Eskom Procurement Book 2015

PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT

must identify and exploit all opportunities available to it. Inputs provided by the procurement function include: • The raw materials, intermediate goods, services and information needed in the production of goods and services. In the case of Eskom, coal and water are the inputs necessary for generating electricity. • The finished goods, services and information required for resale or for operational purposes. • The capital goods, moving assets, consumables, services and information needed to equip and support the operation of the business [20]. There are various roles and activities performed at different levels of management within the procurement function. The purchasing function seeks to obtain the highest-quality goods and services at the lowest possible cost at the right time and place. Therefore its roles and activities are as follows: • Procurement carries out an ongoing analysis of price and cost trends. Since the cost of purchasing represents the largest share of organisational costs, it is therefore the role of procurement to analyse the price and cost of sourcing products and services to ensure that they are sourced at the lowest possible cost. • Top management within the function develops and sets policies for soliciting and evaluating the proposals, quotes and suppliers. • Procurement determines the needs and specifications of organisational customers. • The function estimates the future needs of the organisation, which are then communicated to suppliers. • Procurement must ensure that material and/or services sourced meet the required minimum quality standards so that the end product or service will meet expectations at an acceptable cost. • Procurement is expected to measure supplier performance on an ongoing basis. • Procurement draws up contracts and negotiates mutually acceptable terms with suppliers. • Procurement is expected to conduct market research in order to identify new suppliers and the needs of organisational customers. • Procurement expedites the delivery of shipments, where necessary, and to exercise inventory control. • Procurement is responsible for finding or developing best-in-class suppliers. The success of procurement depends on its ability to align supply-based decisions with the organisation’s strategic priorities; and to identify or develop suppliers, analyse their capabilities, select appropriate suppliers and work with suppliers to obtain continuous improvement. • Procurement is responsible for keeping inventory at an optimum level to reduce the cost involved in maintaining large inventories. Some organisations

1.5.1 ROLES AND ACTIVITIES PERFORMED BY THE PROCUREMENT FUNCTION

11 CHAPTER 1