Merchant buyer- usually purchase their merchandise in volume to take advantage of quantity discount and other incentives such as transportation economy and storage efficiency. they create value by consolidating merchandise, breaking bulk and providing the essential logistical service. INDUSTRIAL BUYER- the typical industrial buyers are the manufacturer.
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• The right price is obtained from the marketplace through competitive bidding, which assures contracts with responsive and responsible suppliers at the lowest price. Buying the Right Quantity If purchasing too small a quantity: • the unit cost will usually be higher, • shortages may occur, • expediting responsibility will be greater, and • the relationship with the vendor may be strained. • If purchasing too large a quantity: • the excess inventory will raise costs, • obsolescence may be come a factor, and • storage becomes an issue for the agency. Buying the Right Quality Quality is normally determined by the requestor and defined in the specifications. • If the quality is too low, additional quantities may be required to compensate for the inferiorities. • If the quality is too high, the cost may be prohibiting. Buying at the Right Time • In markets that are extremely volatile, procurements must be timed to avoid buying when prices are on the upswing. • The buyer must have knowledge of the market and trends and the varied factors that affect the flow of the prices. • Deliver at the Right Time also means to make sure that the product or commodity get appropriate end-user when they need it. Buying at the Right Place • Goods and services must be delivered to the appropriate location to ensure availability for the intended users • Place becomes a critical concern when scheduling and planning for multiple locations. Buying from the Right Source • Vendors must be able to meet all of the requirements of the solicitation and not just some of them • The Buyer must carefully select the responsive/responsible vendor that can provide the best value to the solicitation. Buying the Right Service • Service before and after a particular procurement can solidify or destroy a sellerbuyer • The increased technical sophistication of many products and services requires that quality service must accompany the purchase. • Employee training is a new field that is gaining more importance.
The main objectives of each buyer should be to: • Supply the requester with an uninterrupted flow of 10 goods and services. • To purchase competitively by keeping ahead of the marketplace. • To place emphasis on quality and best value, not simply on lowest price. • To satisfying the requirements for consistency, fairness, equity, and transparency while maintaining a focus on maximizing competition
The ROLE of PROCUREMENT LM303 Principles of Logistics an Supply TOPIC: The Role of Procurement in an Organization. Prepared by: Group 1 (Hauler)
You should be able to: Understand procurement To know the goal/ objective of Procurement <ul><ul><li>Describe the role of purchasing and understand its impact on an organization’s competitive advantage. </li></ul></ul>
What is Procurement? The act of obtaining merchandise, capital equipment; raw materials, services, or maintenance, repair, and operating (MRO) supplies in exchange for money or its equivalent. Two Categories: 1. Merchant buyer wholesalers and retailers who purchase for resale 2. Industrial buyer purchase raw materials for conversion, services, capital equipment, & MRO supplies .
Is the process by which companies acquire raw materials, component, products, services, and other resources from supplier to execute their operation. Definition of Term: Procurement is the process of identifying and obtaining goods and services. It includes sourcing, purchasing and covers all activities from identifying potential suppliers through to delivery from supplier to the users or beneficiary; Purchasing is the specific function associated with the actual buying of goods and services from suppliers; Sourcing is simply: “Identifying and working with appropriate suppliers”.
The role of Procurement in an Organization
<ul><li>The primary goals of purchasing are: </li></ul><ul><ul><li>Ensure uninterrupted flows of raw materials at the lowest total cost, </li></ul></ul><ul><ul><li>Improve quality of the finished goods produced, and </li></ul></ul><ul><ul><li>Optimize customer satisfaction. </li></ul></ul><ul><li>Purchasing contributes to these objectives by: </li></ul><ul><ul><li>Actively seeking better materials and reliable suppliers, </li></ul></ul><ul><ul><li>Work closely with strategic suppliers to improve quality materials, and </li></ul></ul><ul><ul><li>Involving suppliers and purchasing personnel in new product design and development efforts. </li></ul></ul>
7 R’s of Procurement <ul><li>Right Price </li></ul><ul><li>Right Quantity </li></ul><ul><li>Right Quality </li></ul><ul><li>Right Time </li></ul><ul><li>Right Place </li></ul><ul><li>Right Source </li></ul><ul><li>Right Service </li></ul>
THE GOAL OF PROCUREMENT Is to carry out activities related to procurement in such a way that the goods and services, so procured are of the right quality, from the right source, are at the right cost and can be delivered in the right quantities, to the right place, at the right time.