PROCUREMENT

PROCUREMENTBy Nikhita Anchan

WHAT IS PROCUREMENT?

Procurement is the acquisition of goods, services or works from an external source(another firm).

It is favourable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the acquirer in terms of quality and quantity, time, and location.

PROCUREMENT LIFE CYCLE

Identification of Need

Supplier Identification

Supplier Communication

Logistics Management Supplier Liaison Negotiation

PROCUREMENT LIFE CYCLE

1.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.

2.Supplier Identification: Once the company has answered important questions like: Make-buy, multiple vs. single suppliers, then it needs to identify who can provide the required product/service (P/S). There are many sources to search for supplier and trade shows.

3.Supplier Communication: When one or more suitable suppliers have been identified, requests for quotation, requests for proposals(RFP), requests for information or requests for tender 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 are investigated.

PROCUREMENT LIFE CYCLE

4.Negotiation: Negotiations are undertaken, and price, availability, and customization possibilities are established. Delivery schedules are negotiated, and a contract to acquired

5.Supplier Liaison: During this phase, the company evaluates the performance of the P/S and any accompanying service support, as they are consumed. Supplier score card is a popular tool for this purpose .When the P/S has been consumed or disposed of, the contract expires, or the product or service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier.

6.Logistics Management: Supplier preparation, expediting- shipment, delivery, and payment for the P/S are completed, based on contract terms. Installation and training may also be included.

E-PROCUREMENT

E-procurement is the business-to-businessor, business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet.

PROCUREMENT SOFTWARE

Procurement software is business software that helps to automate the purchasing function of organizations. Activities including raising and approving purchase orders, selecting and ordering the product or service, receiving and matching the invoice and order, and paying the bill is handled electronically

There are more than one hundred e-Procurement solutions available today.

SOME E PROCUREMENT SOFTWARES

ADVANTAGES OF E PROCUREMENT

Reduced CostsE-procurement saves you money by preventing duplicate spending, leveraging volume buying, and saving you costs associated with paper-based systems (for example, the cost of stamps to mail your paperwork).

Transparent SpendingElectronically conducting your procurement makes it easier to write and analyze reports on your procurement systems, meaning you can ensure that your procurement procedures conform to your policies. 

Increased ProductivityOnce you've learned the system, e-procurement is less time-consuming than traditional procurement. Having your records stored electronically makes it easier to submit reusable tenders. Meanwhile, use of templates means paperwork can be filled out more quickly.

ADVANTAGES OF E PROCUREMENT

Eliminating PaperworkTired of finding new space to store all that paperwork? With e-procurement, everything can be saved and stored electronically. This not only saves you from needing more room, it also makes the process of finding older tenders

more simple. 

Increased Transaction SpeedE-procurement is both time-saving and efficient. As the electronic handling of tasks supports and simplifies the purchasing process, transaction speed is increased. Also, because of e-enabled relationships with suppliers, procurement cycle times speed up. The e-procurement process eliminates unnecessary activities, allowing you to focus on more valuable tasks.

Standardized BuyingWhen you have various departments making procurement decisions, there can be differences in what and how they purchase. Conducting purchasing electronically makes it easier for every department to conform to company procurement standards. 

RISKS OF E PROCUREMENT

One of the primary risks is missing opportunities to implement strategies that improve procurement management without the need for investment in e-procurement. This is because many of the benefits ascribed to e-procurement may be achieved simply by improving procurement practice.

Another risk is over-investment in e-procurement tools that do not deliver the expected benefits. This risk arises when there has been inadequate evaluation of the implications of the adoption or enhancement of e-procurement tools.

The risk that users will not accept an e-procurement tool is another common risk. This risk often arises where users have not been adequately consulted about the adoption or enhancement of particular tools.

On the supply side, there is a risk that suppliers will not cooperate with the use of e-procurement tools.

THANK YOU!