The ROLE of The ROLE of PROCUREMENPROCUREMEN

TTLM303 Principles of Logistics an SupplyTOPIC: The Role of Procurement in an Organization.Prepared by: Group 1 (Hauler)

You should be able to:You should be able to:

Understand procurement

To know the goal/ objective of Procurement

Describe the role of purchasing and understand its impact on an organization’s competitive advantage.

What is Procurement?What is Procurement?The act of obtaining merchandise, capital equipment; raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent.

Two Categories:Two Categories:

1. Merchant buyer1. Merchant buyerwholesalers and retailers who purchase for resale

2. Industrial buyer2. Industrial buyerpurchase raw materials for conversion, services,

capital equipment, & MRO supplies.

Is the process by which companies acquire raw materials, component, products, services, and other resources from supplier to execute their operation.

Definition of Term:

Procurement is the process of identifying and obtaining goods and services. It includes sourcing, purchasing and covers all activities from identifying potential suppliers through to delivery from supplier to the users or beneficiary;

Purchasing is the specific function associated with the actual buying of goods and services from suppliers;

Sourcing is simply: “Identifying and working with appropriate suppliers”.

The role of Procurement in an Organization

The primary goals of purchasing are:1. Ensure uninterrupted flows of raw materials at

the lowest total cost, 2. Improve quality of the finished goods produced,

and 3. Optimize customer satisfaction.

Purchasing contributes to these objectives by: Actively seeking better materials and reliable

suppliers, Work closely with strategic suppliers to improve

quality materials, and Involving suppliers and purchasing personnel in

new product design and development efforts.

7 R’s of Procurement7 R’s of Procurement

1.Right Price2.Right Quantity3.Right Quality4.Right Time5.Right Place6.Right Source7.Right Service

THE GOAL OF PROCUREMENTTHE GOAL OF PROCUREMENT

Is to carry out activities related to procurement in such a way that the goods and services, so procured are of the right quality, from the right source, are at the right cost and can be delivered in the right quantities, to the right place, at the right time.