Chapter 3: The Supply process

Learning Objectives:
• Understand the key objectives and responsibilities of purchasing
• Be able Establish, develop purchasing process
• Ability to support manage material for company

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Chapter 3: The Supply process
Contents:
Purchasing objectives
Industrial material
Industrial purchasing process
Example
Institution or government purchasing process
Case study

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Purchasing objectives
Supply continuity
Support goals, objectives and strategies of organization
Aligned goals with internal partners or departments

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 Industrial materials
Direct and indirect
material

FACTORY LAYOUT

Hand tools & Spare part

Material handling equipments Personal protective equipment

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Industrial purchasing process
1. Forecast and plan requirement
2. Needs clarification: Technical profile, Quantity, date required, estimated cost, etc.
3. Supplier selection: Financial Health, Expertise, Operation performance, Business
processes and practices, Cultural factors, and Risk factors (*)
4. Place the purchasing order: Purchase order and Blanket purchase order
5. Delivery
6. Receipt and inspection
7. Submit Invoice and payment
8. Records maintenance (*)
9. Continuously measure and manage supplier performance (*)

Note: Small Vietnamese company may skip some steps (*)

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 Example: From place order to payment
Transaction
Buyer Dept Manager/ specialist Supplier
Finance Analyst Buyer

Check, release PO
Place order Check , Approval PO View PO to
prepare shipment Follow up

Accounts Buyer Receiving Store Supplier Delivery

Supplier
Payable (3PL)

payment
Supplier submit Approve the delivery Receipt and inspection
Invoice Delivery

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Institution or government purchasing
process
Types of tendering
 Open tendering
 Limited tendering
- Where a foreign donor providing the financing source (e.g. Official Development
Assistance - ODA)
- Where the tender package has highly technical requirements
 Direct appointment of contractor :
- Tender packages belonging to national confidential projects
- A natural disaster, war or a breakdown which should be immediately dealt with
- Construction and installation (Development project) ≤ 5 billion VND; procurement of
goods ≤ 100 Million VND

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Institution or government
purchasing process
Tendering process
•Identify the need
•Financial approval
•Develop specification
•Collect tenders information and invite tenders
•Receive tenders
•Check and evaluate tenders
•Award contract
•Manage contract
•Vendor rating

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Case study
ABC company in Saigon Hi-Tech Part set up one more assembly line with maximum
output one million CPU per quarter. The production line will start up on 1 st January
2015 with full output. All items are imported from oversea with lead time 6 weeks.
Please make the budget and plan to purchase direct material for new production line to
operate in 2015. Given BOM (Bill Of Material) as table below

Items Quantity Price (USD)

Substrate 1 3
Capacitor A 10 0.1
Capacitor B 4 0.1
Solder ball 30 0.05
Die 1 10