Vilasshinde.com Lib Docs SCM Module-II -A

8/11/2019 Vilasshinde.com Lib Docs SCM Module-II -A

1/24

MODULE: II-A

Procurement Management

Presentation by

Dr !ilas " Shin#ePro$essor % &ea#'

Mechanical Engineering Department'

Datta Meghe College o$ Engineering'

Airoli' (a)i Mumbai-*++,+ .I(DIA/


2/24

PU0C&ASI(1 A(D P0OCU0EME(2

Intro#uction Procurement and Purchasing are the related terms used to acquire the

optimum quality and quantity of material, goods or services at thelowest cost in timely manner for the enterprises as per requirement

The term Procurement can broadly defined as it is the overarchingfunction that describes the activities and processes to acquire goodsand services for the enterprise

goods and services. It is refers to the process involved in orderinggoods /services

The Purchasing is a subset of the wider procurement process

Importantly, the Procurement is distinct from Purchasing,

procurement involves the complete activities right from inestablishing fundamental requirements.

It includes sourcing activities, such as, market research, vendorevaluation and negotiation of cost or contracts. It can also include the

purchasing activities required to issue the purchase order and receivegoods


3/24

Scope an# Importance

Procurement is the most important activities of the element ofsupply chain management

Purchasing is most important function of materials management

The material planning functions determines the requirement ofraw materials, such as, material, spare parts and componentsrequired for the purpose of manufacturing the required product/s.

e requ remen o ese raw ma er a s as es gne y ematerial requirement planning (MP!I"

This process can take the decision regarding the buying of rawmaterial, #hat, $ow and #hen to buy% &ccordingly the

procurement plan can be prepared by the concerned This procurement plan will be forwarded to the purchase

department in the form of requisitions

The suppliers evaluation is also one of the important task of the

procurement process


4/24

P0OCU0EME(2 MA(A1EME(2 I( SC

Procurement Process


5/24

To understand the need of fundamental businessrequirement of any material by the concerned

department To verify the requirement with respect to its

specifications, quality and quantity

DE3I(E 2&E "USI(ESS (EED

To search for the endors and suppliers along with theirdetails who can supply the required material

In the 'upply hain e)ecution the business requirement

can be publici*ed on the intranet through software toreceive the information of requirement

The purchase requisition should include all the requiredparameters of the material in the procurement process


6/24

DE!ELOP P0OCU0EME(2 S20A2E14

+epending on the scale of requirement, there are very wide rangeof potential solutions and approaches to the business need

There are number of ways of searching the market and selecting a

supplier to fulfill the requirement To understand the importance and timely need of required intend

To verify whether the suggested vendors / suppliers are on thea roved list of the com an or not

To verify the records and the reputation of the vendors / supplierssuggested by the intender

To decide the strategy and flow down the complete procedureright from floating of tender to the purchase for the procurement

of said material To take the approval from the concerned authority so as to enable

to e)ecute the process e)peditiously

The quality material shall be procured with optimum lowest cost in

minimum time


7/24

SUPPLIE0S E!ALUA2IO( A(D SELEC2IO(

To evaluate the tenders received or on!line action afterestablishing your procurement process

To draw the compatible evaluation criteria or plan to choosethe appropriate solution by comparing the different solutions

The process for the selection of the supplier involves two basicaspects

Searching $or all possible sources Short listing the i#enti$ie# sources out o$ it

The criteria for comparing different solutions and suppliersare critical which includes all the important parameters

To focused on the key criteria heavily and don-t give muchimportance to aspects that will have little impact on thesolution


8/24

(E1O2IA2IO( A(D A5A0D O3 CO(20AC2

+espite of selecting the suppliers after following the procedure, itis necessary to negotiate for the complete deals.

This is not ust about the cost of the material but its all about the

e)penses incurred on other necessary things, such as, deliverytime, carriage cost, maintenance contract etc..

To draw the procedures carefully by which the goods or services

To consider the claws for delivery terms and returned the materialif necessary

To decide the appropriate invoice process for payment terms and

prepare the M0 between supplier/s and the company &fter following the complete procedure the contract can be

awarded to the selected and negotiated supplier/s

To consider the whole Purchase to Pay process (P1P" which will

help to reduce total costs and risk significantly


9/24

I(DUC2IO( A(D I(2E10A2IO(

To induct the supplier in the company process, the

contract shall be signed by the supplier/s

2o goods or services should be ordered until thecontract is signed

be understood by both, buyer and supplier

To draw the mechanism for evaluate the service levels

of the suppliers

egular review procedure should be established to

integrate the complete procurement procedure


10/24

24PES O3 PU0C&ASES A(D I2S POLICIES

The primary obective of purchasing is to insure the un!interruptedflow of quality raw materials at the lowest possible cost in pre!defined time to produce the product to the customer satisfaction

Purchasing is the crucial link between the suppliers and themanufacturer with supportive overlapping activities to enhance themanufacturability of both.

e purc ase proce ure s e eren rom e procuremenprocedure.

There are eight stages of the purchase procedure, some of themalso involved in procurement process

The significance of the role of purchasing is based on the si*e ofe)penditures for goods/services as reflected in balance sheet.

The whole concept of purchasing activities is now changing fromtraditional material controlling to managing supply chains.


11/24

24PES O3 PU0C&ASES

There are four primary type of purchases which is classified on thebasis of classes of buyers Personal Purchasing:The buyers who purchases the materials /goods

for their personal consumption and survival in economical prices. Thewhole economy is depends upon this group of buyers.

Mercantile Purchasing: The buyers who purchases the goods /material for the purpose of resale to meet customer-s requirements butnot for heir own consumption. 0nder his group he buyers are

distributors, wholesalers, retailers and agents who creates he channelsof distribution of goods from manufacturers to the consumers.

In#ustrial purchasing:The buyers who purchases the semi!finishedgoods / raw material to consume or convert into finished product. Itinvolves buying of raw materials, components, consumable stores and

supplies, spares and tools, machines and equipments, officeappliances. 0nder this group the buyers are manufacturer,industrialist, small or medium scale business proprietors.

Institutional or 1o)ernment Purchasing: The buyers whopurchases the material / goods for public utilities. 0nder this group the

buyers are governmental agencies and institutions.


12/24

The manufacturing enterprises can segregate the types of purchases

according to the category of required material.These type of purchases requires a specific sets of skills to fulfil the

requirement and accomplish the process.

The types of purchases according to category of materials:

aw material

Purchased parts and

In 4eneral Purchasing

describes

componen sMaintenance epair

operating (M"

Packaging

Tools and equipments

'ervices

esale items

The process of buying

5nowing the need

'uppliers selection

Price negotiation6ollow!up

Timely delivery


13/24

PU0C&ASE P0OCEDU0E

(ee# 0ecognition

Selection o$Supplier

Maintenanceo$ !en#ors 6

7

(1P0OCEDU

0E

0ecei)ing % Inspection

Placing Or#er

3ollo8-upPaymento$ In)oice

Maintenanceo$ 0ecor#s

9

*

;,


14/24

PU0C&ASE POLICIES

&n enterprises requires to enhance and achieve continuousprocess improvement in order to produce their products

/services more effectively. There are some policies anenterprises can organi*e the purchasing/supply function in itsquest to achieve the obectives. The policies are as follows

Placement of Purchasing &uthority esponsibility for &naly*ing equirements

esponsibility of Purchasing7Materials Management

entrali*ation versus +ecentrali*ation The Team &pproach as Part of the rgani*ational 'tructure

rgani*ing 'upply hain Management

reating organi*ation for the future


15/24

PLACEME(2 O3 PU0C&ASI(1 AU2&O0I24

The four maor prerogatives of the purchasing department should be emphasi*edin the company8s written obectives and policies.

6irst, selection of the supply source is wholly a matter of purchasingauthority. The need to buy originates in other departments, where required

quality is defined. The purchasing authority is fully responsible for thepurchases so as to satisfy the all measures of the requisition made byconcerned.

'econd, all contacts with vendors / suppliers should be made through thepurchasing department, right from first sales interview to the delivery ofmaterial and approval of the endor8s invoice or any adustments that may benecessary.

Third, it is the duty of the purchasing authority and buyers to check purchaserequests against the need, referred as 9+emand Management:. They can alsosuggest necessary modifications in the requisitions to make it moreeconomical or more e)peditious procurement in order procured the materialin time to meet the necessary need.

6ourth, the commercial aspects of the purchases are within the urisdiction ofthe purchasing department. These include the method of purchase, the priceand pricing method, the terms and conditions of the order or contract,packing and shipping instructions.


16/24

0ESPO(SI"ILI24 3O0 A(AL4


17/24


18/24

CE(20ALI


19/24

CE(20ALInhances Inventory control ?ess operating e)penses

'tandardi*ation of the items

'ystem is more efficient in

administration It provides better control on

purchases as well as onsuppliers

?ack of recognition of uniqueneeds

6ocus of corporate requirements,not on business unit strategicrequirements

2arrow speciali*ation and obboredom

?ack of ob fle)ibility

Tendency to create organi*ational

silos


20/24


21/24

O01A(I


22/24

C0EA2I(1 O01A(I


23/24

P0OCU0EME(2 P0OCESS I( SCM

The procurement process includes the activities right from materialrequisitions to material acquisitions

The concept of adopting these activities are called as supply

management in the supply chain conte)t The variables of the procurement in 'M directly affects the profit of

the enterprise/s

These variables areg t ater a

f ight @uality 6rom the ight 'ource

In the ight @uantity

In the ight ondition

&t the ight Time

&t the ight Price and

6or the ight service

To achieve these all rights the techniques of procurement process supplychain is used


24/24

0E3E0E(CES

&ltekar ahul A., (1BBC", 9'upply hain Management:, P$I?earning Private ?imited, 2ew +elhi, 1BBC

hopra, 'unil and Peter Meindl, (1BBD", 9'upply hainManagement:, 1nd ed. 0pper 'addle iver Pearson Prentice $all

atholic elief 'ervices (1BEE" F 0nited 'tates onference ofatholic Gishops, 11H #est ?e)ington 'treet, Galtimore, M+ 1E1BE

F 0'&

o an y . . an es mu . . , upp y a n

Management (Theories and Practices":, Est edition, by Gi*tantraInnovation in Management

'hah Janat, (1BBC", 9'upply hain Management:, Pearson>ducation

'hinde Ailas G. (1BE1", 9Mergers and &cquisitions for Aalue hainManagement in the 6ramework of Technology +riven Industrial>ngineering Practices: Ph. +. Thesis, 0niversity of Mumbai

Documents

Vilasshinde.com Lib Docs SCM Module-II -A