Procurement Planning in

Logistics Management
Prepared by: Jethro Ponce
Course Outline
• Define Procurement
• Differentiate Procurement vs Purchasing A.
• Introduction Introduction
• Procurement Objectives
Continuous Supply to
Minimize Inventory Investment
Quality Improvement Procurement.
Supplier Development
Lowest Total Cost of Ownership Planning

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“Procureme
nt”
Definition:

/prəˈkyo͝ormənt/
• the action of obtaining or procuring something.
• is a purchasing process that controls quantity,
quality, sourcing and timing to ensure the best
possible total cost of ownership.

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Procurement
• Procurement is the full range of activities related to purchasing goods,
services and works
• Procurement can range from contracting for an entire service to
purchasing small assets such as office equipment
• The procurement process does not end at the commissioning or contract
award stage, but spans the entire life cycle of the product or service from
inception and design through to contract management and disposal of
any redundant assets or the end of the useful life of an asset.
• It involves options, appraisal and the critical 'make or buy' decision.‘
• Procurement differs from purchasing in that purchasing merely reflects
the act of acquisition, while procurement encompasses more elements of
the supply chain ( logistics, transportation etc.).

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Comparison
Procurement
• Acquisition of goods and services at the best possible
total cost of ownership. This is done to meet the
demands of the purchaser taking into account the
factors quantity and quality, and time and location as
well.
• A process of acquisition of property, plant and/or
equipment, goods, works or services through the
purchase, hire, lease, rental or exchange form any
source other than the buying organization.
Purchasing
• Form of buying that consists of getting goods and
services by paying a certain amount of money. The
amount of money or price paid in this case will in
accordance with the quality and quantity of the goods
and services. We ensure that the right thing comes at
the right place at the right time.
• Largely a transactional activity of buying needed
goods and services. This involves placing and
processing purchase orders (Pos) or requisitions.
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INTRODUCTIO
N
.

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Procurement planning is undertaken as part of the
program/service planning process. The primary concept of
procurement is that advanced planning, scheduling and bulk
purchasing result in cost savings, efficient business operation,
and increased value for money. The public sector is expected to
use procurement planning as an opportunity to
evaluate/review the entire procurement process so that sound
judgments and good decision making will facilitate the
success of the overall project implementation in the
procurement of goods, works and services.
The ultimate goal of procurement planning is coordinated
and integrated action to fulfil a need for goods, services or
works in a timely manner and at a reasonable cost. Early and
accurate planning is essential to avoid last minute, emergency
or ill-planned procurement, which is contrary to open,
efficient and effective – and consequently transparent –
procurement. In addition, most potential savings in the
procurement process are achieved by improvements in the
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planning stages. Even in situations where planning is difficult
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Procurement Objective

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 Continuous Supply
Stockouts of raw materials or component parts can shut
down or force a change in production plan, resulting in
unexpected cost. Downtime due to production stoppage
increases operating costs and may result in an ability to
provide finished goods as promised to customers.
.
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MinimizeInventory
Investment

In the past, downtime due to material shortages was minimized by maintaining large
inventories of materials and components to protect against potential disruption in
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supply. However, maintaining inventory is expensive and requires scarce capital
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 Quality Improvement
Procurement is critical to the quality requirements of every
.
organization, The quality finished goods and services is dependent
upon of the materials and components used.
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Successful procurement depends on
locating or developing suppliers,
analyzing their capabilities, and selecting
and working with those suppliers to
achieve continuous improvement.
Developing good supply relationships
with firms that are committed to the
buying organization’s success is critical in
supplier development. It is important to
develop close relationships with those
suppliers in order to share information
and resources to achieve better results.
.

Supplier Development
 Ultimately, the difference in perspective
between a traditional adversarial and more
contemporary collaborative procurement
strategy can be summarized as a focus on
Total Cost of Ownership (TCO) as contrasted
to a focus on purchase price. Procurement
professionals recognize that, although the
purchase price of a material or item remains
important, it is only one part of the total cost
for their organization. Service costs and life
cycle costs must also be considered.
Whether established through competitive
bidding, buyer-seller negotiation, or simply
from a seller’s published price schedule, the
purchase price and discounts of an item are
obviously a concern in procurement. No one
wants to pay a higher price that necessary.
Lowest Total Cost Of Ownership
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