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CHAPTER 8
PURCHASING ANALYSIS TOOLS AND TECHNIQUES
• Development:
Expand selected ideas into workable value-improvement
proposals.
• Presentation:
Obtain the approval, support and resources necessary for
implementation.
• Implementation:
Obtain results from the improvement proposals.
• Follow-up:
Track the progress of the effort by applying precise evaluation
techniques and measuring savings.
8.3.2 VALUE ANALYSIS AND PRODUCT DESIGN
Purchasing professionals can contribute to product design. In developing
specifications, purchasing may help a designer revise tolerances and features
by reviewing plans with potential suppliers. For example, an engineering group
used by a firm might recommend new materials that hold tolerances better than
those originally specified, resulting in lower fabrication costs. Purchasers can
often recommend parts that meet functional requirements at a lower cost. In
one instance, a lower-cost brake pad was recommended by purchasing within
a delivery firm and used on a fleet of many thousands of delivery vehicles. This
substitution reduced costs by several hundred thousands of dollars a year.
The purchasing department is often in a position to recommend interchangeable
or common parts. It already knows what it is buying for other products. Making
some of these parts common to several products reduces inventory and
increases the benefits of larger lot size buying. Aclassic example is Eli Whitney’s
use of exact replicas of any part on a rifle to enable mass production with an
accompanying reduction in costs. Whitney’s demonstration to theWar Department
of disassembling, mixing parts and reassembling rifles resulted in increased sales.
Part standardisation is important and an effort should be made to use off-the-
shelf rather than custom parts to perform a function. Standardised parts typically
have shorter lead times, lower prices and better warranties. In addition, salvage
values are usually higher for standardised parts, in case the product changes.
8.4 BUSINESS PROCESS MAPPING
8.4.1 DEFINITION OF A PROCESS
Aprocess is a series of steps or actions performed to achieve a specific purpose.
A process can describe the way things are accomplished; work in a company
typically involves many processes. Examples of business processes would
include the placement of an order to order receipt process, receiving of goods
from suppliers and quality inspection. Individuals within firms are involved in one
or more processes. A business process is an activity or set of activities that will
accomplish a specific organisational goal. As processes become larger, they
usually cross organisational or functional lines. A process should be viewed as a
‘value chain’ where, ideally, value is added fromone step of the process to the next.
There is usually more than one supplier and customer for a given process,