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CHAPTER 1
PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT
The second idea is premised on the notion that supply chain management
integrates supply and demand management within and across companies.
Unfortunately, many organisations pay attention only to what is happening within
their firms and therefore fail to understand the importance of the entire chain of
activities that ultimately delivers products to the final customer. Consequently,
this has led to disjointed and often ineffective supply chains.
As noted, the main purpose of this chapter is to discuss the principles of supply
chain management and procurement. However, procurement will be discussed
from the perspective of integrated supply chain management. Procurement
plays a critical role in the implementation and management process of supply
chains. New developments in managing supply chains are forcing procurement
departments to implement new practices and adopt new ways of handling the
interface between buyers and suppliers and to integrate internal and external
production and product development activities. For the individual procurement
officer, this can often be a difficult process of unlearning old practices and
adapting to new realities.
1.2 THE RELATIONSHIP BETWEEN SUPPLY CHAIN MANAGEMENT AND
PROCUREMENT
Supply chain management can also be described as the integrated management
and control of the flow of information, materials and services from the suppliers
of the raw materials, through the factories, warehouses and retailers, and finally
to the end customers [9]. It includes systems management, manufacturing and
assembly, sourcing and procurement, production scheduling, order processing,
inventory management, warehousing and customer services [10]. Procurement
is only one aspect of supply chain management and involves ensuring that
goods or services get to the customer at the right time, price, quality, quantity
and place [9].
Procurement is thus defined as a process that involves the acquisition of property,
plant and/or equipment, goods, works or services through the purchase, hire,
lease, rental or exchange from any source other than the buying organisation
[11]. It encompasses the purchasing function, stores, traffic and transportation,
incoming inspection and quality control and assurance, supply market research,
supplier management and improvement and negotiation and contracting. It is
referred to as performing the five rights: getting the right product quality, in the
right quantity, at the right time, for the right price, from the right supplier [12, 13].
Figure 1.1 illustrates the relationship between supply chain and procurement.