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Procurement by Akhtar Khan
Procurement by Akhtar Khan
PROCUREMENT
by,
AKHTAR KHAN
This is
A logistics and
Supply Chain Management
project based on,
PROCUREMENT
Submitted By,
Akhtar Khan
“Knowledge is the food of the soul.”
-Plato
PROLOGUE
Logisitcs and supply chain management one of the very important aspect of
current management principles which has lately gained more and more
importance. There are varied steps involved in Logistics and supply chain
Management one of them is Procurement. In this project we are focusing on
the procurement aspect of Supply chain management
The process of gathering information and studying the topic was more than
interesting it is undertaken by Akhtar Khan, belonging to T.Y.B.M.S./B.
presented to our Esteemed Prof. Mr. Chougule
I put my best foot forward in-order to make this project a very interesting one.
The systematic flow of information and the comprehensiveness of the topics
are my selling points to demand maximum marks.
Finally a heartfelt gratitude to our Prof. for giving us such an important topic
to study and providing timely guidance whenever I sought it.
-Author
AN OVERVIEW
PROCUREMENT: IN A NUTSHELL
Every organization that purchases goods or services has standard
procurement procedures, the methods they use to acquire those things.
These procedures cover all aspects of the procurement cycle, including the
selection of the supplier, contract negotiations, order placement and
payment. All firms have procurement procedures, and they are used to
control spending activity, ensure appropriate approvals are in place and
reduce the risk of overpayment. Procurement or purchasing activity
encompasses all spending activity, excluding payroll, and often represents
more than 50 percent of all expenditures.
The primary driving force for the development of procurement procedures is
to control all spending. The actual procedures used can vary slightly but will be
similar. An appropriate approval process usually involves a separation of tasks
and the involvement of senior managers for transactions that will cost more
than a specific price. Another standard procurement procedure is to limit
access to the purchase order forms and require signed authorization from a
manager other than the person using the goods. This separation of the goods
recipient and the approval is designed to ensure that a senior staff member is
aware of the order and can confirm that the materials are required and will be
used for the proper purpose.
Another common procurement procedure is to create a short list of pre-
approved vendors for specific commodities. Vendors are added to the list
through a bidding process that is conducted on a scheduled basis. This process
is designed to be transparent and to provide the firm an opportunity to obtain
discounts in price, to meet quality standards and to ensure timeliness of
delivery.
The risks for a company without proper procurement procedures are
overspending and the failure to achieve good value and purchasing fraud.
Many people who do not have any accounting or procurement training resent
the steps involved in a purchasing request. These processes, however, are
designed to save both time and money.
Other common procurement procedures include setting value thresholds
that trigger different procurement activity. For example, purchases that cost
more than a certain amount might require a purchase order to be approved by
two levels of management. A purchase order for a much higher price might
require a proposal to be issued.
CONTENTS
1. Introduction 1
CHAPTER 1
INTRODUCTION
Logistics and supply chain management is a very recent terminology. Earlier
companies did not pay much attention to its logistics management thought it
being a very crucial part in a firm’s success. It was some 20 years ago that the
business organizations and management gurus realized its importance. Since
then logistics has gained a widespread importance in the business world. The
subject is interesting and plays an important part in a firm’s functioning. There
are a wide range of topics in the subject of Logistics management. This study
focuses on one of the most important step i.e. Procurement.
Procurement is nothing but The range of activities associated with the buying
of goods and services to support business operations. When talking about
procurement, planning is the first and most important step in the whole
process. Planning involves selecting missions and objectives and the actions
to achieve them; it requires managers to choose among alternative future
courses of action. Plans thus provide a rational approach to preselected
objectives.
Planning bridges the gap from where we are to where we want to go. It makes
it possible for things to occur which would not otherwise happen. Although
we can never be sure what will happen in the future, and factors beyond our
control may interfere with even the best-laid plans, if we don't plan we are
leaving events to chance. And that is quite risky when talking about business
operations. One wrong step and your business is history.
This study guides you on what Logistics management is, takes u through the
various steps involved in the procurement procedures and updates you about
the recent development in the field of procurement like e-procurement and
outsourcing.
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CHAPTER 2
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
2.1 LOGISTICS
Logistics is a very integral of every business organization. earlier this aspect of
management was sidelined. Business organizations did not payed much
attention towards it. However today it is considered as a very crucial part of a
firm’s smooth functioning. Logistics and supply chain management has made
its way into almost all books of management and business functioning. It
involves various steps, and Procurement is one of them. This project mainly
deals with only that aspect of Logistics management. Before getting into the
details of procurement let us study what Logistics and supply chain
management actually means.
Definitions:
“Logistics is defined as a business planning framework for the management of
material, service, information and capital flows. It includes the increasingly
complex information, communication and control systems required in today's
business environment.”
-Logistix Partners Oy, Helsinki, FI, 1996
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Thus from the above given explanations we get a glimpse of what Logistics
management is. Webster’s definition is very comprehensive whereas the
definition given by The Council of logistics management is complete and
covers everything.
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This seems to be the earliest published definition and therefore places the
concept of Supply Chain Management at approximately 26 years old. We can
see that “Supply Chain” without the “Management” is referenced in the
definition, so we know that the general idea of a supply flow through a
business was recognised prior to Olivers definition. What Oliver really
captured was the conscious and deliberate control, integration, and
management of the business functions contributing to, and affecting that
supply flow through the business, for the purpose of improving performance,
costs, flexibility etc, and for the ultimate benefit of the end customer.
The concept has been defined in simpler terms since that time and is often
captured with five words: Plan, Source, Make, Deliver, Return.
Both of these definitions allude to a manufacturing origin but of course Supply
Chain Management is as relevant to service, retail, distribution, and most
other types of companies as it is to manufacturing.
At the same time companies like SAP and Oracle were developing the complex
IT systems that would be essential for enabling large complex businesses to
effectively integrate and managing the sub areas that combined to make
complex supply chains.
Of course the elements of Supply Chain Management have always existed in
business. What changed was the willingness of businesses to recognise the
inter-relationship of the various sub areas, and to pursue the benefits
generated through coordination and integration, both from a strategy /
planning perspective and operationally.
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Purchasing / Procurement
The commercial part of the supply chain is purchasing. Otherwise known as
Buying or Procurement. This is where a business identifies suppliers to
provide the products and services that it needs to acquire in order to create
and deliver its own service or product. Costs and terms of business are
negotiated and agreed and contracts created.
Thereafter the suppliers performance and future contractual arrangements
will be managed in this area.
This area of the business is sometimes referred to as purchasing, sometimes,
procurement, buying, sourcing, etc. However, all titles relate to the
acquisition of materials and services.
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Logistics
In its strictest definition logistics refers to the movement of goods or
materials, whether inbound, through, or outbound.
In some manufacturing businesses forecasting and planning will be found
within a logistics department, in other businesses logistics will be exclusively
managing the movement and transportation of goods and materials.
Operations
Operations is a general management type activity ensuring that a business
uses its resources effectively to meet its customer commitments. Usually
referring to the conversion activity of the business, i.e. the point where the
acquired resources and/or materials are converted into the product or service
that the business is selling on to its customers.
Inventory Management
Sometimes found within Logistics Management, or Demand Planning or
Operations, Inventory Management typically takes responsibility for both the
replenishment of physical stock, the levels of physical stock, and of course
storage and issue of physical stock. Stock may be materials and goods sourced
from suppliers, work in progress, or finished goods awaiting sale/dispatch.
Transport
Transport management can involve the control of a company owned fleet of
vehicles, collecting, moving, or delivering materials and goods, or managing
transport services sourced from a 3rd party transport provider.
Warehousing
Like transport management, warehousing can involve the control of company
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Distribution
Distribution involves the physical distribution of the company's products to
the sub-distributor or directly to the customer base. Typically this is a
combined transport and warehousing operation, responsible for storing and
delivering products to meet the customers needs. Again this combined
activity will often be placed with a 3rd party service provider who will control
and implement the processes.
Customer Service
Most people do not recognise customer service as part of supply chain
management, but it is in fact the final piece in the jigsaw. Having taken the
business inputs, created and delivered a product or service, the final element
is to check that the customers expectations were achieved, and manage any
actions necessary to meet your customer obligations and commitments.
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CHAPTER 3
PROCUREMENT
As we have studied in the earlier chapter Procurement is one of the stages
involved in the Logistics and supply chain management. It is the commercial
part of the supply chain is purchasing. Otherwise known as Buying or
Procurement. The purchase is the main activity in the area of Materials
management. It is defined as the single largest function in any organization.
this is the place where money is spent out of the organization.
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Definitions:
“Acquisition of goods (materials, parts, supplies, equipment) required to carry
on an enterprise. Procurement expenses can be a major cost of doing
business.”
-The Business dictionary
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The budgets for all the departments are then reviewed, and in an organization
that is committed to procurement planning, the accountants spend the time
to find common purchasing requirements. Based on the budgets submitted,
they may direct departments to work with central purchasing to combine
their planned spending for specific commodities. This process works best in
an organization that is committed to reducing costs. Issues surrounding
delivery dates, contract compliance, and customer service issues must be
resolved internally before going out to contract.
Group buying is the process of combining the total resource requirements for
different departments and creating one purchase order. The departments can
be physically located in a range of buildings, with the delivery dates,
quantities, and conditions listed in the purchase order. This practice is
increasingly common in government and public sector firms, where the same
item can be purchased for a range of different institutions.
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In like manner, the circumstances and financial goals of the business or entity
influence the selection of procurement systems. Some systems are simple
manual processes that make use of older methods such as a flip card system to
track purchases, issuance of items to various departments, and a running tally
of inventory that is used to plan future purchases. Today, electronic systems
make it possible to automatically track all these functions, include
automatically generating requisitions and purchase orders when levels of a
given inventory item are down to a certain level.
clearly defining how purchases will be made. As the needs of the entity
change, there is a good chance that the procurement policy will be adjusted to
meet those new circumstances. This is necessary to make sure the policy
continues to function in the best interests of the company or non-profit
organization and keep the acquisition process simple and orderly.
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CHAPTER 4
E- PROCUREMENT
Eprocurement is the term used to describe electronic methods of conducting
business transactions. The 'e' in eprocurement stands for electronic.
Eprocurement can be used in every stage of the process. It can begin with the
actual sale coming through to the purchaser and end with the customer's
invoice and payment.
With the advent of the Internet, many businesses now sell only via computer
technology. It is an excellent way for businesses to cut overhead costs and
reach a larger customer base. Eprocurement is not only beneficial for
businesses; customers can also find this method of purchasing
advantageous. They have a wider choice of merchandise and can shop
without leaving their home. With a little web research, they can easily find
the lowest price when purchasing goods.
Definitions:
“Purchasing process over Internet: the performing of all steps for
procurement over the Internet, including ordering, payment, and delivery”
-encarta dictionary
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This type of buying and selling reaches the widest possible marketplace. Many
people run businesses from web sites like these. There are little or no
overhead costs, but you may need to purchase software applications such as
epayment. Epayment is a software tool which deals with electronic invoicing
and self-billing. Such software is relatively cheap, and once it is in place the
billing procedure takes care of itself.
Eprocurement does not just deal with sales and purchasing. With today's
Internet capabilities, it has never been easier, or cheaper, for businesses to
market and advertise their products. Instead of costly and time consuming
mail shots, a single email can be sent to many customers at a fraction of the
price. Even business conferences with staff based all over the world can take
place electronically.
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4.2 TYPES
There are seven main types of e-procurement:
1) Web-based ERP (Enterprise Resource Planning): Creating and approving
purchasing requisitions, placing purchase orders and receiving goods and
services by using a software system based on Internet technology.
2) e-MRO (Maintenance, Repair and Overhaul): The same as web-based ERP
except that the goods and services ordered are non-product related MRO
supplies.
3) e-sourcing: Identifying new suppliers for a specific category of purchasing
requirements using Internet technology.
4) e-tendering: Sending requests for information and prices to suppliers and
receiving the responses of suppliers using Internet technology.
5) e-reverse auctioning: Using Internet technology to buy goods and services
from a number of known or unknown suppliers.
6) e-informing: Gathering and distributing purchasing information both from
and to internal and external parties using Internet technology.
7) e-marketsites: Expands on Web-based ERP to open up value chains. Buying
communities can access preferred suppliers' products and services, add to
shopping carts, create requisition, seek approval, receipt purchase orders and
process electronic invoices with integration to suppliers' supply chains and
buyers' financial systems.
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4.4 ADVANTAGES
The Internet has emerged as a cost-
effective and reliable medium for
performing online business
transactions. More and more
companies are now adopting this
medium for procuring their goods. E-
procurement advantages primarily
include saving money, time, and extra
workload normally associated with
paper works. The conventional
procurement process usually
involves lots of paper processing,
which consumes a large amount of time and money. In some instances, the
processing cost has been reduced by as much as 85%. E-procurement is a
major component of modern B2B ecommerce and can be applied to a broad
spectrum of industries and markets. Many firms have applied e-procurement
successfully, reaping benefits often to the tune of millions of dollars.
Experience indicates that a firm can enjoy returns that may measure up to
300% of the initial investment in just 3 years. The increasing number of
success stories point to the growing recognition of e-procurement
advantages. This indicates an increased optimism towards automation in
spite of the slowing down of global economy. Some companies have adopted
automation at all stages of the supply process to maximize e-procurement
benefits.
4.5 DISADVANTAGES
The introduction of e-procurement can meet some resistance, as it often runs
counter to corporate culture; in most organizations, this empowers local
business units. So a centralized procurement process will not always be
welcomed by business managers who feel that some of their power has been
taken away from them. Only when they see that there is a financial return do
they become convinced that e-procurement can work.
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The first is the Product Activity Record, which is known as 852. This EDI
transaction contains the sales and inventory information such as key product
activity and forecast measures, such as
?Quantity sold (R)
?Quantity sold (units)
?Quantity on hand (R)
?Quantity on hand (units)
?Quantity on order (R)
R
?Quantity on order (units)
?Quantity received (R)
?Quantity received (units)
?Forecast Quantity (R)
?Forecast Quantity (units)
The EDI 852 information can be sent from the customer to the vendor on a
weekly basis or more frequently in high-volume industries. The vendor makes
the order decision based on this data in the 852 transmission. The vendor
reviews the information that has been received from the vendor and an order
determination is made based on existing agreement between the vendor and
customer.
Many vendors use a VMI software package to assist them in determining
order requirements. VMI software can be part of an ERP suite such as SAP or
be a standalone option such as products from Blue Habanero, LevelMonitor,
NetVMI or others.
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The software will verify if the data as accurate and meaningful. It will calculate
a reorder point for each item based on the data and any customer information
such as promotions, seasonality or new items. The quantity of each item
available at the customer is compared with the reorder point for each item at
each location. This will determine if an order is needed and the quantities
required.
The second EDI transaction that is used in VMI is the purchase order
acknowledgment, which is known as the 855. This EDI document sent to the
customer contains a number of fields including;
?Purchase Order Number
?Purchase Order Date
?Purchase Order Line item
?Quantity
?Price
?Item Number
?Description of Item
?Freight Charge
?Ship Date
?
Some vendors supply an advance ship notice (ASN) to their customers to
inform them of an incoming order, which is know as EDI 856. The ASN differs
from the purchase order acknowledgement in both timing and content. The
856 is sent to the customer after the shipment has been made instead of at
the time of the purchase order.
The customer also can benefit from reduced purchasing costs. Because the
vendor receives data and not purchase orders, the purchasing department
has to spend less time on calculating and producing purchase orders. In
addition, the need for purchase order corrections and reconciliation is
removed which further reduces purchasing costs. Cost saving can also be
found in reduced warehouse costs. Lower inventories can reduce the need for
warehouse space and warehouse resources.
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Reverse auctions and their popularity have had a tremendous impact on both
manufacturers and on suppliers. Manufacturers have been able to streamline
the vendor selection process and have made it easier on themselves to select
the right supplier for each project. These auctions have also played a critical
role in the increase of offshoring. Reverse auctions have also forced suppliers
to find new ways of staying competitive. Since price is not the only factor,
vendors have been forced to bring more added value to their goods and
services, such as extra warranties, training, or other options.
Despite their profound impact, reverse auctions aren't the perfect solution for
every project. They do have some weaknesses, as well as a number of
strengths that have caused them to become a dominant force in modern
procurement. In order to determine whether reverse auctions are the best
strategy for a business, both the pros and the cons need to be weighed.
today the entire process can be completed in 3-7 days instead of weeks or
months.
Regardless of these benefits, reverse auctions still fall short in some areas.
Because reverse auctions seem to emphasize cost over other qualifications,
many buyers may choose the lowest bid only to find out that the shoddy
workmanship, low quality products, and slow delivery times cost them more
in the long run. Reverse auctions can also be detrimental to the supplier-buyer
relationship that is essential for some goods. For example, if only a handful of
vendors can provide the raw materials a company needs, and that company
places the project up for auction instead of simply using its long-term vendor,
chances are that they will lose the goodwill of that vendor and will find it
difficult to work with them again. Furthermore, when only a small number of
vendors can provide a specific good or service, reverse auctions do not always
deliver cost savings and can sometimes cost the buyer more.
Most businesses feel that the strengths of reverse auctions outweigh their
weaknesses, hence the reason why they are so popular. Another method of
online procurement that works well in some industries is trade exchanges. In
trade exchanges, a number of separate companies in a specific industry join
together to create specifications for suppliers. Large suppliers are then
allowed to participate in the vendor selection process. Unlike reverse
auctions, which are open to almost any size vendor, trade exchanges are
usually limited to the big players in the field. Many successful trading
exchanges are often set up by several large players in an industry.
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The Local Buy e-Marketplace solution offers immediate and substantial ROI.
The dynamic purchasing environment allows buyers to transact in real-time
with vendors for goods and services. It streamlines and automates the
purchasing processes, distributes purchasing power to authorised users,
standardises buying methods, controls overall spending and leverages
corporate purchasing to negotiate better deals. The result is increased
productivity, greater efficiency, less maverick buying, and lower transaction
costs.
The numbers speak for themselves. A Deloitte Consulting survey found that
companies expect to save 5-15% of total corporate spending by investing in e-
procurement initiatives. The research firm Aberdeen Group reports that with
e-procurement, transaction-processing costs may drop by 70%, from an
average of $107 to $30 per order. And industry experts from
PriceWaterhouseCoopers and Killen & Associates claim that reducing
purchasing costs by 5-10% can increase profit margins, or in respect of Local
Government, cost effectiveness by 28-50%.
In many medium to large councils, the saved time and effort can equate to
thousands of person-hours every year. This saved time enables procurement
staff to begin implementing a more strategic approach to purchasing and
enables end users to get on with their specific roles.
Many councils using paper-based procurement processes waste considerable
effort in coordinating the matching of orders, delivery notes and suppliers'
invoices. If councils do not manage this process well, they will be unable to
ensure that what is invoiced by the supplier was actually delivered and that
both agree with what was originally ordered. The time spent by accounts staff
and purchasing staff alike reconciling these documents can often be
significant.
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6. User Compliance
Maximising compliance - ensuring that everyone only buys from approved
suppliers - is the holy grail of any purchasing manager, since it serves two
purposes: - (1) gets the best value from the deals the company has struck, and
(2) allows companies to leverage far better deals with suppliers. It is
compliance and leverage that deliver the lion's share of cost reductions
through e-procurement.
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This results in the following problems. Firstly, the best value is not achieved.
Maverick buyers cannot command the same favourable terms as the
organisation as a whole, and preferred suppliers are rarely used. Secondly,
because the purchase is bypassing the system it cannot be analysed and
therefore meaningful management information is hard to produce. Finally, it
may cause internal friction that could be avoided.
The e-Marketplace provides end users with a way of procuring goods that is
generally quicker than even maverick methods. It enables them to quickly
complete an order on-screen in the user-friendly marketboomer front end.
They can track their orders progress at any stage of the approval chain and can
be informed electronically of shipment of the goods from the supplier.
8. Knowledge Workers
Although we have highlighted a range of benefits to councils through the Local
Buy e-Marketplace it is also interesting to consider the following.
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In his 1999 book, Business @ the Speed of Thought, Microsoft founder Bill
Gates described the effect of deploying an e-procurement solution at
Microsoft. As well as savings to the tune of around $140m per annum, the
principal effect of the implementation was the transformation of staff into
'knowledge workers'. This term describes how staff are no longer bogged
down with administrative chores such as filling in and passing around forms –
this is all computerised and staff are given the information to actually manage
procurement, rather than be managed by it.
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CHAPTER 5
INDUSTRY INFORMATION
While we have studied various standard levels in procurement and its
procedures it is very important to review the actual procedures undertaken
by companies. In this chapter we will take into consideration the process
undertaken by some reputed companies. this will help us to understand the
actual procedure apart from the theory knowledge.
Procurement procedure
Chugoku Electric procures equipment and
materials according to the following
Chugoku
Standard Procurement Procedure.
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Procurement procedure
The procurement procedure of NTT docomo is divided into four major steps
as given below.
PROCEDURE FOR REQUEST FOR PROPOSALS (RFP)
1. Request for Proposals
Potential suppliers who wish to submit a proposal can view requirements and
information (overview of the requested product, time and place of submission, how
to download the Procurement Procedure Manual, etc.) on our Internet website.
The Procurement Procedure Manual contains detailed information necessary to
submit a RFP. The Procurement Procedure Manual can be downloaded from our
website from the day proposal acceptance starts until the submission deadline.
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2. Acceptance of Proposals
Potential suppliers will submit the necessary application form based on information
provided in the Procurement Procedure Manual. This will be reviewed by NTT
DOCOMO.
3. Evaluation, Selection, Agreement of Contract
Proposals are comprehensively reviewed according to the criteria indicated in the
Procurement Procedure Manual. A contract will be awarded to the supplier who
scores the highest marks as a result of this assessment.
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2. Contract
We will sign a contract with the supplier who is selected by our customer.
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At this time, we ask the supplier to submit a sample and the supplier's test results.
7. When inspection and evaluation are acceptable, we negotiate with supplier in
respect to transaction contents.
8. Contract is concluded formally.
9. Mass-production prototype is tested using actual machine.
10. Formal mass production is requested.
11. For regular transactions, parts performance is checked from the point of view of
quality, cost, delivery and service.
12. Regular audit is conducted.
13. When contents of regular transaction and results of regular audit are suitable, we
request a new estimate.
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CHAPTER 6
GREEN PROCUREMENT
With the growing awareness about the global issues like ozone depletion and
global warming. Going green is the word in the corporate sector. More and
more organizations are aiming toward going green resembling a sense of
social responsibility towards the masses. Thus earning them goodwill.
Moreover earning a goodwill for the sake of performance and growth is not
enough there is dire need of being socially responsible and working towards
sustainable growth. In this chapter we will focus on Sustainable
procurement. There are a list of companies going green and working towards
green procurement.
Definitions:
“Procurement policies that encourage development and diffusion of
environmentally sound goods and services”
-Buying Green,
a handbook on environmental procurement
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Sometimes a green product may have a higher up-front purchase price, but
will cost less over its liftime. For example, a non-toxic alternative to a toxic
product will cost less to transport, store, handle, and discard. It will require
fewer permits, less training for staff, and the consequences of an accident will
be greatly reduced.
Similarly, a product that uses less packaging and that is easily recyclable or
reusable will carry a lower disposal cost.
3. Insufficient knowledge:
Many organizations are unfamiliar with the concept of green procurement or
with the options available to them. For an organization to participate, it must
have an understanding of concepts, vocabulary and terms.
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4. Availability:
Frequently, local distributors do not stock green products, or else they stock
only small quantities. This can lead to delays in obtaining the product.
Increasing market demand will help to overcome this obstacle.
5. No acceptable alternative:
Another barrier to green purchasing can be simply a lack of acceptable
alternatives to the present product. For example, a few years ago in the
furniture manufacturing industry, the use of water-based finishes as an
alternative to solvent-based ones was impeded by the fact that water-based
finishes presented technical difficulties which were costly to overcome, and
were of lower quality. Growing demand for will stimulate the development of
new and better 'green' products.
6. No specifications:
It is important that suppliers be asked to provide the environmental
specifications of the products they are offering. Purchasers, in the same way,
must clearly define their needs and requirements.
7. Purchasing habits:
We've always done it this way' can be a difficult mentality to overcome. There
may also be existing relationships between purchasers and suppliers that
make it difficult to switch to alternatives.
1. Organizational support:
Implementing a green procurement program means changing policies and
procedures. For it to be successful, it is essential that management support
the initiative fully. In addition, those charged with making purchasing
decisions must be involved in the implementation process. Their suggestions
and support are critical.
2. Self-evaluation:
An important step in implementing green procurement is conducting an
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3. Set goals:
A broad policy should be established, and specific priorities and targets set.
4. Develop a strategy:
It is now to time to identify and implement changes, both short and long-
term, identify suitable products and services, and evaluate the environmental
performance of suppliers.
6. Implementation:
Implementing the green procurement program will require an assignment of
accountability, plus a well designed communications plan addressing
employees, customers, investors, suppliers and the public.
7. Sustainment:
As with all business practices, it is important that a systematic review of the
green procurement program be carried out, in order to establish whether the
scheme is meeting its goals and objectives. The review should take into
account changing environmental goals.
2. Ikea
Ikea, a furniture and household goods retailer, has implemented a code of
conduct for its 2,000 suppliers. The code of conduct focuses on environmental
impact and working conditions. An external body verifies information
submitted by suppliers. If suppliers do not meet the code, they are requested
to remedy the situation and if suppliers continually breach the code, they can
be removed from Ikea's suppliers list.
The code includes a list of supplier musts (waste and emission reductions,
handling, storage and disposal of hazardous chemicals, recycling, etc) and
must nots (use of chemical compounds and substances banned or restricted
by Ikea and source of wood).
Procurement Judgment
Green procurement involves the conventional procurement of materials
based on the criteria of "quality (Q), cost (C), delivery terms (D)", but it also
comprises an overall judgment that is based on environmental considerations
(E).
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CHAPTER 7
IT PROCUREMENT
An IT procurement process, formal or informal, exists in every organization
that acquires information technology. As users of information systems
increasingly find themselves in roles as customers of multiple technology
vendors, this IT procurement process assumes greater management
significance. In addition to hardware, operating system software, and
telecommunications equipment and services - information resources
traditionally acquired in the marketplace - organizations now turn to outside
providers for many components of their application systems, application
development and integration, and a broad variety of system management
services. Yet despite this trend, there has to date been little, if any, research
investigating the IT procurement process.
Definitions:
“IT Procurement is defined as acquisition of technological goods and
services”
Information Technology Services,
IT procurement documents
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A project study on Procurement by Akhtar Khan
(M1, M2, and M3). Each of these major processes consists of a number of sub-
processes. The Appendix at the end of this chapter lists the sub-processes
included in each of the major processes, as well as the key issues identified by
the Working Group.
Major Processes in IT Procurement.
DEPLOYMENT PROCESSES
Deployment processes consist of activities that are performed (to a greater or
lesser extent) each time an IT product or service is acquired. Each individual
procurement can be thought of in terms of a life cycle that begins with
requirements determination, proceeds through activities involved in the
actual acquisition of a product or service, and is completed as the terms
specified in the contract are fulfilled. Each IT product or service that is
acquired has its own individual iteration of this deployment life cycle.
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MANAGEMENT PROCESSES
Management processes consist of those activities involved in the overall
governance of IT procurement. These activities are not specific to any
particular procurement event, but rather are generalized across all such
events. Three general classes of IT procurement management processes are
supplier management, asset management, and quality management.
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CHAPTER 8
CONCLUSION
Procurement, one of the very important step in Logistics and supply chain
management also known as purchasing. It contributes over more than
50percent of entire production cost. hence, it is very crucial for every
organization to give special attention towards strategic procurement policies
to reduce cost and procure best quality. A quality of the raw materials forms
the basis of the quality of the final product.
In this project we have seen the importance of procurement and its role in the
functioning of the organization and in supply chain management.
Procurement being very important aspect of Supply chain management, This
project first deals with what Logistics and supply chain management is and
the steps involved in it. In chapter three we have come towards explaining
what is Procurement. Procurement defined in its simplest form is “Acquisition
of goods (materials, parts, supplies, equipment) required to carry on an
enterprise. Procurement expenses can be a major cost of doing business.”
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REFERENCES
BOOKS
Elements of Logistics and Supply Chain Management
-by S.D. Aphale
WEBSITES
www.merriam-webster.com
www.logistics.about.com
wiki.answers.com
www.supplychainrecruit.com
en.wikipedia.org
en.wikitionary.org
www.apm.org.uk
www.businessdictionary.com
www.ittoday.info
www.wisegeek.com
www.nextlevelpurchasing.com
searchcio.techtarget.com
www.bitpipe.com
ecommerce.hostip.info
www.answers.com
www.theanswerbank.co.uk
www.epiqtech.com
searchwarp.com
www.its.state.nc.us
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