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T H I R D B U I L D I N G B L O C K O F S U P P LY C H A I N
MANAGEMENT
WHAT IS PROCUREMENT?
Procurement or buying is an act of purchasing.
Procurement includes:
Purchasing raw materials and packaging
Contracting out utilities and maintenance
Hiring contract or casual labour
Selecting approved or dedicated suppliers
Outsourcing
Use of professional services
PROCUREMENT VS PURCHASING
Procurement Purchasing
- deals with sourcing
activities, negotiation and
strategic selection of
goods and services that
are usually the importance
of organization, while
purchasing is the process
of how goods and services
are ordered.
- a key activity in
determining the
competitive advantage of
an organization.
Porter,1985
Possible
suppliers
will be
identified
Seek
quotation
s
Quotation
s
Negotiatio
ns
entered
into
On-going
re-orders
Ordering
A. VALUES
Honesty/Integrity
Professionalism
Responsible Management
Serving the Public Interest
Conformity to the Laws in terms of:
The laws of the country in which they practice
The Institutes or Corporations Rules and
Regulations
Contractual obligations
RULES OF CONDUCT
Declaration of Interest
Confidentiality and Accuracy of
Information
Competition
Business Gifts and Hospitality
Discrimination and Harassment
Environmental Issues
FRAUD
Intent
Fraudconsists of
activities undertaken by
an individual or company
that are done in
a dishonest or
illegal manner,
Capability
and are designed
to give an to the
advantage
perpetrating
individual or
company.
Opportuni
ty
ENVIRONMENTAL PURCHASING
Environmental purchasing is a most important
step in the war against global warning and
pollution.
Organizations need to be aware of
environmental issues and to make their
concerns and needs known to their suppliers.
SOURCING
In business, the term wordsourcingrefers to a
number ofprocurementpractices, aimed at finding,
evaluating and engaging suppliers for acquiring
goods and services.
Sourcing includes materials and labor, and also
includes the basic decision of whether to make or
buy.
Sourcing and a search for low labor costs give way to
the beginning of globalization of manufacturing.
SOURCING STRATEGIES
Improved logistics and electronic
communication systems are
assisting the implementation of
sourcing strategies.
Corporate
Strategy
Innovatio
n
Programm
es
Sourci
ng
Strate
gy
Marketing
Strategy
SOURCING STRATEGIES:
MANUFACTURING SECTOR
Project
brief
evaluation
SOURCING STRATEGIES:
SERVICE SECTOR
Outsourcing
In sourcing
Off shoring
OUTSOURCING
Outsourcing is the collaboration with a
partner to manage a part of your business.
Distinct categories of outsourcing in the
service sector:
1.IT outsourcing
2.Business process outsourcing
3.Managed services
RATIONALE OF OUTSOURCING
Advantage of outsourcing:
1. Cash flow
2. Flexibility
3. Key management resources
Dedicated
third
party
Own
manufact
ure
Flexible
third
party
In-source
Volum
e
Low
Low
Hig
Core Strength/Patent
h
Life
OFF-SHORING
Off-shoring is a form of outsourced managed services
where skilled labor is cheaper.
Cost savings are the primary benefits.
Other benefits include time zone differences enabling 24
hour services and access to more wiling well-qualified
workers to tackle boring jobs.
Risks of off-shoring:
1. Services going down
2. Data and physical are in potential danger.
3. Excessive foreign travel
IN-SOURCING
In-sourcing means centralizing multiple,
distributed operations into a semi-autonomous
unit.
Advantages of in-sourcing:
1. The business maintains strategic control
2. It avoids third-party margins
3. It is reversible.
E-PROCUREMENT
Various e-procurement models:
1. EDI networks: Providing communication between a
few trading partners(buyers and sellers)
2. B2E: Allowing transfer of information within an
organization between departments and employees
3. B2B: A website sometimes where business meet to
buy and sell
4. B2C: An e-mail address or web page that allows
customers to buy on line