WEEK 3 : PROCURMENT IN SUPPLY CHAIN

An introduction to Procurement

Procurement can be described as an overarching

function which revolves around determination,
sourcing, accessibility and control of the exogenous
means as well as capabilities that a company
requires to achieve its overall strategic goals.
(Chartered Institute of Purchasing and Supply,
CIPS.)
Procurement is the process to attain goods and services. It can be
comprised of different activities involved in establishing fundamental
requirements including sourcing initiatives such as, supplier
management, and negotiation of contact. Purchasing refers to the
transactional function of placing the order from an approved list of
vendors. It is simply a subset of wider procurement process. Therefore,
Procurement can also include purchasing activities which are needed to
attain goods and services. A procurement procedure could be simple
or complex based upon the operations of an organization.
 A Robust Procurement Strategy

CAN BE AN INDISPENDABLE TOOL TO AUGMENT SUPPLY CHAIN PERFORMANCE

Effective procurement strategies can ensure security of regular supplies , lower costs, better
quality and competitive advantage. They become a potential source of supply chain
innovation and supply chain resilience. Overall, a rigorous procurement policy can enhance
supply chain surplus by accelerating customer value and diminishing supply chain cost.
Three basic structures of procument

Centralized Procurement
Decentralized Procurement
Hybrid Procurement
● Centralized procurement means that all procured
items for each division are centralized via one
department, unit or an operating site.
● When every division within a company makes its
own procurement decisions then the resulting setup
is a Decentralized procurement.
● A Hybrid procurement model is a mixed strategy
of combining both centralized and decentralized
approach.
A snapshot of procurement
process
– Determining the need
– Converting that need into commercially viable
description
– Finding potential suppliers in the market.
– Selecting an appropriate source of supply
– Agreeing on the purchase order and/or the contract
terms and conditions.
– Delivering the products or services.
– Paying the suppliers
– Maintain records and relationships.
 Challenges faced by modern
procurement professionals

● Increasing digitalization and technology.

● Rising market intelligence.
● Emerging trends of globalization
● Complexity of risk management in
procurement.
● Achieving sustainable procurement.
Direct
Procurement
It includes all the items which are part of the
finished product. For example raw materials and
packaging. It can affect the overall production
activity of manufacturing concerns. The examples
of direct service procurement could be services
including product terminal and warehousing
Indirect Procurement

Indirect procurement is comprised of operating

resources that a company buys to carry out its
operations. Examples of indirect material
procurement include supplies or capital assets
purchases etc. Whereas, construction services
and labor involved with installation could be
examples of indirect service procurement.
A snapshot of procurement
process
– Determining the need
– Converting that need into commercially viable
description
– Finding potential suppliers in the market.
– Selecting an appropriate source of supply
– Agreeing on the purchase order and/or the contract
terms and conditions.
– Delivering the products or services.
– Paying the suppliers
– Maintain records and relationships.
Challenges faced by modern procurement professionals
● COVID 19

● Increasing digitalization and technology

● Rising market intelligence

● Emerging trends of globalization

● Complexity of risk management in procurement

● Achieving sustainable procurement.

Emerging trends of E-procurement
 What is Public Procurement

Public procurement includes purchases of goods, services and works by

governments or related public organizations . It is among the various
functions of the government that provides ample opportunity for assisting
government in achieving its strategic objectives

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OBJECTIVES OF PUBLIC PROCUREMENT

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 The fundamental Principles of
Public procurement
Accountability
Transparency
Competition
Fairness
Efficiency
Appealing Rights
Confidentiality
Accessibility of Information

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