Elliot Simangunsong

o Ph.D, Management Science (LUMS-United Kingdom)

o Dip.SCM℗ (ITC), International Purchasing and Supply Chain
Elliot Simangunsong, Ph.D. DIP.SCM ℗ (ITC) Management
o Vice Dean for Development & Knowledge Dissemination,
Prasetiya Mulya Business School
o Head of Authorized Examination Board (AEB), MLS-SCM℗
Certificate & Diploma Programme
o Senior Researcher, School of Business & Economics Prasetiya
Mulya
o Email: elliot@pmbs.ac.id HP: 082112110947

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Qualifications COURSE DELIVERY

o International Purchasing & Supply Chain Management ▪ REFERENCES

Certification (Level III) ❖ SCM-SUPPLY CHAIN MANAGEMENT (for SMES) (2013).
o International Winner: Best Supply Chain Paper 2017 Modular Learning System in Supply Chain Management,
Literati Awards International Trade Centre (ITC)
o Kemenristek Dikti Research Award 2019 kategori Riset ❖ CH-Course Handout (2017), adapted from Modular
Terapan Learning System in Supply Chain Management, ITC
▪ Final exam : 50% (FE)
▪ Group Project : 35% (GP)
▪ Participation : 15% (PA)

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 Google Classroom

▪ We will use Google Classroom

https://classroom.google.com

▪ Code to access: tkhg43o

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Key Questions

▪ Describe the concept of supply chain management,

and how it has evolved

▪ Specify which are the main dimensions of the

corporate environment that have an effect on the
Introduction to PSCM purchasing & supply function
Elliot Simangunsong, Ph.D. DIP.SCM℗(ITC)
▪ Why purchasing is important

▪ The changing role of purchasing

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 A supply chain is …

▪ A business …………..
▪ A series of value added activities where
……………. move through on their journey from
initial ……………. through to final ………….
What is Supply Chain? ▪ Supply chain management is the integrated
management of the activities that procure
materials and services, transform them into
intermediate and final products/services, and
deliver them through a distribution system to end
customers

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Supply Chain Management

Supply Chain Pipeline
Supply side Demand side

Second tier First tier First tier Second tier End Cost
supplier supplier customer customer customer Cost

• Load size • Store size

• Frequency • Inventory •Transport • Store size
• Handling capacity • Inventory Customer
capacity • Handling
capacity

Purchasing and
Information supply
& Financial management Supplier Enterprise
flow Logistics “Valves” “Valves” End customers
Physical management
flow • Requirements

Supply chain management

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 Supply Side SC Strategy Case Discussion: The SCM Dilemma

▪ In the past, the attitude that “anybody can buy” was very
common and purchasing was often seen as a clerical function
▪ Also known as Costs without any strategic importance to the firm.
Competitive
Purchasing & Supply advantage ▪ Focus on price only. The role of buyers was limited to
Management (PSM) responding to requests and placing orders based on the
lowest price (reactive role).
▪ Is PSM strategy Innovation Quality ▪ SCM staff is not involved in developing specifications, supplier
important for appraisal or evaluation.
business? ▪ Limited interaction between SCM and other departments.
Respond
quickly ▪ SCM staff have received no specialised training.
▪ SCM function not linked to corporate objectives and strategy.

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Changing Role of Purchasing Supply chain management objectives

▪ Recognition that purchasing is an essential function ▪ Developing a competitive advantage based on

that has a strategic impact meeting key customer expectations
▪ Growing realisation of its effects on broad ▪ Supporting business growth: developing and
organisational performance taking advantage of new business opportunities
▪ Identification of the high costs of procurement and a ▪ Optimising the profitability of supply chain
movement away from confrontational relationships operations
and towards increasing cooperation
▪ Ensuring the sustainability of supply chain
operations

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 PSCM in the context of Type of
Organisation and PSCM Functions
Elliot Simangunsong, Ph.D. DIP.SCM℗(ITC)

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From supply chains to supply networks

SCM functions in a business 3rd tier
3rd tier
3rd tier supplier
2nd tier customer
supplier supplier
2nd tier
supplier 2nd tier
Supplier 2nd tier customer
relationship supplier
1st
tier 3rd tier
management supplier customer
PURCHASING 2nd tier 1st tier
supplier 1st tier
& SUPPLY supplier
customer
2nd tier
OPERATIONS customer
(including design & LOGISTICS 2nd tier 1st tier Enter- 1sttier
supplier supplier
prise customer
inventory control) (including warehousing,
transportation &
distribution) 2nd tier
customer
DEMAND 2nd tier 1st tier
1sttier customer
supplier
MANAGEMENT supplier
(including sales) 1st tier 3rd tier
supplier customer
Customer 2nd tier
supplier 2nd tier
relationship 2nd tier
1.2-5
customer
management 3rd tier supplier
supplier 3rd tier
2nd tier
customer
3rd tier supplier
supplier

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 P&S in different types of organisatio Key differences amongst different ty
ns Non-profit
pes of organisations
organisations Feature Private Public Non-profit
Individuals and
Control Government Individuals and organisations
other enterprises
Taxation, grants,
Shareholders and Sponsors (grants, donations),
Funding public debt and fees
accumulated profit members and fees for services
for services
Typically, the effective
Typically, to A belief, value, ideology or service
Prime goal and efficient provision
optimise profit to be provided
of public services
Accountability To shareholders To the public To sponsors or members
Competition Typically yes Typically no Generally not relevant
The law (in general)
Public sector
Laws, regulations and The law (in general)
Private organisations The law (in general) procedures applicable
Major sponsors may impose
Constraints Any self-imposed to the public sector
constraints
enterprises constraints Changes in
Any self-imposed constraints
government policy /
politics

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Sectors of the economy P&S in different sectors

Primary sector Secondary sector Tertiary (services)
The secondary sector: sector
The primary sector:
• Purchase of • Supply of components
❖ Extraction of raw ❖ Conversion and processing maintenance, repair and materials to the
of raw materials into finished • Importers,
materials: drilling, and operation production line wholesalers, retail =
goods (manufacturing),
mining, quarrying... (MRO) items P&S critical
• Purchasing and supply
❖ Electricity & water
❖ Fishing, forestry, • Large size of function fundamentally • Banking, logistics,
agriculture… utilities and construction.
certain plant and important to most repair & maintenance,
machinery manufacturing firms communications,
• Highly specialized • Focus = continuity of tourism & travel,
supply consultancy…..
• Operational = importance of P&S
supplies • Capital equipment for varies
The tertiary sector:
utilities...
banking, logistics,
consultancy and retailing. P&S is also affected by the rate of
change in market conditions and in
technological developments
ITC

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 Position of the P&S function What can be done to raise the profile of
the purchasing & supply function?
Likely position of the purchasing & supply function
based on the organisation’s external expenditure
Expenditure on purchase
of goods and services as Example of Position of the purchasing &
Communicate to management the significance of the cost of
a percentage of total organisation supply function purchased products and services and emphasise what P&S
turnover can do to reduce these

50% + Manufacturing industry

Reports to Chief Executive Officer, Identify and make known the impact which suppliers can
or equivalent
have on the organisation
Primary industry – e.g., Reports to deputy Chief Executive
35 – 50%
in petroleum or mining Officer, or equivalent Take advantage of training opportunities & continued
25 – 35% Health service provider Reports to senior manager training
Junior role, possibly as part of Demonstrate the opportunity costs of poor service or lost
Less than 25% Consultancy firm
another department sales resulting from inefficiencies in the supply chain

If the P&S function is not given the responsibilities, position and staffing Recruit qualified staff
that match its importance to the organisation, its potential contribution to
enhancing cost-effectiveness and competitive advantage will be lost.
ITC

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The Role of SCM Leaders & Staff Assignment-Internet Exercise

▪ Leaders
❖ Managing the strategic impact of SCM on overall competitiveness,
involved in the corporate strategy-setting process. ▪ See Google Classroom.
❖ Focus on the entire supply chain and on total cost as opposed to price
❖ Ability to interact frequently with other functions of the enterprise
❖ Proactive propose improvements and have a two-way communication
with suppliers and users.
❖ Developing and managing supplier relationships (e.g. strategic
partnerships).
▪ Staff
❖ Buyers play a key role in negotiations with suppliers.
❖ Staff is actively involved in developing specifications as well as in
appraising suppliers, evaluating performance and value/cost analysis.
❖ SCM staff have received specialised training and their knowledge and
skills are continuously being upgraded.

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