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Instructor’s Manual
Procurement, Principles
and Management
Eleventh edition
Peter Baily
David Farmer
Barry Crocker
David Jessop
David Jones
For further instructor material
please visit:
www.pearsoned.co.uk/baily
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© Pearson Education Limited 2015
PEARSON EDUCATION LIMITED
Edinburgh Gate
Harlow CM20 2JE
United Kingdom
Tel: +44 (0)1279 623623
Web: www.pearson.com/uk
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Contents
Part 1 Procurement Objectives and Development 6
Chapter 1 Procurement scope and development 7
Objectives of this chapter 7
List of Cases, Research Boxes and Figures in this chapter 7
Teaching notes 9
Chapter 2 Strategic procurement and supply chain management 11
Objectives of this chapter 11
List of Cases, Research Boxes and Figures in this chapter 11
Teaching notes 13
Chapter 3 Public sector procurement 15
Objectives of this chapter 15
List of Cases, Research Boxes and Figures in this chapter 15
Teaching notes 16
Part 2 Key Procurement Issues 22
Chapter 4 Outsourcing 23
Objectives of this chapter 23
List of Cases, Research Boxes and Figures in this chapter 23
Teaching notes 23
Chapter 5 Quality management 26
Objectives of this chapter 26
List of Cases, Research Boxes and Figures in this chapter 26
Teaching notes 27
Chapter 6 Inventory management 30
Objectives of this chapter 30
List of Cases, Research Boxes and Figures in this chapter 30
Teaching notes 31
Chapter 7 Lead time and time compression 35
Objectives of this chapter 35
List of Cases, Research Boxes and Figures in this chapter 35
Teaching notes 35
Chapter 8 Sourcing strategies and relationships 37
Objectives of this chapter 37
List of Cases, Research Boxes and Figures in this chapter 37
Teaching notes 37
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Chapter 9 Price and total cost of ownership (TCO) 43
Objectives of this chapter 43
List of Cases, Research Boxes and Figures in this chapter 43
Teaching notes 44
Chapter 10 Negotiations 49
Objectives of this chapter 49
List of Cases, Research Boxes and Figures in this chapter 49
Teaching notes 49
Part 3 Applications 54
Chapter 11 Project procurement 55
Objectives of this chapter 55
List of Cases, Research Boxes and Figures in this chapter 55
Teaching notes 56
Chapter 12 Procurement of commodities 59
Objectives of this chapter 59
List of Cases, Research Boxes and Figures in this chapter 59
Teaching notes 59
Chapter 13 International and global sourcing 63
Objectives of this chapter 63
List of Cases, Research Boxes and Figures in this chapter 63
Teaching notes 64
Chapter 14 Capital procurement 67
Objectives of this chapter 67
List of Cases, Research Boxes and Figures in this chapter 67
Teaching notes 68
Chapter 15 Retail procurement and efficient consumer response (ECR) 69
Objectives of this chapter 69
List of Cases, Research Boxes and Figures in this chapter 69
Teaching notes 69
Chapter 16 Services procurement 72
Objectives of this chapter 72
List of Cases, Research Boxes and Figures in this chapter 72
Teaching notes 73
Chapter 17 Corporate social responsibility 75
Objectives of this chapter 75
List of Cases, Research Boxes and Figures in this chapter 75
Teaching notes 76
Part 4 E-Procurement Systems and Contract Management 79
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Chapter 18 E-procurement systems 80
Objectives of this chapter 80
List of Cases, Research Boxes and Figures in this chapter 80
Teaching notes 81
Chapter 19 Contract management and performance measurement 83
Objectives of this chapter 83
List of Cases, Research Boxes and Figures in this chapter 83
Teaching notes 84
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© Pearson Education Limited 2015
PART 1
Procurement objectives and
development
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CHAPTER 1
Procurement scope and development
Objectives of this chapter
• To discuss the scope of purchasing
• To identify the purchasing cycle concept
• To discuss purchasing and supply as a service activity
• To discuss the changing role of purchasing and supply
• To explain how purchasing might develop from an independent function to an
integrated activity
• To identify the internal and external influences that have affected the evolution of
purchasing
• To examine the ‘total acquisition cost’ concept
• To consider the adoption of relationships based on mutual benefits as an alternative to
the traditional transactional, adversarial approach
• To highlight the evolution of concepts relating to purchasing development
• To identify key practices encountered in developed strategic purchasing
• To provide mini case studies demonstrating how companies are developing their
purchasing functions
List of Cases, Research Boxes and Figures in this chapter
Mini Case Studies
• Hertz
• Nokia
• IBM
• Unisys
• BMW
• Bulwell Precision Engineers
• Phillips
Baily et al., Procurement, Principles and Management, 11e © Pearson Education Limited 2015,
Instructor’s Manual
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© Pearson Education Limited 2015
Case Studies
• Nokia
• Ford
• BOC Group
• Feedwater
• Britvic
• E.ON UK
• Siemens
• Barclays Bank
• Clarks
• Sanofi
Research Boxes
• The Ariba Study – The 2006 Global Spend Agenda
Figures
• Figure 1.1 The increasing importance of purchasing and supply in the manufacturing
sector
• Figure 1.2 The ‘transactional’ relationship
• Figure 1.3 The ‘mutual’ relationship
• Figure 1.4 The ‘procurement positioning’ tool
• Figure 1.5 Supplier objectives
• Figure 1.6 The price/cost iceberg
• Figure 1.7 Example of the scope of a procurement function: some goods and services
necessary to operate a passenger aircraft (Source: Courtesy British Airways)
• Figure 1.8 A four-stage purchasing development model (Source: Reck and Long, 1988)
• Figure 1.9 The three principal areas of focus (Source: Syson, 1989)
• Figure 1.10 The purchasing development matrix (Source: Jones, 1997)
Instructor’s Manual
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© Pearson Education Limited 2015
Teaching Notes
All organisations need inputs of goods and services from external suppliers or providers.
In this chapter, we examine the developing role of the purchasing and supply function in
managing these inputs, and comment upon the ways in which the activity can contribute to the
efficiency and effectiveness of the organisation, offering mini case studies demonstrating how
companies are developing their purchasing/procurement contribution.
We identify ways of measuring the stage of development reached by an organisation and
demonstrate how the development stage reached can affect performance of the purchasing
activity.
Key concepts covered in this chapter, therefore, include a comparison of traditional procurement
approaches with a more strategic value-added procurement approach, utilising the models by
Reck and Long, Sysons and Jones, as cited above in Figures 1.7, 1.8 and 1.9.
Many cases have been included as examples of how companies are making/have made the
transition to a more strategic procurement approach and they include the benefits being enjoyed
as a result.
For example, the mini case study of Unisys in page 13, demonstrates the dramatic changes
which can be made as procurements moves from a disorganised, fragmented approach to a more
strategic approach using best practice techniques.
The other cases can be used to demonstrate the similar approach being adopted as companies
make the transition.
The case study of Sanofi near the end of the chapter is a most useful vehicle for allowing
students to assess and evaluate the Critical Success Factors in the development of the function
Students can also be asked to match the categories contained in the Kraljic matrix, with the
categories contained in the Supplier Preferencing model as these are key positioning tools for an
organisation.
For example, a Critical item on the Kraljic matrix would want to be positioned in the Develop or
Core box in the Supplier Preferencing model.
Students can be asked to look for the key pre-requisites which have been identified across these
cases, and to present an overall summary.
The following list includes many of the ideas taught to students of purchasing/procurement at
all levels.
Clearly, this good practice will not be practicable in an organisation with a less than fully
developed purchasing function.
• Identify and work with key suppliers
• Develop openness and transparency
• Align systems with strategic initiatives
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© Pearson Education Limited 2015
• Articulate mutual goals
• Forge partnerships where appropriate
• Use complementary competencies
• Employ dedicated complementary assets
• Employ appropriate technology
• Use appropriate e-technology/systems
• Share competencies and resources
• Establish common language
• Emphasise mutual benefits
• Implement Kaizen
• Remove decoupling points
• Empower individuals
• Empower suppliers
• Focus on customer needs
• Pursue and eliminate waste
• Consider core/non-core questions
• Build knowledge base
• Use knowledge base
• Be responsive, and ready to change
Students should look for these approaches in the case studies provided.
