Profile

Muhammad Rahies Khan

PhD Scholar
MPhil (MS) Gold Medalist
MBA (Finance) KUBS

Your Name
Previous Qualification/Semester
Address/Company
Future Ambitions
Course Outlines
 INTRODUCTION TO
PROCUREMENT MANAGEMENT
 To select the best suppliers in the market.
 To help generate the effective development of new products.
 To protect the company’s cost structure.

 To maintain the correct quality/value balance.

 To monitor supply market trends.

 To negotiate effectively in order to work with suppliers who will seek

mutual
 benefit through economically superior performance.
 To adopt environmentally responsible supply management .
 The purchasing cycle

The main stages in the purchasing process may be summarized as

follows:
 Recognition of need
 Specification
 Make-or-buy decision
 Source identification
 Source selection
 Contracting
 Contract management
 Receipt, possibly inspection
 Payment
 Fulfilment of need.
Is purchasing a service activity?
 The changing role of purchasing and supply

 Fewer but larger suppliers

 Increasing environmental awareness
 Competitor activity
 Advancing technology
 The Chartered Institute of Purchasing and Supply (CIPS) and the contribution of purchasing
 Increasing proportion of revenue spent externally
 Innovation
 E-commerce
 Internal organizational factors
 The level and percentage of purchased goods and services
 Structural changes
 Performance measurement
Procurement positioning/targeting

Kraljic (1983)
 The principal factors determining risk are:

 The reliability of the sources of supply

 The availability of the commodity or service required

 The degree of response by suppliers to the company’s requirements

 The quality of the product in relation to the role which it is required to

fulfil.
 Procurement potential

 Procurement potential is the degree of opportunity that exists for

the process of procuring the commodity or service under
consideration to contribute to company profitability.
 The benefits potentially include:
 ■ reducing the total cost of ownership (TCO);
 ■ improving the quality of the procurement process;
 ■ improving the efficiency of the procurement process;
 ■ earlier sales or production due to reduced cycle time.
 The four categories

 Procurement strategies can be ranked as high or low in terms both

of risk exposure and of procurement potential.
■ Critical: Items are those with high risk and high procurement
potential.
■ Leverage: Bottleneck items are those with high risk and low
procurement potential.
■ Bottleneck: Leverage items are those with low risk and high
procurement potential.
■ Routine: Routine items are those with low risk and low procurement
potential.
 Procurement strategies/tactics for each quadrant
Critical items
 ■ direct negotiation;
 ■ involvement in supplier quality management;
 ■ developing close collaborative relationships.
 Bottleneck items
 maintaining a detailed knowledge of the market;
 ■ accurately forecasting requirements and planning procurement;
 ■ using medium-term contracts;
 ■ carefully managing relationships with existing suppliers;
 ■ value analysis in order to simplify the specification and open up more
 competition.
 Leverage items
 ■ standardization;
 ■ switching to industry standards where possible;
 ■ co-ordination between business units and companies in order to
strengthen the negotiating position.
 Routine items
 ■ e-procurement/fully automated ordering (for stock items);
 ■ direct call-off by users from suppliers on the basis of blanket agreements;
 ■ purchase by users using field order or procurement card procedures;
 ■ supplier rationalisation;
 ■ outsourcing;
 ■ vendor-managed inventory (VMI).
 Total acquisition cost and total cost of ownership

 ■ Specification

 ■ Quantity and timing

 ■ Market considerations

 ■ Supply continuity
 ■ Product development
 Best practice in strategic supply
management
Identify and work with key suppliers
■ Develop openness and transparency
■ Align systems with strategic initiatives
■ Articulate mutual goals
■ Forge partnerships where appropriate
■ Use complementary competencies
■ Employ dedicated complementary
assets
■ Employ appropriate technology
■ Use appropriate e-technology/systems
■ Share competencies and resources
■ Establish common language
 ■ Emphasize mutual benefits
 ■ Implement Kaizen
 ■ Remove decoupling points
 ■ Empower individuals
 ■ Empower suppliers
 ■ Focus on customer needs
 ■ Pursue and eliminate waste
 ■ Consider core/non-core
questions
 ■ Build knowledge base
 ■ Use knowledge base
 ■ Be responsive, and ready to
change