CHAPTER 1

PURCHASING PROCESS

Compile: Đinh Bá Hùng Anh PhD

Tel: 0347.077.055/090.9192.766
Mail: anhdbh@gmail.com
Purchasing process
Determine requirements

Find supply

Transmit information and support documents

The task of necessary for supply
purchasing

Price negotiation

Confirm delivery time and cost

Following order status, resolve and reveive

goods, incorrect invoices, and return issues.
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Purchasing process
Purchasing skills

• Media &
• Understanding
Commmunica
the product,
tion
the market

• Negotiation • Relations
with partners
(customers,
suppliers)

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Purchasing process
Begin
Step 1

A. Purchase request amount

Determine requirement B. Current inventory level
C. Delivery and receipt requirements
step 2
... ...
Step 6 ...
...

End
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Purchasing process
Define requirements
Begin
Step 1

Determine requirements (quantity, quanlity)

Step 2

Inventory
Step 3

Actual Requirements

End

Actual Requirements = Order quantity – Inventory amount CH1-4

 Purchasing process
The purchasing process starts when the material user initiates a request for material by
issuing a material requisition (MR) in duplicate. A purchase requisition, instead of a
material requisition, is used in some firms.

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 Purchasing process
The Request for Quotation and the Request for Proposal

• If the material is not available in the warehouse, the MR is routed to the

purchasing department. If there is no current supplier for the item, the
buyer must identify a pool of qualified suppliers and issue a request for
quotation (RFQ).
• A request for proposal (RFP) may be issued instead for a complicated and
An component
highly technical RFP allowspart,
suppliers to propose
especially new material
if the complete and
specification of
technology, thus enabling the firm to exploit the technology
the part is unknown.
and expertise of suppliers.
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 Purchasing process
The Request for Quotation Process

While requests for quotes come in all shapes and sizes, the RFQ process generally
follow six key steps.
Selection and feedback

Define the Send out Receive Select the Advice

Document preparation supplier list RFQ responses supplier unsuccessful
suppliers

Document prep

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 Purchasing process
….

...
Step 2

A. Get a quote from the suppiler (already cooperate)

B. Submit request (proposed price matches quote)
C. SAL (same as last)
Determine supple
D. Find potential suppliers, request quotes
E. Evaluate supply options
F. Negotiate price, quality and delivery terms with selected supplier.

Step 3

...
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Purchasing process
KPI

2. On-time
1. Quantity 3. Unit price
delivery

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Purchasing process
KPI

On-time delivery Unit price

1. Quantity

• Quanlity of goods according to specific conditions.

• Reputation: base on past data
• Quantity: Number of goods received with exact quantity/Total
number of deliveries received.
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Purchasing process
KPI

1. Quantity 2. On-time 3. Unit price

delivery

• Demonstrates supply capabilities

• Calculated by diving the number of on-time deliveries by the total
number of deliveries row
For example: Supplier “A” has a total of 50 deliveries with 45 on-
time deliveries, then supplier “A” has an on-time delivery
performance of (450/500 = 0.90 or 90%).
• Exceptions
- Change orders.
- Environment changes.
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Purchasing process
KPI

1. Quantity 2. On-time delivery 3. Unit price

è Major component of total purchase cost

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Purchasing process

Storage Records (If any)

Internet, information centers

Collect
information From investigations
supply

Meet and interview

Expert opinion
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 Supplier evaluation
Supplier evaluation is the process organizations use when choosing vendors
and suppliers for their products or materials.
Price: Monitoring prices frequently helps identify changes in market demands or
availability.
Quality: Product quality provides a qualitative measurement of how durable or
effective a supplier's product is.
Service: friendliness, responsiveness and an overall understanding of the company's
needs.
Social responsibility: supplier's community involvement and contributions to
charities.
Flexibility: supplier's ability to scale deliveries up and down based on business needs.

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 Types of supplier evaluations
Scorecards: numerical rating system for each evaluation criterion.

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 Types of supplier evaluations
Questionnaires: provide questions to suppliers to explain their processes.

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 Types of supplier evaluations
Vendor visits: learn more about the company and its production methods.

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 How to evaluate a supplier
1. Define your metrics: the number of on-time deliveries, average price or
number of product defects received.
2. Identify potential vendors: Once you collect metrics, you can list the
different types of vendors your employer might need. These include
delivery, manufacturers, office supply providers or raw material
suppliers.
3. Create an evaluation process: Consider which team members can offer
input to rate each criterion. determine the most effective method to assess
vendors.
4. Communicate with vendors: establish monthly or quarterly meetings
with vendors to evaluate their performance.

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 Purchasing process
Distributor Integration (DI)
Cooperate with distributors to share information on demand
and inventory levels.
1. Inventory Control & Service Level
• Control inventory in the chain
• Each distributor knows the inventory levels of the remaining
distributors.
• Inventory is low but still ensures service levels.
2. Transfer specialized needs to the appropriate distributor

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Purchasing process
Characteristics
§ Suspicious
§ Uneven distribution
F Distribution according to ability and geography
F No specific distributor assigned.

Request
§ Need commitment of resources and capacity from Supply
§ Need an alliance, long-term cooperation
§ Mutual trust between partners.

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 CPFR – Collaborative planning, forecasting & replenishment
v Synchronization between two or more businesses in the chain to form a
unified forecast plan.
v Information exchange: past sales data, current order data, inventory levels,
marketing plans, forecast plans.
1. Collaboration: Coordinate overall planning for the entire chain when needs
arise.
2. Forecasting: Based on the needs of each department and the entire system
à adjusted for more accuracy.
3. Replenishment: when needing to order additional goods for the amount of
goods consumed, it is necessary to reassess the demand and level of
consumptionà can use two-bin policy.

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Purchasing process
CPFR – Collaborative planning, forecasting & replenishment

Federated
Department Stores

CORNING
FIELDCREST CANNON
Consumer Products
JCPenney Staples
Mead Schnuck
School & Office
Markets

Benchmarking
Partners
QRS CH1-22
CPFR – Collaborative planning, forecasting & replenishment
PROCESS
Step 1: Collaborative planning: Strategy, tactics, tasks, measurement..

Step 2: Forecast general needs

Step 3: Determine needs for specialized items

Step 4: Resolve/cooperate for specialized cases.

Step 5: Forecast orders

Step 6: Forecast orders for specialized items

Step 7: Resolve/cooperate for each specialized item.

Step 8: Place orders.

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 Purchasing process
...
...
Step 3

Order Send a copy of order

Step 4

Fullfill orders (invoices, bill of

lading)
Step 5

...
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...
Purchasing process
...

...
Step 5

Receive goods - Receive and process

(at warehouse or place where the goods and invoices
product is manufactured)
- Acceptance
Step 6

Resolve arising problems and liquidate - Liquidation

contracts

End
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 Exercise
1. Work in pairs/in groups to discuss about the
purchasing process of Vinfast.
2. Independently analyze the purchasing
process of Vinfast .

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 Answer
1.Identify Requirements: Understand the production requirements and identify the materials,
components, and services needed for manufacturing automotive products.
2.Supplier Identification and Evaluation:
• Identify potential suppliers through research, industry contacts, and evaluations.
• Evaluate potential suppliers based on factors such as quality, reliability, capacity, pricing,
and compliance with regulations.
3.Request for Information: gather information about their capabilities, capacity, financial
stability, and other relevant details.
4.Supplier Selection: select the most suitable ones based on criteria such as cost, quality,
delivery time, and compliance.
5.Negotiation: Negotiate terms and conditions, including pricing, delivery schedules, payment
terms, and other relevant contract details.
6.Contract Award: Award contracts to selected suppliers after negotiations are completed
successfully.
7.Quality Assurance and Inspection: ensure the materials and components received from suppliers
meet the required standards and specifications
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