Red McCombs School of Business

The University of Texas at Austin  

MAN 337.18/MSC 337.1 PROCUREMENT AND SUPPLIER MANAGEMENT

 

Fall 2005

 

Professor James A. Fitzsimmons Classroom: CBA 3.202

CBA 3.238; 471-9453 (voice) Meeting MW 12:30-2

James.Fitzsimmons@mccombs.utexas.edu Unique No.: 03320/04040

www.bus.utexas.edu/faculty/James.Fitzsimmons Office Hours: MW 10-12

 

 

COURSE DESCRIPTION

 

The purchase of goods and services by most organizations represents a significant level of spending. For example, in the North American manufacturing sector, close to 60 percent of sales revenue goes to outside sources. Even in nonprofit and service organizations, 20-50 percent of the total budget is often spent in this area. It is obvious that in every organization there should be serious concern over value received for these funds spent and how supply management can contribute effectively to organizational goals and strategies. Using cases and exercises the course will address the following topics: strategic role of purchasing, supplier selection, supplier relationship management, international sourcing, E-procurement, price determination, purchasing services, and auctions. Negotiation skills will be developed in the latter part of the course.

 

COURSE OBJECTIVES

 

 

CASE METHOD AND CLASS PARTICIPATION

 

The case method is used throughout the course. To help in case preparation "Study Questions on the Case" are included in the detailed course outline following each case abstract. These questions should serve only as a starting point. You should decide what the key issues are and how they can best be addressed and where possible apply systems thinking principles.

 

At the beginning of the class, one or more class members will be asked to start the session by addressing a specific question. Anyone who has prepared the case should be able to handle such a leadoff assignment. After a few minutes of initial analysis and recommendations, we will open the discussion to the rest of the class. As a group we will try to build a complete analysis of the situation through a learning dialogue using systems thinking principles when appropriate.

 

You are expected to be an active participant throughout the entire class and to contribute to the quality of the discussion. Please note that the frequency (i.e., the quantity) of your interventions in class is not a key criterion for effective class participation. The classroom should be considered a laboratory in which you can test your ability to use systems thinking principles to create a learning environment. Criteria that are useful in measuring effective class participation include:

 

(1) Is the participant a good listener?

 

(2) Are the points that are made relevant to the discussion? Are they linked to the comments of others?

 

(3) Do the comments show evidence of analysis of the case?

 

(4) Is there a willingness to participate?

 

(5) Is there willingness to test new ideas, or are all comments "safe" (e.g., repetition of case facts without analysis and conclusions).

 

(6) Do comments clarify or build upon the important aspects of earlier comments and lead to a clearer understanding of the case?

 

Class Behavior and Individual Norms

 

Because every faculty member has somewhat different expectations as to class behavior and individual norms, I'd like to outline a few of mine at the outset.

 

(1) Please let me know in advance if you must miss a class. If you do miss a class, please find out from a classmate what additional assignments might have been made, and what handouts you may have missed.

 

(2) To help me learn your names as quickly as possible, I'd like you to use a name card in class. During the third class, I will pass around a seating chart and ask you to use the same seat for duration of the semester.

 

(3) Preparation of the case and thinking about the assigned questions is essential for a stimulating and rewarding class experience.

 

(4) For purposes of general class preparation, group work is acceptable and encouraged.

 

(5) I will try very hard to use the class time effectively and request that you do the same. This includes starting and ending on time.

 

WRITTEN CASE ANALYSIS

 

A written case analysis of your choice from one of the following cases: American Foods & Grains, Harley Davidson Motor, Boze Corporation, or Intecom due on the day assigned. The written assignment, limited to five pages, double spaced, plus exhibits, should address the study questions for the case as shown in the detailed outline section of this course description and be. Exhibits should contain specific types of analyses such as graphs, figures, tables, or other information that supports and is relevant but would be too detailed for the body of the paper. Proofread your paper before turning it in. Papers should be of the high quality that you would provide to the management of the business

 

NEGOTIATION STYLE REPORT

 

A report on your personal negotiation style based on reading the first six chapters of Bargaining for Advantage is due on October 31. The following issues should be addressed in a written report limited to five pages double-spaced:

 
NEGOTIATION JOURNAL

 

For each negotiation simulation, you will need to take the time to reflect upon your performance and outcome. Indeed, one of the verified differences between “expert” and “average” negotiators is time spent thinking about what went well and what did not, so that adjustments can be made going forward. In approximately one-half page (typed, single-spaced) provide a review NOT of the case facts, but of an aspect or two of the process. Consider the strategies you employed, what you would like to replicate in the future, and what you might consider doing differently. Each simulation highlights different principles or contexts, so you should find not shortage of topics to explore. You should compile your entries into a single word processing file each week, and submit a printed copy on the final class day.

 

CONCEPTUAL QUIZZES

 

As a check on your progress, two multiple-choice quizzes will be administered to assess your understanding and integrating of course concepts. Particular attention will be given to ideas learned from case discussion, lecture topics, and readings.


 

Grading

 

Your course grade will be based on the following activities with weights as shown:

 

Written Case Analysis 20%

Negotiation Style Report (due Oct. 31 st) 15%

Negotiation Journal (due last day of class) 15%

Quizzes 2 @ 15% 30%

Class Participation 20%

100%

Interpretation of Grades

 

Grade

Meaning

Attributes

10

Outstanding

Creative analysis exceeding expectations

9.5

Excellent

Flawless in execution

9

Good

Well done with minor blemishes

8.5

Journeyman

Addressed all issues but without creativity

8

Struggling

Lack of depth in addressing issues

7.5

Lackluster

Real mistakes in understanding

7

Incomplete

Missed the point in addressing some issues

5

Why bother

An embarrassment

 

Note: Grades are final and no make-ups are permitted. Give it your best shot!

 

bOoks and Course PACKET

 

The following materials are required for the course:

 

G. Richard Shell, Bargaining for Advantage: Negotiation Strategies for Reasonable People, Penguin Books, 1999, 0-14-02.8191-6. (Paperback)

 

A Course Packet of cases is available at the GSB Copying Center.

 

Additional Recommended Reading:

 

Leenders, Fearon, Glynn, Johnson, Purchasing and Supply Management, 12 th Ed., McGraw-Hill/Irwin, 2002.

 

Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In, 2 nd Ed., Penguin Books, 1991.

 

L. Thompson, The Mind and Heart of the Negotiator, Prentice-Hall, 2001.

 

 


Session #1 (August 31): INTRODUCTION

 

Negotiate : Pakistani Prunes

 

Debrief : Pakistani Prunes

 

Session #2 (September 7): SUPPLIER SELECTION AND BID EVALUATION

 

Case : Custom Equipment (A)

 

If you were in the position of Matt Roberts, what would be the best way to proceed with the Wire Management Program given the available resources?

 

Case : Custom Equipment (B) The Bid Evaluation

 

Matt Roberts, a newly hired buyer for Custom Equipment has received four bids for the company’s cable and wire business and is wondering if the bid evaluation criteria are appropriate.

 

 

Session #3 (September 12): STRATEGIC ROLE OF PURCHASING

 

Case: American Food and Grains: Commodity and Ingredient Procurement 9-685-095

 

This case focuses on vendor management and the role of the purchasing department in improving final product quality. It also raises fundamental questions about the meaning and measurement of quality, since different functional groups of the firm hold widely varying views.

 

Study Questions on the Case:

 

1. How has the approach to procurement and quality evolved over time at American Foods?

2. What role do the various functional groups at American Foods play in improving vendor quality?

3. What recommendations would you make to Leah King concerning Squire Oil?


Session #4 (September 14): ANALYTIC HIERARCHY PROCESS

Read the “Analytic Hierarchy Process” note in your packet and be prepared to discuss the car selection example.

 

Session #5 (September 19): SELECTING ENTERPRISE SOFTWARE VENDOR

 

Case: Harley Davidson Motor Company 9-600-006

 

This case focuses on a change program and selection of an enterprise software vendor. The decision of which partner to choose to help the company change the way it purchased raised fundamental tensions within the company.

 

Study Questions on the Case:

 

1. Consider Exhibit 10 on page 22 of the case; does it include the factors you consider most important in the selection process? Which factors would you weight most heavily?

2. Based on the information in the case, which provider would you select, and why? Summarize for senior executives, in 2 minutes or less, the reasons for your choice.

3. What is your overall assessment of Harley’s approach to enterprise software selection? What, if anything, would you have done differently?

 

Session #6 (September 21): QUANTITY AND DELIVERY FREQUENCY

 

Read the “Inventory Management” note in your packet and be prepared to discuss the “Elysian Cycles” case

 

Case : Elysian Cycles

 

This case deals with a wholesale distributor of bicycles that must decide on an inventory replenishment policy.

 

Study Question on the Case :

 

Develop an inventory control plan for Elysian Cycles to use as the basis for its upcoming annual season. Possible plans include continuous review system, periodic review system, or a hybrid of both. Based on your plan, specify the safety stock requirements if Elysian Cycles institutes a policy of maintaining a 95 percent service level.

 


Session #7 ( September 26): SUPPLIER RELATIONSHIP MANAGEMENT

 

Case: Bose Corporation: The JIT II Program 9-694-001

 

An innovative company known for its excellent speakers is considering a change in the relationship between Bose and its vendors. A proposal is being considered to station a vendor representative full-time on site at a Bose facility.

 

Study Questions on the Case:

 

 

Video: JIT II at Bose (29 min.)

 

Session #8 (September 28): AUCTIONS AND BIDDING

 

Read the “Auctions and Bidding” note in your packet and be prepared to engage in a simulated auction.

 

Read: A Tale of Two Auctions

 

Session #9 ( October 3): QUIZ 1

 

Session #10 ( October 5): FORWARD BUYING AND COMMODITIES

 

Read the Commodity Purchasing Game in your notes with particular attention to the “Result Form.” Be ready to make your decision for the month of October, knowing that the spot price is 48 cents/pound and the contribution is, therefore, 13 cents/pound.

 

Download the “Commodity Purchase Game” spreadsheet from Blackboard onto your laptop computer and bring to class.

 

Session #11 ( October 10): DELL PLANT TOUR

 

Host: Jerry Binder, Manager Test Equipment

 

Session #12 ( October 12): DELL PLANT DEBRIEFING

 

Based on notes from the Dell Plant Tour, we will discuss what has been learned.

Session #13 ( October 17): INTERNATIONAL SOURCING

 

Case: International Sourcing at Intercon 9-688-055

 

Intercon a firm that manufactures electrical connectors and terminals is interested in coordination across divisions and achieving cost savings by sourcing overseas.

 

Study Questions on the Case:

 

 

Session #14 (October 19): E-PROCUREMENT

 

Read the “E-Procurement” note in your packet and be prepared to discuss the “Cable and Wireless” case

 

Case : Cable and Wireless

 

Ninian Wilson, procurement process manager for Cable and Wireless, was evaluating his options for the companies first ever e-auction.

 

 

Session #15 (October 24): OUTSOURCING SERIVCES

 

Read the “Outsourcing Services” note in your packet and be prepared to discuss the “Scope Repairs” case.

 

Case : Scope Repairs

 

Mark Greig, manager of clinical engineering at Victoria Hospital, faces a decision on improving the quality and cost of repairs to the hospital’s flexible surgical scopes.

 

 

Session #16 (October 24): THE NATURE OF CONFLICT

 

Reading: Ch. 7 "Step 1: Preparing Your Strategy” from Bargaining for Advantage

 

Video : The Sluggers Come Home, Part I: Principles of Rational Negotiation

 

Session #17 (October 31): AGREEMENT QUALITY AND RATIONALITY

 

Discuss agreement quality and rationality

 

Negotiate : Blue Buggy

 

Debrief : Blue Buggy

 

Session #18 (November 2): DISTRIBUTIVE NEGOTIATIONS

 

Reading: Ch. 8 "Step 2: Exchanging Information” from Bargaining for Advantage

 

Video : The Sluggers Come Home, Part II: Negotiating Strategies and Tactics

 

Session #19 (November 7): PLANNING DISTRIBUTIVE NEGOTIATIONS

 

Discuss planning distributive negotiations

 

Negotiate : Biopharm-Seltek

 

Debrief : Biopharm-Seltek

 

Session #20 (November 17): CLOSING AND GAINING COMMITTMENT

 

Reading: Ch. 9 "Step 3: Opening and Making Concessions” from Bargaining for Advantage

 

Reading: Ch. 10 "Step 4: Closing and Gaining Commitment” from Bargaining for Advantage

 

Video : The Sluggers Come Home, Part III: Settlement

 

Session #21 (November 14): INTEGRATIVE POTENTIAL

 

Discuss integrative approach to negotiation

 

Negotiate : Package Deal

 

Debrief : Package Deal

 

Session #22 (November 16): THIRD PARTY MEDIATION

 

Discuss the role of a third party mediator in dispute resolution

 

Negotiate : Amanda

 

Debrief : Amanda

 

Session #23 (November 21): QUIZ 2

 

Session #24 (November 23): WORK ON NEGOTIATION JOURNAL (no class)

 

Session #26 (November 28): COALITIONS

 

Discuss coalitions

 

Negotiate : Federated Science Fund

 

Debrief : Federated Science Fund

 

Session #26 (November 30): FAIRNESS AND SOCIAL DILEMMAS

 

Discuss fairness and social dilemmas

 

Negotiate : Sharc

 

Debrief : Sharc

 

Session #27 (December 5): NEGOTIATION ETHICS

 

Reading: Ch. 11 "Bargaining with the Devil Without Losing Your Soul: Ethics in Negotiation” from Bargaining for Advantage

 

Discuss negotiation ethics

 

Negotiate: The Bullard Houses

 

Debrief : The Bullard Houses

 

Session #27 (December 7): ETHICS WRAP-UP


 

MAN 337 PURCHASING AND SUPPLY MANAGEMENT

 

Fall 2005 Course Outline Fitzsimmons

 

Session Date Topic Case

 

1 8/31 Introduction Pakistani Prunes

2 9/7 Supplier Selection and Bid Evaluation Custom Equipment (A) & (B)

3 9/12 Strategic Role of Purchasing American Foods & Grains

4 9/14 Analytic Hierarchy Process

5 9/19 Selecting Enterprise Software Vendor Harley Davidson Motor

6 9/21 Quantity and Delivery Frequency Elysian Cycles

7 9/26 Supplier Relationship Management Boze Corporation

8 9/28 Auctions and Bidding Auction Vignettes

9 10/3 QUIZ 1

10 10/5 Forward Buying and Commodities Commodity Purchase Game

11 10/10 Dell Computer Plant Tour, Host Jerry Binder (no class)

12 10/12 Debriefing of Dell Plant Tour

13 10/17 International Sourcing Intercom

14 10/19 E-Procurement Cable and Wireless

15 10/24 Outsourcing Services Scope Repairs

16 10/26 Nature of Conflict

17 10/31 Agreement Quality and Rationality Blue Buggy

18 11/2 Distributive Negotiations

19 11/7 Planning Distributive Negotiations Biopharm-Seltek

20 11/9 Closing and Gaining Commitment

21 11/14 Integrative Potential Package Deal

22 11/16 Third Party Mediation Amanda

23 11/21 QUIZ 2

24 11/23 Work on Negotiation Journal (no class)

25 11/28 Coalitions Federated Science Fund

26 11/30 Fairness and Social Dilemmas Sharc

27 12/5 Negotiation Ethics The Bullard Houses

28 12/7 Ethics Wrap-up