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CHAPTER 2
THE PROCUREMENT PROCESS
2.2 PROCUREMENT OBJECTIVES
The objectives of a modern purchasing organisation go far beyond the traditional
objectives of purchasing. The key objectives for a purchasing organisation
are covered in this section and include supporting operational requirements;
managing the procurement process; working with other functional groups;
supplier management; supporting organisational goals and objectives; and
developing sourcing strategies.
2.2.1 SUPPORTING OPERATIONAL REQUIREMENTS
Procurement has an important role to play in supporting the day-to-day
operational requirements of a firm. It accomplishes this through the acquisition
of raw materials, components, sub-assemblies, finished goods, maintenance
and repair items and services. Procurement supports supply chain functions
including, for example, transportation and distribution centre functions. In this
regard, procurement would play a role in ensuring that end customers receive
replacement parts or finished products. Procurement supports engineering
functions and technical groups within an organisation during new plant or product
development, commissioning and installation of new machinery and provision
of replacement parts.
Modern enterprises are also looking to concentrate on core competencies
and this has seen a dramatic rise in outsourcing to, and reliance on, external
suppliers to provide not only materials and products but also services, including,
for example, information technology support, design services, etc. In addition,
global business activity continues to increase. Companies are looking to foreign
countries to provide sources of services and products at lower costs, including
lower labour costs. This presents a whole new set of challenges for today’s
procurement organisation.
As more emphasis is placed on the use of external suppliers, including global
suppliers, procurement’s role must include the close support and management
of these suppliers to ensure an uninterrupted flow of high-quality goods and
services. Procurement has a key responsibility to meet the needs of its internal
and external customers; in this regard, by buying products and services:
• From the best sources.
• At the correct specifications.
• At the right price.
• In the correct quantities.
• Delivered at the right time.
• To the satisfaction of internal and external customers.
Ultimately, procurement must support the strategic objectives of the greater
organisation, including helping to ensure overall profitability and an adequate
return on investment for the organisation’s shareholders [1].