Tag: purchasing

OM Podcast #45: Inside Purchasing at Temple University

In our newest podcast episode, Barry Render and Misty Blessley sit down with Donna Schweibenz, former Senior Director of Purchasing at Temple University, for a fascinating look inside one of higher education’s most complex operational functions.

Donna brings 26 years of experience leading a centralized purchasing department responsible for everything from office supplies to cadavers for medical training—yes, cadavers! She shares how universities must navigate wide‑ranging procurement categories, strict compliance requirements, and unexpected challenges that arise even from seemingly simple purchases.

In this episode, Barry, Misty, and Donna discuss:

  • The sheer variety of goods and services a major university must procure, and the challenges the centralized purchasing team faces.
  • The creation of a three‑university purchasing alliance between Temple, Penn State, and Pitt, and how collaboration led to better pricing and efficiencies.
  • What people often misunderstand about purchasing, including bid thresholds, contracts, warranties, lead times, vendor vetting, and how essential communication is to prevent operational issues.

 

TRANSCRIPT LINK

Donna Schweibenz

A Word document of this podcast will download by clicking the word Transcript above.

Prof . Misty Blessley
Prof. Barry Render

 

 

 

 

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OM in the News: Apple Believes in Squeezing Its Supply Chain

To understand Apple’s evolving place in the tech world, consider that one of its most important executives today is a guy whose job is badgering suppliers to get costs down. Tony Blevins, VP-Procurement, will stop at little to get a favorable deal. He has paraded manufacturers past competitors in Apple’s lobby and spurned a UPS contract by sending it back to UPS executives through FedEx. He persuaded subcontractors not to pay a chip maker that Apple was in litigation with, depriving the chip company of $8 billion.

The supply chain was always a critical piece of the Apple formula—alongside, if duller than, its magic designs, writes The Wall Street Journal (Jan. 24, 2020). CEO Tim Cook built the supplier network and instilled rigorous frugality in it as he did so. Today the supply chain looms larger than ever at Apple. Slowing iPhone sales, combined with the increasing cost of new features, make the job of hammering down expenses critical.

The result is a company less identified with visionary leaders and more of an operations juggernaut with rich profit margins it intends to keep. Blevins enforces manufacturing deadlines that help the company fill orders on time around the world. He manages semiconductor suppliers, making him the bearer of bad news if Apple sets out to replace their chips with an in-house product. Under Blevins, Apple pays Intel $10 per modem chip, roughly 50% less than Samsung pays Qualcomm. Blevins even rotates staff members every few years to keep them from developing supplier relationships that might dilute their focus on saving Apple money.

Apple believes that saving 10% on the cost of parts could boost profits more quickly than selling more computers, exactly the point we make in the text on page 7 in Table 1.1, “Options for Increasing Contribution.”

Classroom discussion questions:

  1. Why is Blevins so important to Apple?
  2.  Explain the implications of Table 1.1.

Guest Post: Total Cost of Ownership

john bowlerOur Guest Post today comes  from John Bowler, who is Visiting Professor at DeVry University’ s College of Business.

As the Heizer/Render OM text suggests in Chapter 11, the collaborative relationship between buyer and supplier should yield the lowest total cost of ownership (TCO). TCO is the sum of all direct, indirect, and opportunity costs over the life cycle of a purchase. The goal of the TCO approach is to obtain the most economical total price and not necessarily the lowest initial price. This is the focus of many successful collaborative supplier-client relationships.

The elements of TCO are (but not limited to): Item price; Item ordering cost; Transportation costs; Receiving costs; Inventory carrying cost; Shortage cost; Warranty cost; and Aftermarket/preventative maintenance cost.

TCO composition varies by the type of product, the product’s life-cycle stage, supplier’s location, the buyer’s production methodology and/or method of service delivery. Determining the TCO can be a challenging task. One way to start is to identify the supplier’s costs (or contributions) in regard to the following:

  • Integration relates to how well the supplier meshes with the buyer’s established infrastructure and processes to include the ease by which information flows both ways between buyer and the supplier. In today’s supply chain, timely and accessible information flow is very much as important as on time, in spec, delivery of the product or service.
  • Collaboration relates to the ease of doing business with the supplier.
  • Synchronization refers to supply chain capabilities such as the flexibility to drop ship direct to the end user.
  • Leverage focuses relates to the competitive advantage a supplier contributes to the client’s competitive capabilities.
  • Acceptable risk relates to the level of the supplier’s reliability and resiliency in supporting the buyer’s ability to maximize chosen profit opportunities.

TCO data-driven conclusions provide a competitive advantage to firms across various industries. Thinking outside the box of ways to maximize profitability in supplier relationships rather than calculating ways to minimize supplier costs will earmark industry leaders in the future.