PRINCIPLES OF PROCUREMENTS STUDY GUIDE
NOTES
Purchasing
In simple terms, purchasing is the act of buying what an organization needs to run its business.
2. The Purchasing Process
a) Recognizing a Need: A department (like IT or Production)
realizes they are out of something or need a new tool.
b) Identifying a Supplier: Looking for who can sell it to them.
This could be a quick search or a complex bidding process.
c) Placing the Order: Signing the contract and making the
"deal" official.
d) Monitoring Delivery: Making sure the items actually show up
on time and in the right place.
e) Evaluating: Did the supplier do a good job? If yes, keep them;
if no, look for someone else next time.
1. The "7 Rights" of Purchasing
The 7 Rights are the foundation of traditional purchasing
management. They ensure that the acquisition process is
efficient and supports the organization's needs.
, • Right Product: Buying the exact item that meets the user's
needs.
• Right Quality: Ensuring the goods meet the specific
standards required for their intended use—not necessarily
the highest quality, but the appropriate quality.
• Right Quantity: Buying enough to meet demand without
overstocking, which ties up cash and risks spoilage.
• Right Source: Selecting a reliable, financially stable
supplier who can deliver consistently.
•
• Right Place: Ensuring goods are delivered to the exact
location where they are needed (e.g., a specific warehouse
or factory floor).
•
• Right Time: Coordinating delivery so that items arrive
exactly when needed—neither too early (wasting space)
nor too late (causing delays).
•
• Right Price: Obtaining the best value for money,
considering the total cost of ownership rather than just the
cheapest sticker price.
2. Distinguishing Between Purchasing and Procurement
NOTES
Purchasing
In simple terms, purchasing is the act of buying what an organization needs to run its business.
2. The Purchasing Process
a) Recognizing a Need: A department (like IT or Production)
realizes they are out of something or need a new tool.
b) Identifying a Supplier: Looking for who can sell it to them.
This could be a quick search or a complex bidding process.
c) Placing the Order: Signing the contract and making the
"deal" official.
d) Monitoring Delivery: Making sure the items actually show up
on time and in the right place.
e) Evaluating: Did the supplier do a good job? If yes, keep them;
if no, look for someone else next time.
1. The "7 Rights" of Purchasing
The 7 Rights are the foundation of traditional purchasing
management. They ensure that the acquisition process is
efficient and supports the organization's needs.
, • Right Product: Buying the exact item that meets the user's
needs.
• Right Quality: Ensuring the goods meet the specific
standards required for their intended use—not necessarily
the highest quality, but the appropriate quality.
• Right Quantity: Buying enough to meet demand without
overstocking, which ties up cash and risks spoilage.
• Right Source: Selecting a reliable, financially stable
supplier who can deliver consistently.
•
• Right Place: Ensuring goods are delivered to the exact
location where they are needed (e.g., a specific warehouse
or factory floor).
•
• Right Time: Coordinating delivery so that items arrive
exactly when needed—neither too early (wasting space)
nor too late (causing delays).
•
• Right Price: Obtaining the best value for money,
considering the total cost of ownership rather than just the
cheapest sticker price.
2. Distinguishing Between Purchasing and Procurement
