Procurement cyclesteps, phases or procedures
a)in modern businesses usually consist of the following steps:
1)Identification of need/
2)Procurement
3)specification Supplier Identification
4)Communication with supplie
5)Negotiation with the selected supplier
6)Supplier Liaison/agreement Logistics Management
7)Contract Management and payments etc
Identification of need
• Identification of need: This is an internal step for a company that involves understanding of the company needs by establishing a short term strategy (three to five years) followed by defining the technical direction and requirements
Supplier Identification • Supplier Identification: Once the company has answered important questions like: Make or buy, multiple or single suppliers, then it needs to identify who can provide the required product/service. There are many sources to search for supplier like company’s past records, other suppliers, trade shows, from internet etc.
Supplier selection
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Supplier selection: involves with finding potential suppliers. Identifying and selecting suppliers are important responsibilities of the purchasing department Some search is done to have knowledge of the potential suppliers. A list is prepared for all these suppliers
There are three types of sourcing/supply
_ s ole s o u r cin g : it means there is only one supplier available because of patents, technical specifications, location, raw materials, etc
_ M ultiple s o u r cin g : is the use of more than one supplier for an item. Competition will result in lower prices, and better services for the buyer
_Sin gle s o u r cin g : this is a planned decision by the organisation to select one supplier for an item when several sources are available
In selecting supplier, several factors are taken into consideration
>T e c h nic al c a p a bilit y : relevant technology, can the supplier assist in improving the product features?
> M a n u f a c t u rin g c a p a bilit y : does the supplier have strong financial capability, competent personnel, control systems for timely delivery?
> R elia bilit y : what is the reputation of the suppliers in this kind of job?
>Can the supplier be trusted? A f t e r s ale s e r vic e : can the supplier provide some technical support, or any other after-sale service as specified by the customer/buyer?
>P ric e : competitive price is desirable O t h e r c o n sid e r a tio n s : credit terms, willingness to hold inventory for the buyer
Potential suppliers are identified with the help of
: Salespersons of supplier/buyer firm
; Internet
:Trade magazines
:Trade directories
> A list of suppliers is made, then purchase department prepares document known as purchase enquiry or request for quotations
>The document is sent to potential suppliers in order to make sure that competitive and reliable quotations are received
>The enquiry can also be advertised in the press: for example invitation to tender
> Supplier Communication: When one or more suitable suppliers have been identified , r e q u e s t s f o r q u o t a tio n, r e q u e s t s f o r p r o p o s als, r e q u e s t s f o r in f o r m a tio n o r r e q u e s t s f o r t e n d e r may be advertised, or direct contact may be made with the suppliers. References for product/ service quality are consulted, and any requirements for follow-up services including installation, maintenance, and warranty are investigated.
>After the suppliers have completed and returned the quotations to the buyer, the quotations are analyzed for manufacturing capability, technical ability, reliability, price, compliance to specification, terms and conditions of sale, delivery and payment terms Then the buyer firm makes final selection of the supplierF
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