Procurement Management
Lecture 2
Workshop 1
Procurement Management 3
Recognition
of needs
Fulfillment
of need Specification
Make-or-buy
Payment
decision
Procurement
Cycle
Source
Receipt
Identification
Contract Source
Management Selection
Contracting
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Procurement Management
For example:
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•Sourcing :Before a Purchase Order/Contract is
issued, the right supplier for this type of
purchase needs to be identified.
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Procurement Management
Undertaking studies and researches aimed at predicting
gather information about markets.
.
Scheduling purchases where you place a timetable for the
provision of the needs of the facility
Review purchase orders submitted by the departments of the
property in order to- :
•Make sure to match the purchase order for the policy of
purchasing procedures.
•Reduction of overstatement in some departments supply request.
•Make sure there is no shortage of information and specifications
contained in purchase order.
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Procurement Management
Approve or reject purchase orders.
Issuing orders for the suppliers.
Review procurement contracts to ensure legal integrity.
Organizing records to save all information and data relating
the operations of purchase.
Discharge of stored items that are no longer needed.
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Procurement Management
Production department.
Financial department
Marketing department
Warehousing department
Top Management department
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Procurement Management
The procurement operations cut across most departmental
lines.
Figure 1 provides a graphic illustration of procurement’s
many interfaces within the organisation
Production Procurement
•Determine specifications of •Comply with these specifications
without sacrificing economic aspects
purchased items.
•Cooperate in inspecting purchasing •Checking orders to make sure they
orders conform to the specifications
•Detecting future needs of •Notifies the production management
materials and supplies before on an ongoing basis for the position of
sufficient time to allow for the procurement and supply.
management of procurement review.
• Choice of suppliers and purchase
the items
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Procurement Management
The financial dept. exercises
The procurement dept .sends
financial control of the Purchasing
copies of invoices and records
Management Activity of the receipt
-Pay to suppliers in the deadlines -Determining required quantity
set by the procurement department to allocate required money
-Assurance of getting discounts
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Procurement Management
The marketing department determine the size of the
anticipated sales and through which the production
department identifying the needs of the organization.
Production department plan the production
requirements of the procurement department, which
provided on time and to the required specifications.
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Procurement Management
Warehousing dept. determines minimum level the quantities,
which required to repurchase this product.
The role of procurement dept. confirms the schedules of
purchasing orders detail so that WH dept. can manage inspection
process and the storage place,
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Procurement Management
The Purchasing Management in conjunction with the committees of
senior management plans and formulates policies for dealing with
suppliers and markets, and economic factors related to supply and
demand
The Procurement Department is working as a consultant to senior
management when making decisions to manage the procurement
relationship.
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Procurement Management
Top
Management
Marketing Production
HR manager Financial R and D
Manager Manager Manager department
Manufacturing Engineering
Procurement
Design
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Procurement Management
Top
Management
HR Marketing Financial Production R and D
manager Manager Manager Manager department
Accounting Auditing Procurement
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Procurement Management
Top
Manage
ment
Marketing Procurement Production
HR Dept. Dept. Financial
Dept. Dept. Dept.
Receiving and Purchasing Transportation
Research Unit Record Unit Follow-up unit
Inspecting committee unit
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Procurement Management
Basically there are 3 alternatives:
Complete centralization: A centralized procurement occurs when “all main
procurement is controlled at one central location for the entire firm”
(Leenders and Johnson 2000) generally located in the headquarters.
Centralization of purchasing makes it possible to control the resources
used and the activities performed at one place in the organization.
Complete decentralization: A decentralized procurement occurs when “all
main purchasing is controlled at the business units, and/or divisions”
(Leenders and Johnson, 2000),different business units are responsible
for their own purchasing activities .
Hybrid procurement system :a central leadership structure supported
by local managers with some degree of autonomy. Advances in
technology have made this easier, as communication and working
processes can be fast, letting directives filter through hybridized
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structures more quickly Procurement Management
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What are the advantages and disadvantages of
centralization and decentralization of procurement?
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