DECENTRALIZATION OF PROCUREMENT OF GOODS AND SERVICES

Any Organization if it is in large or small scale should ensure that their limited funds are utilized in
efficient and effective manner. Organizations have to spend a considerable amount of funds for
purchase of material and services required for maintenance and repairs of the Company. More goods in
shelfs means shortage of working capital for other expenses such as payment of salaries to the workers,
utility bills etc. If the procurement process is well streamlined, Companies can save their working capital
and make profits. Therefore, procurement process has been identified as a very important and crucial
function in any Organization.

Main steps of Procurement process.

1. Identify the requirements

2. Obtain quotations
3. Evaluation and selection
4. Ordering
5. Chasing the orders
6. Ensure delivery of goods to stores on time
7. Ensure supplier is paid by Finance Department

To ensure the efficiency of the procurement process generally the job is assigned to a competent officer
who could handle it independently. However, the Procurement officer has to always work with stores,
maintenance departments and finance department closely.

Procurement officer has to plan the future purchases, identify the list of items with quantities with the
assistance of users or based on past consumption data obtained from stores officers (through systems).
Then he can submit his procurement plan with time line to Finance officer to allocate funds. This is call
purchasing budget and it is very important for finance officer to manage Company funds in effective
manner for the benefit of the Organization.

Also, if the material demands are exceeded the budgeted amounts, Finance officer can always raise
questions. Sometimes budgets can be exceeded owing to price increases or high material requirement
for unexpected maintenance jobs. However, Finance can use this budget as a tool of controlling funds of
the company.

As procurement officer himself is responsible for uninterrupted supply of goods for the company
requirements he tends to keep a track on stock positions via Store keeper. Stock in hand should be
taken into account when deciding the quantity to be ordered. Order quantity should be the right qty to
replenish the stock to maintain them at optimum levels (most favourable level). An Experienced Store
keeper knows with his experience that what to order, when to order and how much to order. For which
he should maintain accurate up to date records.

Store keeper has to play an important role in procurement process. He is the initiator of ordering of
goods. For which SK has to maintain stock levels at least for fast moving items.

a. Minimum level- stock in hand should not go beyond this level

 b. Reorder level- when the stock in hand reaches this level next material request should be raised
by SK and send to Procurement officer to start procurement process.
c. Maximum level- quantity in hand should not exceed this level.

Lead time = the time between raising of material request by SK and raising of good receipt note
by SK. At this time goods are ready to issue.

Store keeper is aware of which items are moved fast and which are moved slowly. Demand for
some items is seasonal. I.e.; SK should know which items are specially required during Perahera
season. Also demand of which items will be increased during Perahera season etc. So, SK has to
raise requests for such items well in advance for enable procurement officer to procure them by
calling quotations and make available the items before the perahera season starts.

If special decisions are taken by the management to start new projects such as refurbishment of
Main Hall, the material list should be prepared by engineer/Forman and send to Purchasing
officer through SK, leaving sufficient time for procurement process.

While purchasing is handled by purchasing officer the accountant can focus on finance matters.
He can concentrate on investing excess funds in banks which give high rates for fix deposits,
timely payment of salaries to workers and motivate them, could get a discount by timely
payment of assessment tax to local authorities, enhance Company / supplier relationship by
prompt payment of supplier’s bills etc. so, Finance officer can bring profits to the organization.
So, he could expedite his duties more efficiently.

Finance officer also can involve during the procurement process in order to make sure the transactions
are done in acceptable manner, as follows.

1. At the time of quotation evaluation, to ensure items are purchased from the lowest acceptable
supplier. Lowest acceptable supplier=the supplier who quoted lowest price for the item with
required specifications)
2. Paying the suppliers for their delivered goods after making sure the goods are taken into stock
by the store keeper
3. Checking the inventory at the yearend or as decided by the Management

Decentralizing of procurement/stores and Finance will provide rooms to cross check each and every
transaction of the whole procurement process making sure the company funds are utilized efficiently.
Also, transparency could be maintained.

Accordingly, each officer will be able to concentrate on their own subject and perform their jobs very
effectively. End of the day they will specialize their jobs.

Further by decentralizing work, company can ensure fair distribution of duties and responsibilities
among officers. As a result, delay of work will be minimized.

Also, the work perform by each officer will be cross checked automatically.
Business Process Reengineering…

BPR is re designing the work processes to improve the end result.

Benefits.

Reduce processing time. Cut down duplicate work in a process

Improve service level

Reduce cost

Improve employee satisfaction