e-procurement application because of internet popularities and development of procurement related software, which can largely increase information transparency in supply management and reduce transaction cost.

The module will also introduce Lean Management principles, first initiated by Toyota, widely accepted by the industrial world and fundamentally changing the business process and mentality.

The classroom debate, simulation and case study will help students understand the fundamentals of lean thinking, what would be the change it brings to supply management, and what would be the challenge of lean purchasing execution.

Combining with other lean techniques such as 5s, visual control, etc… students will also learn how to use value stream mapping to identify the waste, and potential improvement in the supply management.

The key definitions and concepts in lean supply included in this module are:

• 5S
• Push vs Pull
• ‘TAKT’ time and its calculation
• Bottleneck and pace maker
• WIP and Process lead time, its calculation
• Safety stock and its calculation
• ABC classification…

The module also introduces some legal topics such as intellectual property protection, competition law by procurement specialist, regulation of e-commerce and electronic contracts in today’s supply management environment which becomes more global and e-procurement is widely employed.