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CHAPTER 2
THE PROCUREMENT PROCESS
cultures. What must be remembered when dealing with these activities is that
all firms are different and will have different requirements for the procurement
process.
2.6.1 STEPS IN THE PROCUREMENT PROCESS
A four-step approach can be used and adapted to a firm’s particular needs.
Based on the previous discussion of the procurement process activities, the
following process can be used to maximise effectiveness:
• Determine the type of purchase
– In the procurement process, the type of
purchase will usually dictate the complexity of the entire process. For example,
a straight re-buy will mean that all the procurement activities were completed
when the purchase was a new buy or a modified re-buy. A modified re-buy
may not require all of the activities, but a new buy would normally require
performing all of the activities.
• Determine the required levels of investment
– The procurement process
requires two major types of investments by the firm: time and information.
The individuals involved in making the purchase expend time. Generally, the
more complex and important the purchase, the more time would be spent on
it. Information can be internal and external to the firm. Internal information is
gathered around user requirements and the implications that the purchase will
have for the firm. External information concerning the item to be purchased
may be gathered from supply chain members, from potential suppliers,
professional journals and other sources. The more complex and important
the purchase, the more and better the information that is needed for the
procurement process to be effective. By determining the type of purchase
(which is also a function of the user’s needs), the procurement professional
can determine the levels of investment necessary in the procurement process.
Problems can occur when not enough or too much investment is made to
satisfy a particular user’s needs. Determining the level of investment needed
in time and information to adequately meet a user’s requirements is firm
specific. Once the level of investment is decided, the procurement process
can take place.
• Perform the procurement process
– This includes performing those
activities necessary to make a purchase, in an effective manner and to satisfy
the user’s requirements. In this step the procurement professional should also
collect data on the time and information used in making a specific purchase.
The ability to measure the investment and how well a user’s needs were
satisfied is important to the final step in managing the procurement process.
• Evaluate the effectiveness of the procurement process
– This is a control
step that asks two questions:
-- Were the user’s needs satisfied?
-- Was the investment necessary?
The goal is to invest the appropriate level of time and obtain the required
levels of information to satisfy the user’s needs. If the procurement process