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Samenvatting Trade for SME
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Trade for SMEL1 – procurement management
The purchasing process model
Sourcing & Supply : mostly used in production environment
Buying : mostly used in retail
Purchasing : mostly associated with the Operational activities
Procurement vs. purchasing
Procurement:
Broader context incl the stategical elements, incl Sourcing, incl supplier mgt
“the process of finding and acquiring all of the goods, services, and works an
organization needs to operate and fulfill its business model”
Activities include
o Identify goods and services required
o Approve purchase requests
o Procurement
o Identify suppliers
o Sending inquiries (RFQs and RFPs)
o Receipt of quotes from suppliers
o Negotiate pricing and terms
o Select vendors
Purchasing:
Focus on the Operational activities
“set of tasks involved in buying goods and services. Purchasing involves tasks such as
ordering, raising purchase orders, receiving, and arranging payment”
Activities include
o Acknowledge purchase orders
o Advance shipment notice
o Receive goods
o Inventory management
o Invoice recording
o Three-way match
o Payment to supplier
1
,Procurement covers different aspects :
Strategic elements (single supplier vs multi supplier)
Operational (…steps to buy)
Technology (e Procurement)
Contract (almost legal)
Strategic - tactical - operational procurment
The 5 rights of procurement:
At the Right Time.
In the Right Quantity,
At the Right Quality
At the Right Price
In the Right Place
Extensions to 6R, 7R, ….
o To Acquire the right material
o From the Right Supplier
Business context
4 economic sectors:
2
,Colin clark sector model:
-> Evolution of Economic Sector
-> Western Economic world (3-4th)
Relationship economic sectors -> purchasing
Economic Sector drives the procurement strategy
Business strategy drives the procurement strategy
o Cost Leader (Colruyt, Aldi, Mediamarkt, ..) …everything with small margins
o Product / Differentiation (Apple, Tesla, …)
Type of business
B2B – B2C is less important for procurement strategy
Marketing much more impacted
We will try to focus on B2B
Importance of procurement (department)
Porter value chain model
A typical company structure..including supporting services
3
, What’s Procurement’s place in the Value Chain?
Although Procurement departement is typically as ‘supporting service’, it is of
strategic importance
A well-organized procurement department will be the 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.
A developing recognition that concern with strategic costs of supply and total cost of
ownership (TCO), rather than short-term price, is important.
Procurement Roles / functions
Procurement role: Isolated?
Not an isolated role/function
Interaction with many colleagues/departements INSIDE the company
Interaction with suppliers OUTSIDE the company
Interaction with others:
A procurement role/functions is never working at its own
Does she/he knows al the details of the goods to be purchased ?
Typically working for an ”Internal Customer”
o Defining the “needs” & the details (see Specifications”)
For significant purchases, a DMU (Decision Making Unit) is composed
DMU (Decision Making Unit)
What?
o Team of individuals who participate in a buyer decision process.
o Relates to business or organizational buying decisions.
Why?
o Minimalise the risk by involving as many people
as possible in the decision making process.
Who?
o Typical Roles (see scheme)
4
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