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Family Name LEE Given Names WAN FEI

Program/Intake DipLM10 Student No. 1027

Module’s Name Purchasing Management Lecturer’s Name Mr. Pang Joo Leow

Assignment No. 1 Assignment Due Date 28th Nov 2009

DECLARATION: I hereby declare that the attached assignment is my own work. I understand that if I am suspected of
plagiarism or another form of cheating, my work will be referred to the Academic Review Committee/Registrar, which
may result in me being expelled from the program. My grade will be affected by the level of plagiarism detected in my
assignment.

Signature Submission Date 28th Nov 2009


Program Manager’s
Ms Elyn Ng
Name

SECTION B: COMMENTS FROM YOUR LECTURER ASSIGNMENT GRADE:

Level of Plagiarism

High Medium Low


CONTENT PAGE

1. Introduction
2. Order Processing
3. Improvement
4. Conclusion

5. Reference

Page1
Introduction

NESH Pte Ltd, a leading global electronics services provider, offers an excellent combination of
outstanding management, world-class technical capabilities, innovative manufacturing technology, reliable
testing capabilities and state-of-the-art facilities. Founded in 1984, the Venture group comprises about 40
companies with global clusters of excellence in South-East Asia, North Asia, America and Europe, and
employs more than 14,000 people worldwide.

In 2008, Venture achieved sales of S$3.8 billion with annual earnings exceeding S$160 million.
With an excellent track record, strong engineering expertise and experience, Venture is undisputedly a first
class electronics services provider. Today, top Fortune 500 companies including Agilent Technologies,
HP, IBM, Intermec, as well as other multinational companies have chosen Venture as the strategic partner
for their long term manufacturing needs. These partnerships bear testimony of Venture's relentless pursuit
of manufacturing and engineering excellence, continuous innovation, and absolute commitment to quality
and delivery, thus meeting total customer satisfaction.

Page2
Order processing

Page3
The Purchasing function is becoming one of the most important contributions to profitability Purchasing
function is an integral part of transformation of raw materials and component parts into finished goods by
utilizing materials, systems, information and people. Purchasing functions are redesign to emphasize the
competitive strategy and the linkage to the other functions. Purchasing is due to purchasing cost is very
high, cost for department is 80% for company using one finish product. So purchasing management is very
important for company. Company have good management will increase profitability for company, if
purchasing cost not able to reduces will effect company profit.

This flow chart shows a typical purchasing work flow detailing which areas of the business are involved in
my company. Firstly, when the production department starts to produce the product, we will check with
warehouse department wether we have enough raw material in our warehouse if we have it warehouse
people will send it to the production department to start produce the product. Less say we have not enough
raw material in our warehouse, warehouse manager will inform production department and purchasing.
This is due we need to requires buying the raw materials to ensure that the production department can
continue to produce their product without delay and miss the shipment to the customers. Once the
purchasing department receive the information from the store keeper that they are requires buying the raw
materials, then they will start to generate the vendor RFQ (request for quotation) for the vendor. The
details for vendor RFQ should include the materials needs, quantity, and delivery date and delivery
location.

If vendor is needed to purchase for the items, purchaser will determined that current vendor or new vendor
is needed. If the materials can provided by the old vendor, then they will review the performance of the
current vendor to make sure they are comply with six R- right material, right time, right quantity, right
price, right source and right location before send the RFQ to current vendor. But if the vendor is new, then
they will go to either internet or the green book to search for the new vendor. They will list down as many
as vendor that can provide the right materials with the right source and price. After the vendor are
screened, they will choose the most reliable and trustable vendor to supply the materials and send the RFQ
to them. We do all of this is want make sure the material we purchase are in good quality and value price.

Page4

When everything is done staff will inform warehouse the date and time to receive the order, in the
meantime we also send a copy of invoice to warehouse to ensure they receive their receive the right
material and in right quantity. When receive the order from vendor warehouse manager will make an
inspection on the material to make sure the material are in good quality. When everything is no problem
warehouse will send it to the production department If something is wrong like wrong quantity, wrong
item or quality problem. Warehouse manager will inform vendor and reject the order if needed. So
warehouse will ask for vendor to resent the order for another date are acceptable. Warehouse manager also
must inform purchasing department if any happening and also must update them when the problem is
solve. Transportation will arrange by vendor so they decide what transport they using.

One copy of the signed delivery order attached with a copy of purchase order will send to the account
department to issue an invoice before payment can be made. And one copy of the signed delivery order
will send to the purchasing department to filling and for revision. When month end all department will
calculate how many material are using, how much cost are using and the result must tally with all invoice.
Due to all the cost will affect profit for company. Warehouse also will do a cycle count for weekly to
ensure no material is missing. As inventories are produced in advance of their use, they are stored till they
are requisitioned by the production departments. The stored inventories are issued to the respective
production departments against the authorized material requisitions.

After I do a analysis I had write some idea to improve my company purchasing processes. These idea will
reduce cost for my company and improve service to my company customer.

Page5
Improvement

The most challenging area for the most manufacturing in achieving JIT is the purchasing of raw materials
and parts. This is important because an internal JIT system can only be operated successfully when the
material being fed into it are of sufficient quality and delivered on time. Therefore, unless the quality and
delivery of purchased material are not production issues, the purchasing function should being to establish
a JIT supplier base. In JIT purchasing several tactics are being used to achieve certain goals and objectives.
JIT free up assets allow us to lease out our warehouse space increase our Return on Investment and reduce
man power in warehousing. Improve quality upon delivery, less Back Order and less Lost of Sales.

Kaizen, in Japanese means to strive relentlessly to increase quality efficiency and effectiveness in all areas
of life including personal, family, social and work. The continuous improvement approach is illustrated by
Stewart-Deming plan-do-check-action (PDCA) cycle. The steps include identifying a problem or potential
for improvement, and developing a plan for the solution. The PDCA cycle involves using a variety of
statistical tools and is never ending activities to embrace the continuous improvement methodology.2
JIT system must be able to respond quickly to demand changes because of the tight scheduling and low
inventory characteristics on the buyer’s side. These requirements for flexibility must be build into the
purchase contract to the extent possible. Although meshing the buyer’s need with the supplier’s capability
may be difficult, it is these issues that should be discussed ahead of time, agreed on, and stated in the
contract.3

Implementation of JIT purchasing had reported that encounter many problems due to lack of support from
top management and employees. This philosophy requires a cultural change in the organization. Very
often, the employees are required to change their long-standing work habits, or because they interpret the
new system as being a threat to their jobs. Also, the JIT system requires most employees to assume more
problem-solving responsibilities on the job, which may lead to additional frustration. The top management
should always persuade the workers to involve in the implementing of the JIT system in order to improved
quality and customer satisfaction. As JIT will affect all parts of the organization there must be a high level
of cooperation among functional areas. That is why; middle managers’ commitment should also be
obtained. The decision to introduce JIT procedures into the production environment is usually made by a
firm’s top management. Once this decision is made, the next step toward implementation is to gain an
active support from the firm’s middle managers and supervisors. Getting this support may not be very easy
because these managers could be reluctant to support the implementation of JIT production system.
Page6

Possible changes in production process, control procedures and performance measurement that would be
required by the implementation of JIT may discourage middle managers from actively participating in the
implementation of the system. In a JIT environment, everything must be perfect; there is no allowance for
defective products and production errors because there must be no delay caused by those kinds of
activities. These strict requirements brought by the JIT production system may discourage managers from
voluntarily participating in the implementation of the system. Because the existing organizational slow
down that the JIT concept wants to eliminate provides middle managers and supervisors with a cushion
against the difficulties caused by defective raw materials, production errors, and irregular supply and
demand schedules. As a result, they may be reluctant to support the implementation of JIT.

However, it is difficult to implement JIT production system without the support of middle managers and
supervisors. Therefore, the motivation of middle managers and supervisors to support the implementation
of JIT procedures is exceedingly important concept if this production system is to be implemented. In other
words, managers must be motivated to participate in the implementation of the system. For this reason,
some researchers have conducted research about the motivation of managers in implementing JIT
production system. For example, according to a research conducted by Lynn and Adrian (1991) about the
examination of managers’ motivation to implement JIT procedures; rewards associated with increased
productivity in the new work environment, employment security which would be brought by the new
manufacturing system, more challenging production standards and output goals associated with the JIT
environment are the most attractive outcomes of implementing JIT production system. In this case,
management accountants who advise senior executives regarding appropriate incentives for motivating the
implementation of JIT procedures might advise publicizing those productivity rewards and employment
security results for the. In this case, managers can be motivated to participate in the implementation of JIT
production system because they expect to get positive results from the implementation of the system.

Vendor Managed Inventory or VMI is a process where the vendor creates orders for their customers based
on demand information that they receive from the customer. The vendor and customer are bound by an
agreement which determines inventory levels, fill rates and costs. This arrangement can improve supply
chain performance but reducing inventories and eliminating stock-out situations. One of the benefits of
VMI is that the vendor is responsible for supplying the materials to production department when the items
are needed. This removes the need for the company to have significant safety stock. Lower inventories for
the company can lead to significant cost savings. In these VMI we also can safe labor for our warehouse,
due to inventory is managed by vendor so we no need so many worker in warehouse. Production
department also can move very well due VMI we will never face sing down of material. So we never waste
time for waiting for material this will increase our service due to we can serve customer in short lead time
and in good quality and value cost. So we will get repeat sale from customer.
Page7

As a manufacturing company we must meet our customer needs and expectation. So as a purchaser for our
company, purchaser must ensure the entire item is purchase is meet customer expectation and company
cost budget. Purchaser also should call up a meeting with the relevant departments like engineers,
marketing department, production department and delivery department to achieve customer’s goal and
save the operation cost for the company Purchaser requires meeting with the vendor occasionally to
prevent lack of communication. This effective development will brings to increase the quality of the
material that provided by the vendor. Therefore, customer’s satisfaction will be increase. Not only this, we

Conclusion

In a JIT manufacturing system, a company-wide commitment, proper material, quality, people and
equipments must always be made available when needed. In addition; the policies and procedures
developed for an internal JIT structure should also be extended into the our supplier and customer base to
establish the identification of duplication of effort and performance feedback review to continuously
reduced wastage and improve quality. By integrating the production process; the supplier, manufacturers
and customers become an extension of the manufacturing production process instead of independently
isolated processes where in these three sets of manufacturing stages are inter-related and dependent on one
another.4

REFERENCES
1. Study Guide Purchasing Management, JL Pang, 2009

2. JIT , Theory of Constraints and activity based management concepts, JR Martin,


http://www.maaw.info/Chapter8JITExhibits.htm
Cited 19 Nov 2009

3. World Class Supply Management 7th Edition, Burt, Dobler, Starling,2003

4. JIT and Purchasing ,http://www.maaw.info/Chapter8JITExhibits.htm


Cited 19 Nov 2009
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