Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

2.7.3 LONG-TERM PURCHASE AGREEMENTS

Long-tern purchase agreements, as opposed to blanket purchase orders, are set up to cover the purchase of higher value/cost items over a long period of time. Typically, these agreements are set up for a time period of one to five years with review and renewal during that period based on a supplier’s ability to conform to performance expectations (including quality, quantity, cost, damages, etc.). Long-term purchase agreements can reduce transaction costs by eliminating the need for time-consuming renewal for each purchase and/or a group of purchases. In addition, once a buyer and supplier have reached agreement on the terms of the contract, it often becomes possible to shift the material-releasing responsibility to users. Material releasing should ideally be accomplished electronically, as opposed to manually, to save more time and cost [1]. From time to time the processes and procedures used in procurement should be evaluated to determine if these processes and procedures could be improved. Re-design efforts can lead to reduced cycle times for transactions, simplified processes and procedures, reduced costs and improved service levels. The procurement process affects many individuals and groups within an organisation. Users in every department within an organisation can benefit from a procurement process re-design initiative [1].

2.7.4 PROCUREMENT PROCESS REDESIGN

2.7.5 ELECTRONIC DATA INTERCHANGE

EDI involves the computer-to-computer exchange of information. It can be used to support transactions between a buyer and a seller, allowing for greater efficiencies and streamlined communication. This, in turn, can lead to less time and lower costs in the procurement process.

2.7.6 ELECTRONIC CATALOGUES

Procurement groups typically use this approach in conjunction with other low value/cost item purchase systems. Electronic catalogues provide a user-friendly way of accessing information about a seller’s products and/or services. The key benefit of using electronic catalogues is their low-cost search capability, and, if users order directly from these catalogues (using a procurement card for instance) cycle times and ordering costs can be reduced [1]. 2.8 CONCLUDING REMARKS This chapter provided an overview of the purchasing process, including the key objectives and functions; key steps in the purchasing process/the purchasing

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