SCM Overview:

 “SCM is a network of supplier, manufacturing, assembly, distribution and logistics

facilities that perform the function of procurement of material, transformation of these
materials into intermediate and finished products and the distribution of these
products to customers.”
Raw
Raw
Material
Material
Supplier
Supplier --
Plastic
Plastic
granules
granules
Customer
Customer -- Transport
Transport --
Plastic
Plastic Plastic
Plastic
Bukcet
Bukcet granules
granules

SCM Factory
Factory //
Local
Local Shop
Shop Manufacturi
Manufacturi
ng
ng Unit
Unit

Distribution
Distribution
center
center //
Warehouse
Warehouse Finished
Finished
product
product --
Bucket
Bucket

 Operational Procurement:
a. Purchasing - Buying goods and services with the right direction of the right
item, at the right price, quality and quantity, from the right support and then at
the right time.
b. Procurement - the complete process of obtaining goods and services from
preparation and processing of a requisition, through to receipt and approval of
the invoice for payment. Also called sourcing.

Compliance

Cost Procurment Delivery

Quality

 Procurement - it is a broad term that describes all committees and processes to

acquire goods and services.
 Two main types of procurement - Direct procurement and Indirect procurement
o Direct Procurement -
i. It is often described as the procurement of goods that go into
production.
ii. These purchases and really large quantities of something
acquired from a pool of suppliers at the best possible cost,
reliability and quality.
iii. Direct Procurement generally exists in the manufacturing
business.
 o Indirect Procurement -
i. It involves purchasing goods or services that likely will not end
up in the product / service being delivered to the customer and
are certainly not the core of the product.
ii. It is the act of purchasing services / supplies required to keep the
day-to-day business alive.
iii. This includes things like repairing equipment, marketing services
and office supplies.
Procurement objectives:
o Obtaining goods & services of the required quantity & quality at the lowest
possible cost.
o Ensuring the best possible services & prompt delivery by the supplier.
o Developing & maintaining potential suppliers.
o Determining purchasing specification - right quality, quantity and delivery
(time & place).
o Selecting the supplier (right source).
o Negotiating the terms & conditions of a purchase.
o Issuing & administration of purchase orders.
o Achieving the best overall value for the organization.
Procurement Cycle:

General Process Flow of Purchase to pay:

Checklist while creating a Purchase Order:
 Detailed order information (Part #, Quote # etc)
 Correct Supplier name and number
 Correct quantity information
 Correct delivery location
 Correct currency
 Correct agreement # (if any)
 Required terms and conditions
 Clock the savings done in back end (if any)
 Agreed payment terms
 Requester details

Purchase Order Amendment Scenarios:

 Scope change
 PO item change
 Duration of PO change
 UOM change
 Delivery schedule change
 Billing/Pricing change
 Quantity of the material change
 Any other requirement changes
 Change order

Change Order Concept/PO Amendment:

 When a PO is changed, the buyer needs to attach the documentation that evidences the
reason for change & related approvals. E.g., to add additional funds, the buyer needs to
have an approved requisition in place.

Cancelling a PO:
 The buyer cannot cancel a PO if it is partially receipted / payment is in process / any
change in the order is in place.

Purchase Order types (PO):

3 types of Purchase Orders:
 Individual Purchase Order: Pos getting created against the approved requisition.
 Blanket Purchase Order: This type of PO could get created against each business unit,
against an approved budget for some specific event / job. Each time one specific work is
done, the supplier submits the invoice against the blanket PO by mentioning the blanket
PO number. Once payment is done to the supplier, the paid amount gets deducted from
the blanket purchase order.
o Caution: The supplier and buyer must monitor the balance amount against the
master PO.
o Benefits: This kind of PO gets used to speed up the purchasing process for the
client end.
 Catalog Purchase Order: This PO gets processed against the catalog set up for a specific
supplier. This is a system generated PO and the buyer does not have any control over it.
 Ince the requisition is approved; it automatically gets turned into a PO and reaches the
supplier portal (in case the supplier is web enabled). Otherwise, the PO is sent to the
supplier manually)

Responsibilities of the Purchasing Department:

o Selecting the right supplier
o Sourcing materials & services at the best cost
o Placing Pos with suppliers
o Follow up with suppliers for prompt delivery & working out to reduce the lead time.
o Developing good relationships with suppliers
o Enquiring about complaints from both suppliers & user departments and ensuring their
timely & prompt resolution
o Cost saving

Spot Buy / Special Procurement / One-time Procurement:

Catalog Management:

What is Catalog - A catalog represents a collection of products that are grouped into categories.

Need for a Catalog in Procurement -

o Commitment to lowering the cost of procurement by creating & utilizing a highly
automated supply chain system worldwide.
o Environment of cooperation with suppliers.
o Improving hands-free procurement of products & services.
o Facilitate an easier & faster procurement process.
o Effective supplier collaboration.
o Improved compliance & realized savings.

Catalog Management Includes:

o Setting up the catalog
o Loading it into the system
 o Managing
o Categorizing
o Controlling access
o Maintenance / Review

Best Practices for Catalog Management

Responsibilities for Catalog Suppliers

o Suppliers providing catalogs for procurement of goods and services are required to
comply with the process guidelines
o Management systems
o Matching quality expectations
o Accurate classification codes for all the items
o Manufacturer names are required for all items
o A manufacture part number is required for all items
o For service items, the supplier part number is to be utilized
o Accurate lead time definitions are required for each item
o At least one unique & product specific image is required per item

Content Template:
o Need to have a standard spreadsheet to be used by suppliers
o Suppliers are expected to provide detailed information regarding every product / service
included in their catalogs
o Need to share any new items with the catalog management team