Engineering Management

(MGT-404)
Assignment # 05

Submitted to:

Engr. Fazeel Ahmed

Submitted by:

Muhammad Usama Saeed

Registration#:

Uw-19-Che-Bsc-016

Due Date:
27th December, 2022

Chemical Engineering Department

Wah Engineering College

University of Wah
Table of Contents
Question 01) What is Procurement and describe the methods of procurement? ___________ 3

Procurement: ________________________________________________________________ 3

Procurement in Chemical Process Industries: ___________________________________________ 3

Procedure for chemical industries for procuring raw materials: _____________________________ 3

Purchasing procedure for MROs: _____________________________________________________ 4

Methods of Procurement: ______________________________________________________ 5

Difference between Direct, Indirect and Services Procurement:_____________________________ 6

References __________________________________________________________________ 6
Question 01) What is Procurement and describe the methods of procurement?

Procurement:
The tactics, systematic processes, and tools used to simplify an organization's procurement process
and accomplish desired goals while saving money, shortening the procurement process, and
developing win-win supplier partnerships are referred to as procurement. Direct, indirect, reactive,
or proactive procurement are all options.

Procurement in Chemical Process Industries:

Chemical procurement is the process of procuring goods and/or ingredients for commercial
reasons. This comprises not just the act of pressing the "purchase" button, but also the prior
thoughts and instruments required to accomplish the transaction.

These methods help you keep track of what chemicals you have on hand and ensure that you take
the necessary safety measures. There are two types of chemical purchase and chemical
procurement procedures:

• Raw material ingredients

• Maintenance repair and operating supplies.
Procedure for chemical industries for procuring raw materials:
All of the goods that chemical businesses either resell or utilise in their manufacture are referred
to as raw materials. Everything is included, from the chemical compounds used in production to
the shrink wrap, labels, and pallets needed to distribute completed items. While each company's
method may change, the following phases should be included in a chemical procurement procedure
for raw materials:
• Determine demand. Buying raw materials depending on the demand for the finished
products that will be made with them.
• Calculate the ingredients needed to fulfill demand. Afterwards, you must decide how
much of a certain raw material is needed to match your predicted demand. This is
performed by multiplying the amount of raw materials necessary to manufacture one unit
of final product by the expected number of sales.
 • Factor in other logistics. One must consider the logistics of delivering raw materials from
the source—the supplier—to their eventual destination, the production plant or laboratory,
in addition to freight charges.

• Leverage your human resources. Your supply chain or procurement manager may be
aware of information that the software does not.
• Maintain just-in-time inventory. Chemical raw ingredients have a limited shelf life; if
the product degrades, you've lost money. This is why most chemical businesses work hard
to maintain,
• Place a PO. Once the manager has decided what to buy, they should always create a
purchase order (PO) that documents everything they are buying, including quantities and
freight costs, and then send an email or a hard copy of the PO to the supplier (s).
• Just-in-time inventory: having just enough raw materials to meet demand without
stockpiling excess inventory.
• Optimize shipping quantities: Transportation and logistics charges may account for a
significant amount of your items' landing cost. That is why it is vital to optimise purchase
and procurement based on full truckload or shipload quantities: A half load is sometimes
twice as expensive as a full load.

Purchasing procedure for MROs:

Maintenance, repair, and operating supplies (MROs) are the products that keep your business
running smoothly, from your warehouse to your manufacturing plant. The process of obtaining
these items is much simpler:
• Set up automatic ordering for inventory items. Components that are vital to everyday
operations can be labelled as inventory, ensuring that they are always available when
needed.
• Create a PO requisition for non-inventory items. A new desk chair, for example, is one
of several materials that will require one-time orders. A competent ERP system can help
you create a PO request, which is required before issuing a formal purchase order.
Methods of Procurement:
Procurement may be classified into numerous types. Depending on how the things being acquired
will be utilised by the organisation, it can be categorised as direct or indirect procurement. It can
also be classed as commodities or services procurement depending on the products being acquired.
1. Direct procurement refers to acquiring everything required to make a finished product.
Raw materials and components for a manufacturing firm are included. It covers any
products acquired from a wholesaler by a retailer for resale to clients.
2. Indirect procurement Acquisition of things required for day-to-day operations but not
immediately contributing to the company's bottom line are common. This might include
anything from office supplies and furnishings to advertising campaigns, consulting
services, and equipment maintenance.
3. Goods procurement It mostly refers to the purchase of actual goods, although it may also
encompass things like software subscriptions. Effective goods buying often necessitates
solid supply chain management practices. Direct and indirect procurement are both
possible.
4. Services procurement focuses on obtaining people-based services. Depending on the
enterprise, this may entail employing individual contractors, contingency labor, law firms,
or on-site security services. Direct and indirect procurement are both possible.

Figure 1 Types of Procurement

Difference between Direct, Indirect and Services Procurement:

Figure 2 Difference between Direct, Indirect and Services Procurement

References

[1] "What Is Procurement? Types, Processes and Tech," Order, 18 April 2019. [Online].
Available: https://www.order.co/blog/procurement/define-procurement/.

[2] A. Jenkins, "What Is Procurement? Types, Processes & Technology," ORACLE NETSUITE,
24 March 2021. [Online]. Available:
https://www.netsuite.com/portal/resource/articles/accounting/procurement.shtml.

[3] "Chemical Purchasing and Procurement: Procedure, Policy & Best Practices," datacor, 27
October 2020. [Online]. Available: https://www.datacor.com/the-datacor-blog/chemical-
procurement-best-practices.