Quản trị kinh doanh - Procurement

PROCUREMENTAfter this lecture you should be able to:■ DEFINE the role of procurement■ APPRECIATE the importance of procurement in the logistics chain■ CHOOSE an appropriate supplier■ APPRECIATE the advantages of choosing single or multiple sourcing■ DISCUSS the steps in a procurement cycle■ DESCRIBE e-procurement and its advantages■ TALK about different arrangements for purchasingLEARNING OUTCOMESIntroductionIn a supply chain, each organisation buys materials from upstream suppliers, adds value, and sells them to downstream customers. As each organisation, in turn, buys and sells, the materials move through the whole supply chain. The trigger that initiates each move is a purchase.This is basically a message that an organisation sends to a supplier, saying, ‘we have agreed on terms, so send us materials and we will pay you’.Purchasing Vrs Procurement; any Difference?Yes‘Procurement’and ‘purchasing’ are often taken to mean the same thing. Purchasing refers to the actual buying, while procurement has a broader meaning. It can include different types of acquisition (purchasing, rental, contracting, and so on) as well as the associated work of selecting suppliers, negotiating, agreeing terms, expediting, monitoring supplier performance, materials handling, transport, warehousing and receiving goods from suppliers.Definition of Term:Procurement is the process of identifying and obtaining goods and services. It includes sourcing, purchasing and covers all activities from identifying potential suppliers through to delivery from supplier to the users or beneficiary;Purchasing is the specific function associated with the actual buying of goods and services from suppliers; Sourcing is simply: “Identifying and working with appropriate suppliers”.Importance of procurementProcurement is clearly an essential function within every organisation. We know that every organisation needs a supply of materials, and procurement is responsible for organising this. If procurement is carried out badly, materials do not arrive, or the wrong materials are delivered, in the wrong quantities, at the wrong time, with poor quality, at too high price, low customer service, and so on.Why is supply chain getting shorter?Customers use the Web or avoid different tiers of suppliersAlliances are reducing the number of suppliers used by each organisation; Amounts purchased are increasing as companies focus on their core activities and outsourcing more;Customers are more demanding of products and conditions of purchase. Aims and goals of procurementThe overall aim of procurement is to guarantee that an organisation has a reliable supply of materials.To organise a reliable and uninterrupted flow of materials into an organisationTo work closely with user departments, developing relationships and understanding their needsTo find good suppliers, work closely with them and developing beneficial relationshipsTo buy the right materials and making sure that they have acceptable quality, arrive at the time and place needed, and meet any other requirementsTo negotiate good prices and conditionsTo keep stocks low, considering inventory policies, investment, standard and readily available materials, and so onTo move materials quickly through the supply chain, expediting deliveries when necessaryTo keep abreast of conditions, including pending price increases, scarcities, new products, and so on.7 R’s of ProcurementRight PriceRight QuantityRight QualityRight TimeRight PlaceRight SourceRight ServiceChoosing a SupplierThe most important part of procurement is finding the right supplierThere is no point in having a well-designed product, if the supplier cannot actually deliver itFactors to consider in choosing a supplierSuppliers who;are financially secure with good long-term prospectshave the ability and capacity to supply the necessary materialsaccurately deliver the requested materialssend materials of guaranteed high qualitydeliver reliably, on time with short lead timesquote acceptable prices and financing arrangementsare flexible to customers’ needs and changesare experienced and have expertise in their productshave earned a good reputationuse convenient and easy procurement systemshave been used successfully in the past and can develop long-term relationships.Choosing a supplierMost organisations have a list of approved suppliers who have given good service in the past, or who are otherwise known to be reliable. If there is no acceptable supplier on file, the organisation has to search for oneSuppliers for low value items can probably be found in trade journals, catalogues or through business contacts. More expensive items need a thorough search, and this can be very time consumingSteps in choosing the best supplierfor a productLook for alternative suppliersBuild a long list of qualified suppliers who can deliver the productsCompare organisations on this long list and eliminate those who are, for any reason, less desirableContinue eliminating organisations until you have a shortlist (usually four or five) of the most promising suppliersPrepare an enquiry, or request for quotation, and send it to the shortlistReceive bids from the shortlistSteps in choosing the best supplierfor a productDo a preliminary evaluation of bids and eliminate those with major problemsDo a technical evaluation to see if the products meet all specificationsDo a commercial evaluation to compare the costs and other conditionsArrange a pre-award meeting to discuss bids with the remaining suppliersDiscuss condition bids, which are specific conditions that have to be agreedChoose the supplier that is most likely to win the orderArrange a pre-commitment meeting to sort out any last minute detailsAward orders to the preferred supplier.Steps in choosing the best supplierfor a productNormally, an organisation will spend little time looking at alternative suppliers if:it is buying low value materialsthere is only one possible supplierthere is already a successful arrangement with a supplierthere is not enough time for extended negotiationsthe organisation has a policy of selecting specific types of supplier.Choosing the best supplierfor government workProcurement has to be visibly fair, and all potential suppliers must be given an opportunity to submit quotations.Supplier SelectionHow Many Suppliers Do You Need?Some organisations say that this single sourcing leaves them vulnerable to the performance of an individual company, and they have severe problems if something goes wrong. For instaceIf the single supplier hits financial problems, an organization may, through no fault of its own, have to stop production. To avoid this, some organisationshave a policy of buying the same materials from a number of competing suppliers.Aspects of Many vs. Few SuppliersIncreased competition may promote better quality and reduced costLow likelihood organization will be left without production inputs Suppliers gain considerable amount of bargaining power. Less resource to potentially exploit.High risk of suppliers defaulting on delivery. Many SuppliersFew SuppliersAspects of Many vs. Few SuppliersSuppliers will experience decreased demand, driving sales down and costs up.Logistics and operations become complex and difficult to manage. Increased demand makes it easier for suppliers to experience economies of scale.Streamlined logistics and operations are easy to manage. Many SuppliersFew SuppliersAspects of Many vs. Few SuppliersUtilizing many suppliers can undermine trusting relationship and display a lack of commitment to long term business.Difficult to collaborate with suppliers, allowing inputs to be developed in parallel with organizations products.Shows commitment to long term relationships which can promote trust.Often easier to collaborate with suppliers to develop products in parallel with organizations products.Many SuppliersFew SuppliersMonitoring supplier performanceMost organisations monitor their suppliers to make sure that they continue to give satisfactory service. This is called supplier rating or vendor rating.One common approach uses a checklist of important factors and checks that the supplier meets an acceptable standard in these. The checklist might ask whether the supplier is financially sound; whether it delivers on time; if material quality is high enough; if there is technical support; whether the price is competitive; about relevant trends, and so on.If the supplier does not meet any criterion the customer has to discuss improvements or look for new sources. The aim is not really to replace existing suppliers, but to monitor performance, identify areas that need improving and agree the best way of achieving these improvements.Only as a last resort should an organisation start looking for new suppliers.Procurement CycleOnce a supplier is chosen, an organisation has to follow some procedure for arranging purchases.Procurement Cycle cont..The first three steps sort out the materials and supplier, and then comes the crucial point with the issue of a purchase order in step 4. At this point the organisation agrees to buy specified materials from a supplier, and the purchase order triggers the supply (along with necessary production planning, transport arrangements, finance, and so on). The purchase order is part of a legal contract between the organisation and its supplier. The remaining steps finalise the details of delivery.E-ProcurementHas to do with purchasing through the InternetAdvantages of E-Procurementallowing instant access to suppliers anywhere in the worldcreating a transparent market where products and terms are readily availableautomating procurement with standard proceduresgreatly reducing the time needed for transactionsreducing costs, typically by 12–15%outsourcing some procurement activities to suppliers or third partiesintegrating seamlessly with suppliers’ information systems.Two types of e-procurementB2B (where one business buys materials from another business) B2C (when a final customer buys from a business)TYPES OF PURCHASEThree of procurement by Van de Vliet, (1996) based on the importance of materials:non-critical materials have low profits with little risk in supply, and need basic, simple procedures for purchasingbottleneck materials have low profits but have more risk in supply, and need long-term contracts with alternative sources to avoid potential problemsstrategic materials with higher profits need more formal relationships with suppliers over the long term, possibly developing into alliances and partnerships.Arrangements for delivery (INCOTERMS)The advantages of INCOTERMS They determine the stage during carriage when responsibility passes from seller to buyer.They determine who is responsible for the cargo when same is lost or damaged.They set standard rules for Customs Clearance.They oblige the Seller to pack goods in such manner as is required for transport.They defines the role of Carrier.Lecture ReviewDEFINE the role of procurementThe importance of procurement in the logistics chainSteps in choosing an appropriate supplierAdvantages of choosing single or multiple sourcingthe steps in a procurement cycle e-procurement and its advantagesdifferent arrangements for purchasing akpe na mi!