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Master Data 89

PURCHASING GROUP
Whereas purchasing organizations are responsible for the strategic aspects
of purchasing, such as negotiating contracts with vendors, purchasing groups
carry out the day-to-day purchasing activities. A purchasing group is an indi-
vidual or a group of individuals who are responsible for purchasing activities
for a material or a group of materials. These activities include planning, creat-
ing purchase requisitions, requesting quotations from vendors, and creating
and monitoring purchase orders. A purchase order (PO) is a formal commu-
nication to a vendor that represents a commitment to purchase the indicated
materials under the stated terms. The purchasing group also serves as the main
point of contact with vendors.
A purchasing group is not always an entity within the company. Some
businesses outsource the group’s activities. Consider, for example, a case in
which a company needs to acquire land or a building. The company most likely
will retain a realtor to fi nd the property that best suits their needs. In this case,
the realtor serves as the purchasing group. Similarly, many companies use the
services of buyer agents to fi nd suitable vendors and buy materials from them
because these agents are more familiar with the vendors. GBI has one pur-
chasing group for North America (N00) and one for Europe (E00).

Business Processes in Practice 4.1: Dell & Intel

Dell Computers and Intel Corporation illustrate how and so on. All purchases are based on the global con-
purchasing organizations manage both local and glo- tract and pricing terms negotiated between Dell and
bal procurement strategies. Dell has manufacturing Intel headquarters, but they are executed locally by the
facilities in the United States, Brazil, Ireland, Poland, purchasing groups for the various plants. This arrange-
China, Malaysia, and India. The company purchases ment ensures that Dell receives the best pricing and
vast quantities of Intel microprocessors for its various terms due to the aggregate demand and strategic over-
computer product lines (laptops, desktops, and serv- sight of the centralized purchasing organization. At the
ers). In turn, Intel maintains a dedicated sales force at same time, however, the local manufacturing facilities
Dell’s headquarters to negotiate purchasing contracts maintain control over the tactical purchasing activities
and manage the relationship. Dell has a central pur- because the purchasing organization is located on the
chasing organization that consolidates procurement same premises. Intel also benefi ts from this arrange-
requirements globally and negotiates pricing centrally ment by gaining global visibility into Dell’s purchasing
with Intel. However, the actual purchase orders are cre- so that the company can better adjust their manufactur-
ated at the local Dell manufacturing facilities in each ing capacity to provide the right amount of chips to Dell
region. In other words, Dell US purchases chips from when and where they are needed.
Intel US, Dell China purchases chips from Intel China,
Source: Dell & Intel company reports.

MASTER DATA

In Chapter 2 we explained that business processes involve multiple types of
master data. The four master data types that are relevant to the purchasing
process are material master, vendor master, purchasing info records, and con-
ditions. All four types are integrated in various combinations throughout the
procurement process.

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