Sourcing and Supply Management

The purchasing and sourcing functions have long been focused on reducing the organization s materials and services costs. Recall from earlier chapters that inventory purchases are captured in the inventory account on the balance sheet. Inventory purchases include the amount paid to suppliers to acquire inventory, freight costs incurred for the delivery of products, import costs, and taxes. Once this inventory is 

The profit leverage effect (PLE) is widely used to show how a reduction in COGS leads to improved profits faster than a corresponding increase in sales. A question often contemplated is, should the company increase sales or decrease costs to improve profitability quicker Using a simplified profit and loss statement (Table 10.1), PLE is demonstrated. As viewed in the table a base state is provided, and then increasing sales by 10% and reducing costs by 10% are compared. 

As observed in the table, a 10% decrease in spending (COGS) is more advantageous than an equivalent percentage increase in sales. A decrease in cost results in an 18% change in profit, where an increase 

Notes COGS and SG A are calculated as a percent of sales. In the decrease cost scenario, COGS is reduced tO% from the COGS in the base case scenario. 

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Procurement covers all company and/or market-oriented activities that have the purpose to make objects available to the company that are required but not produced (Large 2000, p. 2). Other terms found in the context of procurement are strategic sourcing, purchasing, supply management and/or supplier relationship management. 

The 65 tools and techniques below are not definitive but they do provide a comprehensive listing of some of the major tools and techniques regularly used hy managers in procurement and supply, as well as some of the most recently developed by academics and consultants. When appropriate a reference source for further reading is provided. These tools and techniques provide a basis for comparison with the actual tools and techniques found to he in use by procurement and supply managers in the research survey. These findings are reported in chapter 9. 

Nesheim, T. (2001). Extemalization of the core Antecedents of collaborative relationships with supphers. European Journal of Purchasing and Supply Management, 7(4), 217-225. Newman, R. G. (1988). Single source qualification. Journal of Purchasing and Materials Management, 24(2), 10-16. 

Canadian Centre for Occupational Health and Safety (CCINFO). This set of four CD-ROM disks contains several valuable data bases of information that are updated on a quarterly basis MSDS, CHEM Data, OHS Source, and OHS Data. The MSDS component currently contains over 60,000 MSDS supplied by chemical manufacturers and distributors. It also contains several other data bases [RIPP, RIPA, Pest Management Research Information System (PRIS)], one of which (PRIS) even includes information on pest management products, including their presence and allowable limits in food. 

All point source and nonpoint source wastewaters at an industrial site must be properly managed for source separation, waste minimization, volume reduction, collection, pretreatment, and/or complete end-of-pipe treatment [39,47]. When industrial waste is not disposed of properly, hazardous substances may contaminate a nearby surface water (river, lake, sea, or ocean) and/or groundwater. Any hazardous substance release, either intentionally or unintentionally, increases the risk of water supply contamination and human disease. Major waterborne contaminants and their health effects are listed below. 

Often, the manager sets up a periodic inspection schedule to aid in inventory control. In this modified visual inspection, the inventory manager routinely inspects designated inventory levels, e.g., on a daily or weekly basis, to determine whether an order should be placed. This routine examination of inventory minimizes the potential for stockouts and can potentially improve inventory control. This is a fixed-time reorder system, in which the quantity ordered might vary but the date of ordering remains the same. This is ideal for small to medium businesses for whom a prime vendor is the main supply source and the true volume of activity can be determined easily. 

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