TRADE FOR SME
L1: Procurement management
The purchasing process model
Procurement purchasing
- Broader context inclusive the strategical - It is only a small part of the “big part” procurement
elements, inclusive sourcing, inclusive supplier - Focus on the operational activities
management
- “the process of finding and acquiring all of the - “set of tasks involved in buying goods and services.
goods, services, and work an organization needs Purchasing involves tasks such as ordering, raising
to operate and fulfill its business model” purchase orders, receiving, and arranging payment”
- Activities include:Identify goods and services required, - Activities include: Acknowledge purchase orders, Advance
Approve purchase requests, Procurement, Identify suppliers, shipment notice, Receive goods, Inventory management, Invoice
Sending inquiries (RFQs and RFPs), Receipt of quotes from recording, Three-way match, Payment to supplier
suppliers, Negotiate pricing and terms, Select vendors
1
,3 levels of procurement: Strategical procurement – tactical procurement – operational procurement
The 5R’s of procurement
- The 5 Rights of Procurement
o At the right time
o In the right quantity
o At the right quality
o At the right price
o In. the right place
- Extensions to 6R, 7R, …
o To acquire the right material
o From the right supplier
Business context
Which Business Context are we in? procurement is different depending on business context so instead of
theoretical => apply in real business contxt
- Which Economic Sector?
- Which Type of Business: B2B, B2C, …?
- Which Company size?
- What is the Company structure?
2
,4 Economic Sectors
Primary sector, secondary sector, tertiary sector, quaternary sector
Service industries - industry
Economics Sectors: Colin Clark sector Model
B2B – B2C
focus on b2b: marketing much more impacted
b2c is less important for procurement strategy
IMPORTANCE OF PROCUREMENT: everyone gets in touch with it, regardless of your role in the company or size of company
Ex: product mngmt -> machine, marketing -> campaign, legal -> contract
3
, Relationship Economic Sectors Purchasing
Porter Value Chain model
A typical company structure, including supporting services
What’s procurement’s place in the value chain?
- Although procurement department is typically as ‘supporting services’, it is of strategic importance
- A well-organized procurement department will be source of intelligence to know:
o Who you are sourcing and procuring goods/services from?
o How those goods/services are being produced or delivered?
o Why you are procuring from those particular suppliers?
o When to eliminate defective/non-compliant suppliers?
- Purchasing is seen as an area for adding value, not simply reducing costs
- Reducing price and availability risks in the supply chain
- Awareness that active supplier involvement can increase efficiency and effectiveness
4
L1: Procurement management
The purchasing process model
Procurement purchasing
- Broader context inclusive the strategical - It is only a small part of the “big part” procurement
elements, inclusive sourcing, inclusive supplier - Focus on the operational activities
management
- “the process of finding and acquiring all of the - “set of tasks involved in buying goods and services.
goods, services, and work an organization needs Purchasing involves tasks such as ordering, raising
to operate and fulfill its business model” purchase orders, receiving, and arranging payment”
- Activities include:Identify goods and services required, - Activities include: Acknowledge purchase orders, Advance
Approve purchase requests, Procurement, Identify suppliers, shipment notice, Receive goods, Inventory management, Invoice
Sending inquiries (RFQs and RFPs), Receipt of quotes from recording, Three-way match, Payment to supplier
suppliers, Negotiate pricing and terms, Select vendors
1
,3 levels of procurement: Strategical procurement – tactical procurement – operational procurement
The 5R’s of procurement
- The 5 Rights of Procurement
o At the right time
o In the right quantity
o At the right quality
o At the right price
o In. the right place
- Extensions to 6R, 7R, …
o To acquire the right material
o From the right supplier
Business context
Which Business Context are we in? procurement is different depending on business context so instead of
theoretical => apply in real business contxt
- Which Economic Sector?
- Which Type of Business: B2B, B2C, …?
- Which Company size?
- What is the Company structure?
2
,4 Economic Sectors
Primary sector, secondary sector, tertiary sector, quaternary sector
Service industries - industry
Economics Sectors: Colin Clark sector Model
B2B – B2C
focus on b2b: marketing much more impacted
b2c is less important for procurement strategy
IMPORTANCE OF PROCUREMENT: everyone gets in touch with it, regardless of your role in the company or size of company
Ex: product mngmt -> machine, marketing -> campaign, legal -> contract
3
, Relationship Economic Sectors Purchasing
Porter Value Chain model
A typical company structure, including supporting services
What’s procurement’s place in the value chain?
- Although procurement department is typically as ‘supporting services’, it is of strategic importance
- A well-organized procurement department will be source of intelligence to know:
o Who you are sourcing and procuring goods/services from?
o How those goods/services are being produced or delivered?
o Why you are procuring from those particular suppliers?
o When to eliminate defective/non-compliant suppliers?
- Purchasing is seen as an area for adding value, not simply reducing costs
- Reducing price and availability risks in the supply chain
- Awareness that active supplier involvement can increase efficiency and effectiveness
4
