The Purchasing Process

Training Presentation
Joseph Roundy
 Materials Covered
• Purchasing Process Defined
• Purchasing and Your Organization
• The Nuts and Bolts of Purchasing
• How the Purchasing Process Works
• An Example
• An Exercise
 Purchasing Process Defined
• Purchasing- the
process of acquiring
goods, services, and
equipment from
another organization
in a legal and ethical
manner.
Purchasing Process Defined Cont.
• The 5 “Rights” of Purchasing
1. Purchasing the right item or service
2. In the right quantity
3. At the right quality level
4. At the right price
5. At the right time
Purchasing and Your Organization
• Brainstorming Activity
– Think of all items purchased within the
organization
– List them (3 minutes)
– Get into small teams and categorize (3 minutes)
 Nuts and Bolts
• The nuts and bolts of the purchasing
process include the following
– Requirements
– Supplier Selection
– Purchase orders
– Performance measures
 Requirements
• Requirements are the attributes and
specifications a product or service needs to
posses in order to fulfill its specific
purpose.
 Supplier Selection
• Supplier selection is the process of
identifying potential sources of supply for
the product or service that is to be
purchased.
The Purchase Order (PO)

• The purchase order is

the means by which
products and services
are procured.
– Pictured at the right is
a generic copy of a
purchase order
 Performance Measures
• Performance measures are used to track and
evaluate suppliers.
 How It Works
• The purchasing process consists of six main stages
1. Identify user requirements
2. Evaluate potential suppliers
3. Bid, negotiate and select supplier
4. Purchase approval
5. Release and receive purchase requirements
6. Measure supplier performance
 Identifying Requirements
• Identify a need (product or service to be
purchased)
• Identify needed requirements
– For example: size, color, length, thickness etc.
 Evaluating Potential Suppliers
• Find Qualified Suppliers
• Request Bids/ Quotes
• Gather External Data
 Selecting a Supplier
• Identify the pro’s and con’s of each suppler
– Location, cost, relationship, financial stability
etc.
• Rank the suppliers according to their
strengths
• Choose the best supplier
• Negotiate agreements where possible
 Purchase Approval
• Purchase Order
• Department/ Company Approval
• Legal contract
Release and Receive Requirements
• All Requirements need to be accurate and
clearly communicated
– Quantity
– Quality
– Price
– Delivery and Shipping
– Product or Service Specifications
 Measure Supplier Performance
• Supplier Scorecard
• Relationship Status
• Is the supplier meeting our needs?
• Is our product or service meeting customer
needs?
Process Flow Chart
 A Real World Example
• Buying A Car ( what is the process?)
 Other Things to Consider
• Total Cost of Ownership
– Sometimes the cheapest initial option isn’t
always the cheapest long term option.
 Scenario
• You are a purchaser for your organization. You
were asked to buy a fence. The fence is to be
installed on the west side of your office building;
periodically the wind can blow hard from that
direction. You have a choice between a wood
fence that costs $1,200, a vinyl fence that costs
$3,200, and cinder block fence that costs $5,000.
Which fence would you choose and why?
 Exercise
• Pair off into groups of two
• Assign each pair to be either a buyer or
supplier
• Buyers go through the purchasing process
 Exercise
• Switch roles and repeat the exercise (10
minutes)
• Report
– What went well?
– Which parts were difficult?
 Summary
• The purchasing process is important to
every organization
• Through the purchasing process you can
create value for your organization
 Reading List
• Straight to the bottom line- Robert Buzki
• Supply Chain Gains- Dan Barnes
• Managing Purchasing: Making the Supply Team Work-
Kenneth Killen
• The Relationship Driven Supply Chain- Emmett Stuart
• Business-to-Business Procurement-Richard Pinkerton