PROCUREMENT

PRINCIPLES
 
 LOG 214

CPSP-MBA(PSM)
MEM’BWANA
AHMED
 TOPIC 4

LEAD TIME AND TIME

COMPRESSIONS
 COVERAGE
 Time and Competitive Advantage
 Managing internal and External lead Times.
 Expediting
 Purchase Schedules.
 THE RIGHT TIME
Refers to the time at which the required items
need to be delivered at the mentioned
destination.
This is to ensure that goods and services are
delivered at the right time, not too early or too
late so as to avoid risks during the organization’s
operation.
 THE RIGHT TIME
 Example if order s are submitted late, It will
involve costly expediting and will interrupt
continuous flow of production process causing
material shortage
 If goods arrive too early, they will have to be
paid for and kept in stock until they are
required. This will involve unnecessary
storage costs.
TIME AND COMPETITIVE
ADVANTAGE
 A major determinant of choice of supplier or brand is the cost
of time. The cost of time is the additional costs that a customer
must bear while waiting for delivery or seeking out
alternatives.
 The company that can react promptly and accurately to the
needs of their customers are more likely to attract orders than
those that can not.
 If a company is seeking competitive advantages should be
able to Respond to customer needs as they arise by ensuring
greater degree of responsiveness from its own supplier.
TIME AND COMPETITIVE
ADVANTAGE
 The achievement of delivery on time is a standard
procurement objective. If goods or materials arrive
late or work is not completed at the right time, sale
may be lost, production may delay, damages clauses
may be invoked by dissatisfied customers.
 Also failure to achieve supply on time may slow
down the cash to cash cycle and thus reducing the
organization’s efficiency and profitability.
 MANAGING INTERNAL AND
EXTERNAL LEAD TIME
 In procurement, Lead Time includes the first
effort to initiate acquisition of goods or
services, up to the time of their arrival.
 Procurement lead time includes identifying a
need, selecting a good or service and sourcing
vendors, in addition to time spent negotiating,
ordering and paying.
 TYPES OF LEAD TIME
 There are 3 types of lead time
i. Internal lead time
ii. External lead time/delivery time
iii. Total lead time
 1. INTERNAL LEAD
TIME
 Is the elapse time between identifying the need
for a product or service, and issue of a
complete purchase order.
 This will include preparing the specification,
identifying suitable suppliers, the
enquiry/quotation process, and finally
selecting the supplier and agreeing the contract
 2. EXTERNAL LEAD
TIME
 Is the elapse time between the supplier
receiving the purchase order and completing
the order.
 3. TOTAL LEAD TIME
 Is the elapse time between identifying the need for a product
or service and the supplier completing the purchase order
satisfactorily.
 From procurement point of view, ‘total lead time’ is the best
one to use because it covers all eventualities. It comprises the
following stages
 Stages in the complete process to which
lead time refers;

 Origin of need
 Requisition
 Order sent to suppliers
 Order received by suppliers
 Supplier’s manufacturing process commended
 Manufacture completed
 Dispatch by supplier
 Receipt at buyer’s premises
 Goods available on buyer’s premises
 Goods in user’s possession
 Internal lead time is often a significant part of total lead time,
but is often neglected. Any attempt to reduce lead time should
focus on internal as well as external (supplier’s) lead time
because:
i. The supplier’s lead time may be extended if the buyer has
not provided sufficient or accurate information to suppliers
ii. Quality inspections carried out by the buyer at the supplier’s
premises can add to the total lead time although, from a
quality view point, they may be useful
iii. Lengthy goods inwards procedures can add to the total lead
time
 But how can you determine if the
supplier quoted lead time is
realistic?
 Suppliers can intentionally quote delivery dates that they
cannot achieve to win the business. Buyers are responsible for
establishing whether quoted dates are realistic. For example,
the buyer might establish whether the supplier has the
following:
 Sufficient available capacity
 Credible delivery performance
 Sufficient stock of long lead time components
 A good production planning system
 Appropriate supply strategies
 EXPEDITING

 Expediting to ensure delivery time are met.

 Following-up the order to ensure prompt deliveries is
an important function and this function is also
variously called, progressing, expediting or follow-
up.
 The expediting process refers to the procurement
organization contacting the supplier for either updates
on the delivery schedule or to reassess the schedule
based on issues with the supply of parts.
 EXPEDITING

 Expediting is a planned, proactive task. As a

concept, expediting is a purchasing
responsibility/task of attempting to speed up
delivery as the buyer’s timing requirements
undergo unexpected changes.
 In order to achieve to procurement’s
responsibility of delivery on time expediting
is frequently undertaken.
 Importance of the expediting in
Procurement
i. The supplier is aware of the purchasing department’s interest
and control
ii. Possible late deliveries or delays will be identified via the
early warning system and therefore alternative suppliers can
be secured or alterations of production programmes can be
made, without loss of output.
iii. The purchasing manager has a complete and updated visual
picture of the purchasing department’s position in term of
ordering and suppliers.
iv. Enables timely preparation of the receiving process, e.g.
space, equipment and workers
 REDUCTION IN
EXPEDITING
 The need for expediting may be reduced by ensuring
that:
 Lead times are known and accepted
 Mutual concern exists between buyer and seller
 Information is shared by buyer and seller
 Specification are clear, understood by seller and fall
within seller’s technical capability
 Delivery required is specified properly
 What the salesman says can be done reflects the
actual situation.
 End of Topic FOUR

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