Purchasing in a supply chain environment

Why the interest in purchasing? In the typical company, material costs are 40% to 75% of the cost of goods sold, labor is 5% to 15%, and the balance is burden. The typical company has $4-$5 in purchased cost to $1 in labor. Most companies are implementing material requirements planning (MRP II) and...

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Bibliographic Details
Published in:Hospital materiel management quarterly 2000-08, Vol.22 (1), p.25-28
Main Author: Schorr, J E
Format: Article
Language:English
Subjects:
Appointments and Schedules
Commerce - organization & administration
Contract Services
Corporate purchasing
Cost control
Cost reduction
Electronic data interchange
Equipment and Supplies - supply & distribution
Health administration
Hospital Distribution Systems
Inventory
Inventory management
Just in time
Manufacturers
Manufacturing resource planning
Material requirements planning
Materials Management, Hospital - methods
Office Automation
Operations management
Product Line Management - methods
Purchase orders
Purchasing
Purchasing, Hospital - methods
Raw materials
Schedules
Scheduling
Shipments
Suppliers
Supply chains
Total Quality Management
United States
Value analysis
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Summary:Why the interest in purchasing? In the typical company, material costs are 40% to 75% of the cost of goods sold, labor is 5% to 15%, and the balance is burden. The typical company has $4-$5 in purchased cost to $1 in labor. Most companies are implementing material requirements planning (MRP II) and enterprise resource planning systems to control the $1 in labor and have little expectation in the area of purchasing savings. Yet a dollar saved in purchasing goes directly to the bottom line. I ran a survey of 100 Class A users of MRP II; in all 100 of the companies, the biggest payback was in the area of purchasing.
ISSN:0192-2262