Purchasing

1. Purchasing Defn Jack Ninemeir defines purchasing as "the series of activities designed to obtain products of the right quality and quantity at the right price and time and from the right source."

2. Purchasing requires determining the standards (purchase specifications) for the products to be procured .

3. Cont……. • Purchasing requires determining the standards (purchase specifications) for the products to be procured . Clearly, there is more to purchasing effectively than simply paying for product.  • In purchasing we must be very specific exactly what it is we need and how much. 

4. Cont….. • Purchasing as a function provide the interface between customer and supplier in order to plan, obtain, store and distribute as necessary, supplies of materials, goods and services to enable the organization satisfy its external and internal customers.

5. Objectives of purchasing • Objectives are clear statements of the results the organization wishes to achieve. • They can be medium to short-term, long-term or strategic. • The operational or functional objective are short-term, tactical and specific. • The objectives will include: obtaining goods or services of the right quality in the right quantity from the right source to the right place at the right time at the right price.

6. Cont… • In practice some objectives are irreconcilable e.g it may be possible to obtain the right quality but not at the right price. • The objectives have to be balanced according to the overall corporate strategy and requirements at a given time. E.g • Corporate strategy- a plan introduce a cost reduction programme • PSO will be a plan to introduce supplies standardization, supplier reduction programme and e-procurement

7. Purchasing methods Tendering- • A tender is a formal offer to supply goods or service for an agreed price. Also commonly referred to as a bid.

8. Types of tenders Open tender-a contract is advertised in the press or on the internet then the lowest tender generally being accepted. However, the advertiser usually state that they are not bound to accept the lowest or any tender

9. Restricted open tenders • Suppliers are invited to compete for a contract. The advert is restricted to appropriate technical journals or local newspapers

10. Selective tenders • Tenders are invited from suppliers on an approved list. Vetting is done regarding their competence and financial capability.

11. Serial tenders • Suppliers are requested on either open or selective basis to tender for an initial scheme on basis that subject to satisfactory performance and unforeseen financial contingencies, a programme of work will be given to the successful contractor. • The rates and prices for the first job form the basis for the rest of the programme.

12. Negotiated tenders • A tender is negotiated with only one supplier so competition is eliminated.

13. Supplier evaluation The seven aspects of evaluating suppliers (7 Cs) • Competence of the supplier to undertake the tasks required • Capacity of the supplier to meet the purchaser’s total needs • Commitment of the supplier to the customer in terms quality, cost and service • Control systems in relation to inventory, cost budgets and people and information

14. Cont……….. • Cash resources and financial stability ensuring that the selected supplier is financial sound and is able to continue in business into the foreseeable future • Cost commensurate with the quality and service • Consistency i.e. the ability of the supplier to deliver consistently and where possible improve levels of quality and service

15. Green Procurement • Green Procurement is also known as Affirmative Procurement. This is referred to as the purchase products and services which are environmentally friendly. • The products or services purchased should have a lower impact on the environment over their whole life cycle than the standard equivalent.

16. Cont……. • It involves the integration of environmental issues into purchasing decisions based on price, performance and quality. Green procurement requires pollution prevention and reduction of waste along with price, performance, and other traditional factors, when making purchasing decisions.

17. The Green Procurement entails program elements which include: • Recycled content products • Energy Efficient products and energy efficient standby power devices • Alternative fuel vehicles, alternative fuels, and fuel efficient vehicles

18. Cont……….. • Bio-based products • Non-ozone depleting substances • Alternative fuels and fuel efficient vehicles • Environmental Protection Priority Chemicals

19. Advantages of Green Procurement Green procurement has the following benefits Economic benefits • Green procurement enables organizations reduce handling expenses and risks associated with waste disposal by reducing supplier-generated wastes and surpluses. • It helps organizations to achieve competitive advantage through innovation. Efficient production may be enhanced through suppliers’ use of cleaner technologies, process innovation, and waste reduction. • It leads to improved public image. Greening its suppliers can contribute to a company’s overall reputation among customers, investors, employees, and other stakeholders.