Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

Figure 2.1: Procurement plays a vital support role within an organisation.

2.2.4 SUPPLIER MANAGEMENT

Many companies understand the key role that procurement plays in overall supply chain management and that supplier relationships are a vital part of successful procurement strategies. ‘Good suppliers do not grow on trees’ is a saying often quoted by procurement professionals. This is especially true when companies look to reduce their overall spend or consolidate the total number of their suppliers, frequently in conjunction with Total Quality Management (TQM) programmes or Just-in-Time (JIT) production and inventory systems. The strategy to use a smaller number of suppliers/vendors frequently means an alliance or partnership with suppliers/vendors because of the need to ensure an adequate supply of quality materials over time at an optimum total acquired cost. The partnership/alliance concept encompasses more than just the procurement process, since these days companies are developing partnerships throughout the supply chain. For example, partnerships are also evolving with transportation companies, contract logistics companies (third-party providers), and other channel members. Supplier management objectives include pursuing better relationships with fewer better suppliers and developing reliable, high-quality sources of supply. This objective includes procurement working directly with selected suppliers to improve their capabilities.

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