Procurement, which refers to the raw materials, component parts, and supplies brought
from outside organizations to support a company’s operations, is an important activity and
closely related to logistics because acquired goods and services must be entered into the
supply chain in the exact quantities and at the precise time they are needed.
Historically, procurement, purchasing, and supply management were terms that could be
used almost interchangeability, but this is no longer the case.
Taking a supply chain perspective toward purchasing has led some companies to use the
term strategic sourcing.
this approach involves an increased focus on identifying and using data internally
and across the supply chain so that a company can consolidate its purchasing power
for enhanced value.
Utilization of procurement cards (also referred to as p-cards) has grown dramatically with
the evolution of electronic commerce.
Potential procurement objectives include, but are not limited to:
- Supporting organizational goals and objectives.
- Managing the purchasing process effectively and efficiently.
- Managing the supply base.
- Developing strong relationships with other functional groups.
- Supporting operational requirements.
Multiple sourcing proponents argue that by having more than one supplier increased
amounts of competition, greater supply risk migration, and improved market intelligence can
arise.
Single sourcing consolidates purchase volume with a single supplier with the hopes of
enjoying lower costs per unit and increases cooperation and communication in the supply
relationship.
A process-based evaluation is an assessment of the supplier’s service and/or production
process (typically involving a supplier audit).
a supplier audit usually involved an onsite
visit to a supplier’s facility.
Many companies use supplier scorecards to report
performance information to their supplier.
Kraljic’s Portfolio Matrix is used by many managers to
classify corporate purchases in terms of importance and
supply complexity with a goal of minimizing supply
vulnerability and getting the most out of the firm’s
purchasing power.
Supplier development (reverse marketing) refers to
Figure 1: Kraljic's Portfolio Matrix
aggressive procurement involvement not typically part
of supplier selection and can include a purchaser initiating contact with a supplier or a
purchaser establishing prices, terms, and conditions, among other behaviors.
Global procurement (sourcing), which refers to buying components and inputs anywhere in
the world, is driven by two primary reasons, namely, the factor-input strategy and the
market-access strategy.
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