The document outlines the fundamentals of procurement, detailing its definitions, differences from buying and purchasing, and its significance in business operations. It discusses the objectives of procurement, including acquiring materials efficiently, supporting company operations, and fostering relationships with suppliers. Additionally, it emphasizes the procurement department's role in corporate planning by enhancing profitability, working capital, and providing essential information to management.

2. COLLEGE OF BUSINESS AND MANAGEMENT
(CBM)
COURSE : BTCA, BTCBA & BTCPS
MODULE : BASIC PROCUREMENT PRINCIPLE
MODULE CODE : PST 04207
NO. OF CREDIT : 14
TOPIC ONE : INTRODUCTION TO PROCUREMENT
SUBTOPICS
Definition
The differences between buying, purchasing and procurement
Why is procurement important
Objectives of procurement

3. COLLEGE OF BUSINESS AND MANAGEMENT
(CBM)
Roles of procurement in corporate
planning
Function of procurement, what does
procurement do?
The Links with other department
(relationship)

4. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Definition
The term procurement is defined in several ways
depending on the inclination of its use.
According to Lyons & Farrington
Define procurement means buy materials of the
right quality, in the right quantity from the right
source delivered to the right place at the right
time at the right price.
Procurement aims at achieving the 5 R’S

5. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Other definition
Procurement is the function responsible for
purchase, buying , lease, hiring or other legal
means of acquisition of the right goods, works,
services required to satisfy certain needs at the
right time from the right supplier, contractor, or
service provider at the right price delivered at the
right place.
 The differences between buying, purchasing and procurement
The term buying, purchasing are used interchangeably with
procurement.

6. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Buying refers to acquire goods by exchange.
Purchasing usually refers to a limited range of procurement, its an
activity of buying things especially for company.
The difference between purchasing, buying and procurement are;-
Purchasing and Buying usually refers
 To a limited scope of acquisition
 Limited to the acquisition of goods and supplies
 Limited to tangible items being acquired
While Procurement usually refers
 To a wide concept than purchasing and buying
 Involves more process

7. TOPIC ONE : INTRODUCTION TO PROCUREMENT
it can also be viewed as a system
Encompass the acquisition of services, goods and
works
Undertaken for organizations (whatever in public
or private organizations)
Why is procurement important?
Procurement is important because;
 It is a vital of production department by pumping
raw materials, components and stationery to
facilitates production flow.

8. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Contribute positively in profit; through make
savings on components and therefore minimizing
the cost of production of the final product.
 Provide important information concerning
forward planning e.g. raw material availability,
market trend and opportunities
 Participate in the control of cash flow through
effective control of material purchase and ensure
that the budget is maintained, the cash is sound
and no wasteful use of funds.

9. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 All contract with outsiders are made through
procurement department hence makes the
whole process of procurement to be very
important for survive of the organisation and
human life at large.
 Carries research on new materials and
alternatives sources of supply
 Advice on board of director on matters
relating to supply

10. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Procurement Objectives
The main objective of procurement is the
acquisition of materials of the right quality, at the
right time, from the right supplier at the right
price.
Practically, it is not possible to strike a balance of
these five rights in most cases conflict exist
among objectives some trade of need to be
made. In other words achieving 5R’s is the
primary objective of procurement.

11. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Procurement Objectives
 To support company operations with uninterrupted flow
of materials and services. This is the main reason for
existence of department
 To purchase competitively. Properly administered
competitive purchasing/tendering contributes towards
obtaining competitive price. It involves understanding
supplier cost structure, which can assist in price
negotiations. To buy wisely. This involves continuous
search for better values that yield the best combination
of price, quality and services it entail coordination with
users in defining needs.

12. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 To develop reliable and effective source of supply. The
concept of buyer/ supplier relationship, which involves
identification, investigation, selection and development of
suppliers.
 Integration with other departments. To perform efficiently
procurement department must work closely with other
departments in the firm. Purchasing department plays a big
role in proving other department with vital information of new
products, prices sources, design etc.
 Function of procurement (what does procurement do?)
 Supply market monitoring

13. TOPIC ONE : INTRODUCTION TO PROCUREMENT
Supplier evaluation and selection
Clerical and administrative task
Processing procurement or stock
replenishment request
Proving input to the preparation of
specifications
Negotiating, buying and developing contracts
Expediting or contract management

14. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Roles of procurement in corporate planning
 It enhances the profitability of organisations by
ensuring costs of goods and services are reduced by
 Knowing what fair price to pay
 Negotiating price discounts
 Controlling price increases
 Consolidating purchases
 Obtaining discounts for prompt payment
 Going into long term contracts in turn for longer
discounts

15. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Evaluating “value in use factor” e.g. reliability and
maintainability
 Negotiating benefits not directly indicated in the price.
 Enhancing working capital by
 minimizing the time stocks are held
 Turning redundant stock into cash
 Negotiating extended payment times for purchases
 Obtaining “value for money” by
 Initiating value analysis exercises with designers, users and
suppliers
 Investigating the scope for standardization and simplification

16. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Developing profitable opportunities by
 Evaluating the performance of existing suppliers
 Discovering and appraising new suppliers
 Developing the capacity of suppliers to meet buyer’s need
 Investigating the possibilities of sourcing abroad, and vice
versa
 Scrutinizing the terms and conditions of purchasing
contracts
 To see if they are favourable in terms of price, quality,
services etc
 To see if they can be improved in any of the aspects
mentioned above.

17. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Providing management/departments etc. with advice on;-
 Supply markets
 Costs and prices of bought out goods and services
 Legal aspects of procurement
 Potential supply and continuous availability of items esp.
sensitive commodities
 Recommendations on policies e.g. futures trading
 Improving administrative procedures by ;-
 Controlling & reducing expenditure of purchasing

18. TOPIC ONE : INTRODUCTION TO PROCUREMENT
 Determining objectives for purchasing functions and
strategies to achieve them
 Devising purchasing function machinery, e.g.
computerization
 Staff training and development
 enhancing standing of organization by;-
 Consistently striving to achieve a reputation for fair
dealing
 Adherence to high ethical principles and practices