PROCUREMENT MANAGEMENT IN

SUPPLY CHAINTHE FUNDEMENTAL GOAL OF THE PROCUREMENT OR PURCHASING FUNCTION IS TO ACQUIRE OPTIMUM QUALITY AND QUANTITY OF GOODS AND SERVICES FOR THE COMPANY IN A TIMELY MANNER AND AT THE LOWEST TOTAL COST

PURCHASING CYCLE Requisitioning

Financial approval

Market Assessment

Purchase decision

Ordering

Delivery

Receipting and Accounting

Payment

Accounting system

Market Assessment After the purchasing officer receive an approval a check should be made to insure that the item is not already in stock

1. Is there a competitive market for them

2. Volume of the goods

3. List of suppliers

4. Scope of bulk purchase

Purchase decision

The choice of suppliers has to be justified under official information act

We have to point out or mark the suppliers in order to have cost cutting methods

Traditional inventory management

Inventory is the physical stock of items that a business or production organization keeps in hand for efficient running of affairs or its production

Inventory control technique implies ensuring availability of any materials

It assures of adequate supply of goods in order to meet an expected pattern of distribution of demand

The objective of inventory control was to provide efficient and smooth service to the customer by minimising the idling of men and machine which may cause due to the sortage to raw material

Order

Every organization need a good system of orderDelivery

It must be done in time because it also incurred the cost Receipts

It has to be clear procedures need to establish Payment

The satisfactory conclusion of a purchasing transaction is payment . It also help us to make good relation with the suppliers

Inventory Models

EOQ (Economic order quantity)

FOIS (Fixed order interval system)

FOQS (Fixed order quality system)

ORS (operational replenishment)

Economic Order Quality It is the level of inventory that minimizes the total inventory holding cost and ordering cost .The model was develop by F F. W . Harris

It determines the point at which the combination of order cost and inventory carrying cost are at least

It only applies when the demand for the product is constant

Assumption of EQM Model

Only one product is involve Annual demand requirement known

Demand is even through out the year

Lead time does not vary

Fixed Order Inventory system

This is a periodic review inventory scheme in which we review our inventory regularly such as once a month, and after the review we determine how much to order

After our review we order an amount equal to the difference between the maximum level and the amount in hand

It is economical

Fixed order quality system

In this system the basic inventory model is that the order quality is fixed and order or re-order is placed whenever the inventory touches a certain level known as order or reorder post

Operational replenishment system

In this system inventory is reviewed at periodical intervals and if there has been any depletion since the last review an order or reorder is placed

The amount ordered is equal to the amount by which a fixed replenishment level exceeds the actual inventory at the time of review

Material requirement planning

It is a production planning and inventory control system use to manage manufacture process most MRP system are software based but is can also be done by hand

USES • It ensure material are available for production and

product are ready to deliver to the customer • Maintain the lowest level of inventory • Plan manufacture activity delivery schedule and

purchase activity

Just in time (JIT)

Meeting the customer demand with minimum delay of the good and services

Taiichi ohno was the first to introduce jit in toyota manufacturing units he is also known as father of JIT

It reduces the waste and improve the product quality and efficiency of the product

Green channel suppliers

A green vendor is one who supplies the goods directly to the assembly line for further processing .

The suppliers has the information about the product requirement of the organization

There is no check or inspection of the goods This type of relation not only reduce the production

time but also built a good relation with the suppliers

Ship to line

Ship to line is another cost and time reducing method in supply chain management .It involve the suppliers to supply the raw material directly from the delivery vehicle to the assembly line .it usually requires vendor to be green channel suppliers .it also help to reduce the cost of the ware house