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Introduction

Procurement and Purchasing are quiet similar. Procurement means obtaining or to buy something regardless of volume fo (Ammer 1997)r business purposes which will fit in logistics matters while purchasing means to buy something which is limited only to the supplies of the company (Biomni 2001). Procurement is the acquisition of goods and services at the best possible total cost of ownership (Carr 2000), in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of the company, or individuals, generally via a (Crosby 1979) contract. Purchasing means from where to buy or at what price to buy Procurement means how much to buy and when to buy Purchasing refers to a business or (Dobler 1990) organization attempting to acquire goods and services to accomplish the goals of the enterprise (Edwards 1985). through there are several organization that attempt to set standards in the purchasing process, processes can vary greatly between organizations (H. 1998) .Typically the word purchasing is not used interchangeably with the word d procurement (Harland 1999). Since procurement includes expediting, supplier quality and traffic and logistics in addition to purchasing. Purchasing is the function responsible for issuing purchase orders and initiating the flow of materials (J. 1974). But many transactions are not simple purchasing, but include rental, leasing, contracting (J. 1974), exchange, gifts, borrowing and so on. It is really more accurate to talk about the acquition of materials, or more commonly procurement. Some people argue that purchasing describes the actual buying , while procurement has a broader meaning which (cavinato 1992) includes different types of acquisition ( leasing , rental , contracting , etc )as well as the associate work of identifying and selecting the supplier , negotiation , agreeing terms (G. C. W 2003) , expediting ,monitoring suppliers performance (D. D. W 1990) , analyzing orders , material administration , developing purchasing system and so on .

fixing standards etc. Purchasing is unplanned approach. Procurement refers to start from the initial stage i.(Ammer 1997) . Procurement is systematic approach with material management technique whereas purchasing is unplanned need based approach. 1999) commodity to site. processing. Purchasing process : Sourcing group ± (Edwards 1985) y y y y Confirm user requirements Development category definition Define basic characteristics Understand industry and supply markets Select sourcing strategy ± (Heinritz 1981) y y y Asses bargaining position Evaluate alternative strategies Select appropriate approaches and technique Generate supplier profile ± (J. negotiating. (L. III.2 II. 1993) and purchasing refers to fulfilling the commercial aspects of procuring the commodity via releasing purchase orders/tracking delivery schedules /till bringing the (H. sourcing.e. R. designing. 1974) y y y Identify qualified supplier s Determine supplier value added capabilities Develop supplier ³ short list ³ Select implementation path ± (Ammer 1997) y y Verify and adjust sourcing strategy Develop implementation plan Negotiation and select suppliers. R.

W 1990) suppliers.  Checking background: References for product/service (J. 1974)quality are consulted.3 y y y y Plan negotiation strategy Evaluate supplier proposals Conduct negotiations with suppliers Recommend sourcing decision Operationalize supplier integration ± (Mclvor 1997) y y y Plan and implement transition to new suppliers relationships Link key processes Conduct joint process improvement activities Benchmark the supply market ± (Mclvor 1997) y y y y Monitoring market conditions Asses new technology and best practices impact Conduct benchmarking activities Determine appropriateness for re-examining category IV. it is necessary to search for suppliers who can satisfy the requirements (P. RFP. and any requirements for follow-up (A.  Contacting the supplier: When one or more suitable suppliers have (cavinato 1992) been identified. D. M 1998)services including installation. Samples of the P/S being considered may be examined or trials (Heinritz 1981) undertaken. ROQ. RFI or RFT may be advertised. maintenance. 1991). or direct contact may be made with the (D.  Procurement cycle Gathering the Information: If the potential customer does not already have an established relationship (Harland 1999)with sales/ marketing functions of suppliers of needed products and services (P/S). and warranty are investigated. .

D. and a contract to acquire the P/S is completed. (cavinato 1992) . Installation and training may also be included (cavinato 1992). customers. and customization possibilities are established (D.  Tender Notification: Some of the organization uses a tender notification so that they can raise the competition for (Harland 1999) the chosen opportunity (Harland 1999). W 1990). V. availability. the company evaluates the performance of the P/S and any accompanying service (G. W 2003)and/or disposed of. Delivery schedules are negotiated.  Fulfillment: Supplier preparation (L. C. shipment. measures . capabilities and particularly its strengths and weaknesses. delivery.Which is summarized in its strategy . 1993). procedures. etc. performance . y Analyze the purchasing function ± Including demands (Heinritz 1981) on its services. in (Dobler 1990)which the procurement function works ± including details of the broader organization. or the product or service is to be re-ordered. If the P/S is to be re-ordered. expediting. as they are consumed. The tender notification can from an external notification company or it might be through the e-tendering system of the company (Heinritz 1981). current state of operations. this analysis defines the (cavinato 1992) board aims to be achieved by purchasing . R. y Analyzing the business objective from purchasing perspective :: Analyze the purpose of the business of the business. 2001) detailed picture of the internal features of the procurement function y Analyze the environment. this gives a (S. based on contract terms. company experience with the P/S is reviewed. and price. W 2003) support. the company determines whether to consider othe (Ammer 1997)r suppliers or to continue with the same supplier. the contract expires.  Renewal: When the P/S has been consumed (G.  Disposal and consumption: During this phase. goals . including a set of objectives .4  Negotiating: Negotiations are undertaken. and payment for the P/S are completed. C.

y Supply chain risk management ± supply chain risk management are putting an increasing emphasis on risk management ( waters. six sigma methods. unless its suppliers also provide materials of the perfect quality.5 competitors. .TQM is an approach and management philosophy designed to ensure (Dobler 1990)that products have the highest possible levels of quality (L. Some specific tools of TQM include quality at source. likely future changes and particularly the opportunities and threats. Although not all risk can be predicted. economic conditions. hijacking . diseases . terrorist attack . 1991). This usually means reducing the number of suppliers. this gives detailed picture of the external environment in which procurement works y Design supply strategy ± to identity he best (cavinato 1992)future state of procurement and design policies for moving from its present state to this desired future one. 1993). W 2003) . y Total quality management of suppliers . 1993)The implication is that those suppliers that cannot meet new demands for ³world class performance ³are been eliminated from the supply base (cavinato 1992).2007 ) (Ammer 1997) (Crosby 1979) (Heinritz 1981) . Several strategies (cavinato 1992)might move the function forward and managers have to compare the alternative and choose the best. VI. R. fires . R. statistical process control. many sources of potential disruption to supply chains can be managed better. Different types of Purchasing and Procurement Strategy : Types of Purchasing Strategy ± y Supply base optimization . A key element of TQM is that a company cannot make perfect quality products itself. quality audits and a broad range of others (P. C.accidents and economic downturns (cavinato 1992) . (L.Supply base optimization (cavinato 1992) is the process of determining the best number and mix of suppliers. perhaps encouraged by a series of disruptive events such as hurricanes . So TQM requires suppliers to develop a philosophy of zero defects and continuous improvement (G.

1991) . service and materials. W 2003)assure competitive prices. 1999)contractors through ICB or (L. y Earlier supplier design development -. M 2002) allows an exchange of technology. These relationship rages with preferred suppliers. 1993)other exceptional reasons may justify departure from full ICB procedures. D. few industries have true global sourcing (cavinato 1992)and they generally take a more limited view that includes some international operations (A. W 1990)seek bids from a list of potential suppliers broad enough to (G. In practice. M 2002) appropriate method of procurement where (a) there are only a limited number of suppliers. Under LIB. M 1998).It seeks to maximize the benefits received from using the supplier¶s design capabilities Types of Procurement Strategy: y Limited international bidding: Limited international bidding is essential ICB by (Harland 1999) direct invention without open advertisement.This strategy recognizes that the suppliers have (G. (Q. R. R. None the less more firms are developing strategies that see the world as a single market and source of materials (Mclvor 1997). W 2003)considerable expertise and they can offer more than the basic production of previously specified items (P. satisfies countertrade requirements. 1974) sourcing means that purchasing staff view the whole as a potential source for goods. borrowers shall (D. and establishes a presence in new markets and so on.6 y Global sourcing ± Global (J. (Heinritz 1981) (B) the amount of the contract is not large enough to attract foreign suppliers and (H. It may be (Q. This global view brings immediate benefits in cost and quality. but it also gives products greater exposure. y Longer term supplier relation ± There is a trend towards longer ±term relationships with the suppliers which last over many years (Mclvor 1997). C. such list to . increasing the number of potential sources. through shared information and product development and on to formal partnerships and vertical integration. C.

7 include all suppliers when there are only a limited number. with a minimum of three to assure competitive prices and is an appropriate method for procuring readily available off the shelf goods or standard specification (Q. R. To be acceptable for use in ADBfinanced procurement. 1991) (Edwards 1985) the most appropriate method of procurement where foreign bidders are not expected to be interested because (a) the contract value (Q. y National competitive bidding : National competitive bidding is the (Biomni 2001) (Dobler 1990) competitive bidding procedure normally used for public procurement in the country of the borrower and may be the most appropriate way of procuring goods or works which by their nature or scope are unlikely to attract foreign competition (H. M 2002) comparing price quotations obtained from (D. (H. W 1990) several suppliers or from several contractors. these procedures shall be reviewed and modified as necessary to assure economy efficiency transparency and broad consistency with the provisions included in section I of these guidelines. y Shopping : Shopping is a procurement method based on (Q. y Force account : Force account that is (Edwards 1985)construction by the use of the borrower¶s own personnel and equipment may be the only practical method for constructing some kinds of works. M 2002) commodities of small value or simple civil works of small value. works are scattered geographically or spread over time. NCB may b (P.NCB procedures may also be used (Harland 1999)where the advantages of ICB are clearly outweighed by the administrative or financial burden involved. D. 1999). works are labor intensive or the goods or works are available locally at process (Harland 1999) below the international market. 1998) (Edwards 1985)The use of force account may be justified where: . Domestic preferences are not applicable in the evaluation of (Carr 2000)bids under LIB. M 2002) (Heinritz 1981)s are small.

W 1990) involving reconstruction repairs and new construction in emergency situations or where large numbers of small contractors are involved. Purchasing typically is (G. 2001) primarily in the fields of education and health and specialized (S.  Work is required to be carried out without disrupting ongoing operations (J.  There are emergencies needing prompt attention (S. review procedures and documentation (J. The agent shall follow all the procurement procedures provided for in the financing agreement and the guidelines including use of ADB. W 2003) necessary organization resources and experience borrowers may wish to employ as their agent a (D. VII. W 2003) concerned with the flow of . C. 1998). 1974). M 2002). 1974). 2001).quantities of work involved (Heinritz 1981) cannot be defined in advance. (S. Where borrowers lack the (G. This also applies in cases where UN agencies act as procurement agents. 2001)products where the number of suppliers is limited such as vacancies or drugs. SBDS. 1998) (Harland 1999) pursuant to their own procedures may be the most appropriate way of procuring: Small quantities of off-the shelf goods. Role of purchasing and procurement Purchasing Role: Action # 1: Improve SCM information flow (cavinato 1992). W 1990) (J.  Risks of unavoidable work interruption are better borne by the borrower than by a contractor (Q.8  . 1974)firm specializing in handling procurement. Management contractors may be employed in a similar manner for a fee to contract for miscellaneous works (D. y Procurement from specialized agencies: There may be situations in which procurement directly from specialized agencies acting as suppliers (H. D. C. A key to improve the management of products in the supply chain is working with timely and accurate information. D.  Works are small and scattered or in remote locations for which qualified construction firms are unlikely to bid at reasonable prices (H.

M 2002) Electronic data interchange is a tool that allows current information to be passed quickly up the chain. 1993). There are two areas that purchasing and supply can take lead roles to improve the information flow: y Expand EDI links with supplier. The challenge is to expand the information flow throughout the supply chain. W 1990). Purchasing play a key role in reducing supplier lead times that are a part of the SCM cycle times (L. Action # 2: Make supplier arrangements to reduce assets. (Mclvor 1997) Once the supply chain is analyzed it is usually found that there are duplicate assets at different level in the supply chain.9 information from the customer to the supplier (D. There have been many supplier arrangements that have been established to reduce inventory including: y y y y Just in time Consignment supplier stocking Supplier managed inventory Quick response Action # 3: Reduce cycle times. 1991) The goal of SCM is to identify duplicate inventory and reduce it by reducing cycle times and improving the flow of information. The followings are three key steps purchasing can take to reduce supplier lead times: . R. y Supplier personnel in the chain. (Q. W 1990)cycle time the more responsive the supply chain will be and the less backup inventory that needs to be carried. R. 1993). R. D. The shorter the (D. (Mclvor 1997)Another way purchasing can help improve communication in the supply chain is to locate supplier personnel at different level in your supply chain. without jeopardizing customer service (L. D. 1999) The challenge for purchasing is to work with the supplier to establish new methods to reduce the inventory. from customer to manufacturing to supplier (A. (P. (H. M 1998).

Outsourcing can reduce cycle times. Compare one supplier (cavinato 1992)lead time to others. C. (G. (S. D. M 1998). 2001)Another tactic to improve the supply chain is to (cavinato 1992) outsource non-core functions and services. Challenging the supplier to reduce the waiting time. not just supplier lead times (G. M 2002) Set a goal with each buyer to negotiate lower lead times. This concept holds for each level in the supply chain. plus give you more flexibility in managing changes in demand. 2001): Utilizing distributors Guaranteed volume commitments Investing in new tooling y Action # 4: Outsource non-core functions. Measure how long it takes for: Inbound transportation Transport time to customer Manufacturing lead times Distribution cycle time Negotiate lower lead times. Other option to reduce supplier lead times include (S. 2001)We have out sourced many components and service functions in the past few years: these are the major responsibilities that (cavinato 1992)purchasing has in outsourcing of non-core functions. W 2003)The buyer should challenge supplier lead times. (D. Purchasing needs to find. Ask for a breakdown of the components of supplier lead times. C. y Select and negotiate with suppliers (A. When the lead time components are reviewed it is often found that most of the lead time is ³waiting time ³and little (cavinato 1992) of the lead time is actual ³processing´ time.10 y Track and measure supplier lead times. (Crosby 1979) Most buyers are more experienced in outsourcing direct material. W 1990)reduce costs. Many of the items we have outsourced have been services such as: . select. (S. W 2003). (Q. establish and manage the relationship with supplier who will perform the outsourced function.

In the past at our company (Heinritz 1981). (Heinritz 1981)There is a tendency to concentrate on reengineering the processes and forgetting the needs of the customer. Assist with budget preparation: . M 1998) The goal of our new project is to establish corporatewide proffered suppliers for each commodity that will reduce cost throughout the entire supply chain. Some measurements we have used include: y y y y Backorders Lost sales Fill levels Late shipments Action # 6: Select a supplier based on supply chain capability (Heinritz 1981). we have had purchasing and engineering at each plant selecting suppliers focusing on low quotations and supplier reduction. Purchasing should take the lead in establishing a sourcing strategy project for each purchased commodity. (A. Procurement role: 1. We need to refocus our organization on the customer. (Heinritz 1981)Purchasing should ask each day: how can we get the product to customer on time? How can we reduce transport time? How can we improve communications with our customers? Establish objectives for the supply chain targeted on serving the customer better.11 - Transportation services Warehousing Incoming inspection Mailroom Security Action # 5: improve customer service (Harland 1999).

Verify a supplier¶s quality (cavinato 1992) control systems: a. (S. This will result in a pre-bid advantage. changes in technology. for example. make sure that notifications of changes are presented to all bidders at the same time. changes in industry standards. R.12 a. make reference to those specifications (Ammer 1997). b. Keep internal customers updated on (H. M 2002) determine production costs to produce the targeted number of finished units. 4. Investigate the supplier¶s (Edwards 1985)work flow or capacity. M 1998) mergers/acquisitions. 1999)any outside conditions that would affect their process. 1974)quote preparation: a. of course. 5. Help the internal customers pinpoint the strengths and weakness of each returned quote through the issuance (D. Analyze the condition (Mclvor 1997)of the supplier¶s capacity. Find out who is supplying (Mclvor 1997) the first tier supplier. thus. . Gather information: a. 1993). Offer advice and assistance with (J. changes in labor contracts. D. b. R. Providing all the selected (cavinato 1992) bidders with a level playing field. and. The budget committee may require may require anticipated standard costs for materials in order to (Q. Assure that the quotes being generated (Heinritz 1981)by internal customers properly defined the needed specification and. c. b. R. 1993) resulting from supplier plant shutdowns. An internal customer (Mclvor 1997) may be given the objective to increase throughput by ³x´ percent. 3. Secure the supplier¶s quality mission statement and quality manual. W 1990) of standard quotes. and changes (L. changes that arise due to natural disasters. 2. Also. changes in suppliers personnel. Formulate or join the supplier audit team to: a. One area that requires special attention is that of preventing end user departments from accepting pre-bid (cavinato 1992)technical assistance from a single supplier (L. require from purchasing and supply a commodity¶s price history and forecast. 2001) changes in the applicable law. changes that come about due to (A. b.

and lower usages of products or materials. services. W 2003). Determine the degree of computer automation and (Carr 2000)technology. R. C. 8. b. 1998) or commodity contracts will be up for renegotiation or new bids. or (Heinritz 1981) commodities that are under development and require supplier participation in the early product development stage. e. Communicate to internal customers that the most effective way to take advantage of the . d. Observe how the supplier¶s workforce (Biomni 2001)operates equipment. Involvement with cost reduction and cost avoidance: a. Dates which these products. Publish lead-times for every incoming (Crosby 1979) product used by internal customers: a. (G. service or commodities (Harland 1999) which are secured under present agreements. Determine the (Ammer 1997) morale and appearance of the supplier¶s workforce. lower production costs. (H. due diligence teams. Define how lead-times are calculated. New products. which should result in requisitions being prepared (Edwards 1985) on time. Standardization is affectionately called ³variety control. 7. (Dobler 1990) Typically they will begin with purchase order creation and end with delivery. Standardization of incoming products (Mclvor 1997) and services can lead to lower material cost. W 2003) The closer the internal customer moves towards taking full ownership (cavinato 1992) of the products. These lists can be communicated via (Heinritz 1981) internet. 1993) department to the point where corporate policy mandates that purchasing is to be included on new product developments teams.13 c. and value analyze projects (G. 6. Promote purchasing and supply as a crucial (L. newsletters. b. W 2003)capital projects. Products. C. lower future pricing. or period reports. c. Publish list that identifies the following items: a.´ (G. the less purchasing and supply might be involved directly with the transactions. C. services.

talents. . but it can result in purchasing and supply identifying cost saving opportunities based on its (S. (L. 2001)expertise with a given market or supplier. and experience is by early involvement. (cavinato 1992) Not only will this help facilitate alignment between internal customers¶ (Heinritz 1981) needs and suppliers¶ abilities. M 1998) skills. 1993) Purchasing and supply should be brought into picture during the recognition and description stage of required materials and services to contact suppliers. R.14 purchasing department¶s (A.

15 VIII. . Purchasing is commonly used as a commercial term (Harland 1999) . Procurement is commonly used as a logistics term (Harland 1999). setting up the process for buying/selling. However procurement is generally referred as whole process which includes purchasing. But in many cases it seem have different boundaries or meaning. Conclusion: The terms "purchasing" and "procurement" (cavinato 1992) can be used as the same meaning. In short one may say purchasing is subset of procurement. logistics .transportation and warehousing management. they both mean sourcing or buying raw materials or products. Well.

The network approarch in analysing international marketing and purchasing option. S. R.S.& Dobler D.K. Hemel hempstead: Prentice Hall. S. 1998. Leong . and Sheu. P.16 References Ammer. New York: Mc Graw Hill. 1997: 145-165.its growth and organisation . 1985. E-procurement . 1998. "New trends in internet commerce . C.. "Developing the concept of supply strategy. "Purchasing : Principle and applications .F. Heinritz." International Journal of operations and production management. Croom. 1979.. Humpherys. Tikkanen. New York : Mc Graw Hill. 2001. Purchasing and material Mnanagement . M.S.biomni." Englewood Cliffs. J. "Purchasing in small firms. M.& Townsend . D. London : Prentice hall. Business enterprise ." Strategic Change . . 2011). H. "Profit goes to the swift and lithe. R. 2001: 450-470.. Europe. "A study of purchaing pratices In taiwan ." Management today. 1990. & Cousins . "A total cost / value model for supply chian cometitiveness. Purchasing and supply management." Journal of business logistics . 2000: 1200-1350. 1981: Prentice hall. New York : Mc Graw Hill." European Journal of purchasing and supply chian management. Lee. "The evealution of purchasing . www." International Journal of operations and Production management. Heller. Purchasing and metrial management.. P. Juran.L . London: Macmillan. . Harland. Lamming . . Biomni. Atla. Crosby. L. 1999: 550-670. Dobler. 1997. J . Irmin : Homewood ." Journal of internet Purchasing . 1993. London: Mc Graw Hill.com (accessed April 05. A. G. "Restructuring supply chains through onformation channel innovatiion . Material Management and Purchasing . Quality is free.W. 2002: 150-157. Beyond Partnership : Strategies for innovation and lean supply . Carr. & Farrell. Bailey. 1992: 100-160. Quayle.. R.P. cavinato. Mclvor. 1974. Lamming. ." International Journal of operation and production management . 1999: 32-40. Quality Control handbook . 1997. 1991. R. D. Edwards. .. H.

17 W. New York : Mc Graw Hill. Dobler D. W. Purchasing and material management text and cases. Gowen C and Tallon. 2003: 32-44." Journal of management . 1990. . "Enhancing supply chain pratices through Human resource management .