MATERIAL AND SUPPLY CHAIN MANAGEMENT

1. PURCHASE AND PROCUREMENT
SYSTEM
HA -6006
MATERIAL AND SUPPLY CHAIN MANAGEMENT
DR.TAMASMITA BASU
2035019
MHA 2nd SEMESTER

2. INTRODUCTION
1
CONTENTS
OBJECTIVES
2
TYPES OF PURCHASE
SYSTEMS
3
STEPS INVOLVED
4
RFPs AND RFQs , BIDDING
5
CONCLUSION
6

3. INTRODUCTION
PROCURENMENT -
Act of obtaining / buing goods
and services from external source
which ensures that buyer recieves
goods or services at best possible
price.

4. PURCHASING -
Purchasing refers to the process by
which a company contracts with
third parties to obtain goods and
services required to fulfill its business
objectives in the most timely and
cost-effective manner”

5. DIFFERENCE BETWEEN PURCHASING AND PROCUREMENT
“Procurement” is the overall
function that describes the
activities and processes to
acquire goods and services.
Importantly, and distinct from
“purchasing”, procurement
involves the activities involved
in establishing fundamental
requirements, sourcing
activities such as market
research and vendor evaluation
and negotiation of contracts. It
can also include the
purchasing activities required
to order and receive goods.
"Purchasing” refers to the
process of ordering and
receiving goods and services.
It is a subset of the wider
procurement process.
Generally, purchasing refers to
the process involved in
ordering goods such as
request, approval, creation of a
purchase order record and the
receipting of goods.

6. Objectives of Procurement -
1.Procuring goods of the right quality in the right quantity at the right price
at the right time from the right source.
2.To maintain continuous supply of materials for supporting the various
functions of the hospital.
3.To avoid wastage and duplication.
4.To ensure that all the above are carried out with utmost integrity .
5.To develop reliable sources of supply good relationship with vendors and to
continuously monitor vendor performance.
6.To do so with the minimum of capital investment (good inventory control
and achieving reduction in cost of materials while ensuring quality of
materials suitable for use)

7. 1 RIGHT QUALITY
2 RIGHT QUANTITY
3 RIGHT PLACE
4 RIGHT TIME
5 RIGHT PRICE
Obtaining goods in sufficient quantity to
meet demand and maintain service levels
while minimising excess stock holding.
Having goods delivered to the appropriate delivery
point, packaged and transported in such a way as
to secure their safe arrival in good condition
Securing all of the above at a price which is reasonable, fair,
competitive and affordable. Ideally, minimising procurement
costs in order to maximise profit
FIVE RIGHTS OF PROCUREMENT
Obtaining goods which are of
satisfactory quality and fit for their
purpose (suited to internal and
external customer’s needs).
Securing delivery of goods at the right time to meet
demand, but not so early as to incur unnecessary
inventory costs

9. STEPS IN PURCHASE AND PROCUREMENT SYSTEM
NEED RECOGNISATION
SPECIFIC NEED
SOURCE OPTIONS
PRICE AND TERMS
.

10. • 5. PURCHASE ORDER - The purchase order is used to buy
materials between a buyer and seller. it specifically defines the
price , specifications and terms and conditions of the product or
service and any additional obligations.
• 6. DELIVERY - The purchase order must be delivered, ususally
by fax , mail, personally, email or other electronic means.
Sometime the specific delivery method is specifiedin the
purchasing documents.The recipient then acknowledges reciept
of purchase order. Both parties keep a copy of file.
• 7. EXPEDITING - Expedition of purchase order addresses the
timelines of the service or materials delivered. It becomes
especially important if there are any delays. The issues most
often noted include payment dates, delivery times

11. • 8. RECIEPT AND INSPECTION OF PURCHASES - Once the
supplier delivers the product , the recipient accepts or rejects
the items. Acceptance of the item obligates the company to pay
for them.
•TYPES OF PURCHASE AND PROCUREMENT
SYSTEM -
1.TENDER SYSTEM - In this type of system the orgamization
invites supplies to give their quotationsand the suppliers with the
lowest quotations wins the contract. It is mostly followed by large
organization.
ADVN - competative, lower cost , transparent process.
DISADV - low price ususally determinant of quality, time
consuming

12. • 2. SUBCONTRACTING SYSTEM - The process of entering a contractual
agreement with an outside person and company to perform a certain
amount of work is known as subcontracting system. Outside person and
company are the subcontractors.
ADVN - cost saving , increased efficiency, continuing and risk management
DISADV - loss of managerial control , quality problem and hidden cost.
• 3. BLANKET ORDER SYSTEM - Items are purchased which are used
regularly. Divided into 2 methods -
a. Agreement is made to fixed quantity of the product at fixed price for a
specific period.
b. Agreement to made to supply for a specific period but quantity is
unknown.
ADVN - flexible , avoid placement of again and again reduce clinical
activties,protection against higher pricing in future
DISADV - poor vendor performance, difficult to determineand forecast to
quantity.

13. • 4. CAPITAL EQUIPMENT PURCHASE SYSTEM - Used to purchase large
value assets such as machinary equipments.
ADVN - flexible , one time investment , increased coordination and
communication
DISADV - requires lots of capital, decision making is difficult
5. IMPORTS - Indicates purchasing the goods from the outside country.
imports are governed by the central Govt.
ADVN - high quality , more variety , cheaper goods
DISADV - high tax , increase transportation cost , foreign exchange risk.
6. PROCUREMENT SYSTEM - It is business to business or business to Govt
- purchase and scale of suppliers work and service through the internet.
ADVN - reducing cost , productivity , quick processing
DISADV - no hard copies , training cost and system failure

14. • 7. STOCKELESS PURCHASING SYSTEM - In this system a supplier holds
the items ordered by customer in its own warehouse and release them as
and where required by the customer.
ADVN - required workhouse space , required inventory turnover ,lean
manpower
DISADV - high cost , need of complex technology
• 8. TELEPHONE ORDERED SYSTEM - order is placed over telephone.
ususally items with small quantity is being ordered by this system.
• 9. RATE CONTRACT SYSTEM - Mutual agreements between the buyer and
the seller to operate a set of choosen tems, during a given period of time ,
for a fixed price variation

15. .
An RFP is a document that lists all of the requirements and needs of a
project. It helps companies prepare for upcoming projects as a form of a
proposal to potential contractors and agencies.
• What is included in an RFP process?
Determining needs
Writing
Distributing
Evaluating
Reevaluating
Decision-making
• What are the types of RFPs?
Marketing RFP ,Social media RFP,Branding RFP,Design RFP,Website
RFP,Workplace RFP,
PR RFP,Government and non-profit RFP

16. An RFP:
• Informs suppliers that an organization is looking to procure and
encourages them to make their best effort.
• Requires the company to specify what it proposes to purchase. If
the requirements analysis has been prepared properly, it can be
incorporated quite easily into the Request document.
• Alerts suppliers that the selection process is competitive.
• Allows for wide distribution and response.
• Ensures that suppliers respond factually to the identified
requirements.
• Is generally expected to follow a structured evaluation and
selection procedure, so that an organization can demonstrate
impartiality - a crucial factor in public sector procurements.

17. sample RFP for reference -
https://juniperhealth.org/wp-content/uploads/2019/07/X-ray-
Equipment-RFP.pdf

18. • RFQ - REQUEST FOR QUOTATION
• A request for quotation (RfQ) is a business process in which a company or
public entity requests a quote from a supplier for the purchase of specific
products or services. RfQ generally means the same thing as Call for bids
(CfB) and Invitation for bid (IfB).
• A request for a quote (RFQ) is a business process in which a business solicits
quotes from select suppliers and contractors for a specific task or project.
• An RFQ can be sent alone or in tandem with a request for proposal (RFP).
• A business generally sends an RFQ when the quantity for a standard
product is known and needs are ongoing.
• RFQs do not generate unsolicited bids and quotes as businesses target
specific vendors and contractors.
• An RfQ typically involves more than the price per item. Information like
payment terms, quality level per item or contract length may be requested
during the bidding process.
• An RfQ typically involves more than the price per item. Information like
payment terms, quality level per item or contract length may be requested
during the bidding process.

19. • To receive correct quotes, RfQs often include the specifications of the items/services
to make sure all the suppliers are bidding on the same item/service. Logically, the
more detailed the specifications, the more accurate the quote will be and comparable
to the other suppliers. Another reason for being detailed in sending out an RfQ is
that the specifications could be used as legal binding documentation for the suppliers.
• After the RfQ process, professional procurement organizations have to compare the
quotations, and try to get the best price for the job (by negotiations, or by
conducting an e-auction (a reverse auction or a ticker auction). Aim is to determine
the fair market value of the goods or services and thus generate savings for the
company.
• RfQs are best suited to products and services that are as standardized and as
commoditized as possible, as this makes each supplier's quote comparable. In
practice, many businesses use an RfQ where an RfT or RfI would be more
appropriate.
• An RfQ allows different contractors to provide a quotation, among which the best
will be selected. It also makes the potential for competitive bidding a lot higher, since
the suppliers could be quite certain that they are not the only ones bidding for the
products.

20. TECHNICAL AND FINANCIAL BIDDING
• In a tender offer, the TECHNICAL BID talks about how you understand the
delivering, how you are going to deliver it, by what resources and with which
qualifications, to which timeline and with which KPIs and they has better include all
the ones expected in the tender and in the format expected, if given. Your
expectations from what the client or other contractees of the client need to have put
in place in order for you to do the job also go there.
• The FINANCIAL BID is often in a completely separate envelope and contains the
price you want, the timing of payment, and anything else like the bank account it
should be paid on.
• You should not mention fees at all in the technical bid as these are often assessed
separately so as to ensure best value for money not just lowest price.
• Technical bids can be ten or twenty times fatter than the financial bid.

21. FOR BETTER UNDERSTNDING -
• Technical bid speaks of every thing except money. It covers details specs of product ,
testing, gurantee / warranty, payment terms, penalty, advance, bank guarded etc
etc. once technical bids are evaluated and successful once selected, price bids are
opened for only technically accepted offers for final processing.
• The financial bid is often in a completely separate envelope and contains the price
you want, the timing of payment, and anything else like the bank account it should
be paid on.
• Bid and offer are quotes on a single type of financial asset, just that bidders want to
buy the asset at one price while sellers want to sell the same type of asset for a
different price.
• For example with foreign currency- a British bank may buy 1 US dollar (bid for
dollars) for say 1 pound then sell (offer to sell) that same US$1 for say 1.03 pounds
so that the bank makes a net profit.

22. CONCLUSION
• The role of procurement and supply chain management will help
businesses maximize profits. This is done by balancing cost reduction,
supplier quality, assurance of supply and increasingly unlocking supplier
innovation.
• As the manufacturing and supply chain environment grows more
complex, procurement and supply chain management functions are
also growing more strategic in manufacturing companies that need to
find new ways to optimize the supply chain.
• Procurement also helps manage compliance and reduce overall supply
chain risk.
• Procurement helps organizations become “the customer of choice” to
suppliers, which helps manufacturers drive innovation and bring
products to masrket faster— and with higher margins.

23. • The smooth functioning of the production department depends upon a large extent on the right
type of materials purchased at right time at right quality and at right cost.
• The right cost of materials leads to good saving. It is possible through efficient buying.
• The purchase manager must be technically skilled, innovative, intelligent, vigilant and efficient
inbargaining.
• Heavy competition has generated the importance of efficient purchasing.
• Forany industrial project, the purchasing is main function that contributes in the timely
execution and delivery.
• The corporate policy indicates the guidance map for purchasing. Itincludes the purchasing
strategies, plans, programmes and goals.
• The purchasing department must have good coordination with other departments like finance,
engineering,
production, quality department, etc.
• The purchasing department is responsible for avoiding any type of over-inventory or under-
inventory. The purchasing department helps in the clearance of all the bills of external parties
like suppliers, etc. Every organisation must adopt scientific and analytical way of identifying the
need and type of materials, right supplier and smooth flow of materials.

24. REFERENCES
https://www.investopedia.com/terms/r/request-for-
quote.asp#:~:text=A%20request%20for%20quote%20(RFQ)%2C%20also%20k
nown%20as%20an,fulfill%20certain%20tasks%20or%20projects.
https://www.linkedin.com/pulse/five-rights-procurement-eman-abouzeid-
cscp-cips-
https://www.g2.com/articles/rfp-request-for-proposal
https://perso.crans.org/fortineau/ressources_maxnce_nouchet/Introduction%
20to%20Materials%20Management.pdf

25. THANK YOU