Supply Chain Management

Chapter 1: The scope and influence of

procurement
Dr. Pramod Matolia
 Introduction
CIPS Australia motivated a debate on an agreed procurement
lexicon. The following statements were proposed:

• Procurement is the business management function that ensures

identification, sourcing, access and management of the external
resources that an organization needs or may need to fulfil its
strategic objectives.
• Procurement is a pro-active, strategic corporate activity to
ensure a continuing supply of goods and services to enable
world-class organizational performance.
Strategic roles of procurement
1. Due diligence
2. Risk Management of the supply chain
3. Relationship management
4. Continuous improvement of supplier performance
5. The supplier’s investment in ‘right first time’ (Quality)
6. The supplier’s investment in inventory
7. The supplier’s investment in procurement expertise
Procurement and change
There are a number of drivers influencing and demanding changes in procurement, including those
detailed in the following sections.
1. The challenge to manage escalating costs in purchasing
goods and services.
2. The public sector focus on driving out inefficiencies in
public expenditure
3. The increasing trend to outsource manufacture and services
4. The recognition that procurement is a significant contributor
to corporate efficiency
5. The positive impact of global sourcing
6. The enhanced use of information technology and e-procurement
7. The redressing of procurement power
8. The challenge to outdated traditional practices
World-class procurement
• Schonberger defined world-class manufacturing as analogous to the
Olympic motto ‘citius, altius, fortius’ (translated as faster, higher, stronger).
• Twelve characteristics of world-class supplier management were identified
by the Center for Advanced Procurement Studies,12 namely the following:
1. Commitment to total quality management (TQM).
2. Commitment to just-in-time (JIT).
3. Commitment to total cycle time reduction.
4. Long-range strategic plans
5. Supplier relationships,
World-class procurement
• Twelve characteristics of world-class supplier management were identified
by the Center for Advanced Procurement Studies,12 namely the following:
6. Strategic cost management
7. Performance measurements
8. Training and professional development,
9. Service excellence
10. Corporate social responsibility,
11. Learning
12. Management and leadership
The status of procurement and supply management (PSM)

• Within a particular organization the status of PSM is influenced by

leverage, focus and professionalism.
1. Leverage:
The greatest scope for savings lies in the areas of greatest expenditure. For
many organizations these areas are labor and materials. Labor is usually
outside the scope of procurement unless outsourcing activities and agency
staff are being considered.
The status of procurement and supply management (PSM)

1. Leverage:
The status of procurement and supply management (PSM)

2. Focus
Syson states that the position of procurement within a particular
organization depends on whether the focus of the function is
transactional, commercial or strategic.
The status of procurement and supply management (PSM)
3. Professionalism:

Professionalism is traditionally associated with certain attributes, including:

■ skill based on theoretical knowledge

■ prolonged training and education
■ demonstration of competence by means of tests and examinations
■ adherence to a code of professional ethics.
The status of procurement and supply management (PSM)

3. Professionalism
 References:

• Procurement and Supply Chain Management by KENNETH LYSONS and

BRIAN FARRINGTON. Chapter 1 The scope and influence of procurement
page no.3 -26.
Thank You