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CHAPTER 2
THE PROCUREMENT PROCESS
is not effective, this can be traced to various causes including, for example,
not enough investment, not performing the proper activities, or mistakes
made in performing one or more of the activities. When the procurement
process is not effective, procurement management should determine why
and take corrective action to make sure that future purchases will be effective.
If the purchase satisfied the user’s needs at the proper level of investment,
the procurement process can be considered effective and can serve as a
reference for future purchases.
Thus, although the procurement process is complex, it can be managed
effectively as long as procurement management develops a systematic approach
for implementing it. A key factor in achieving efficiency and effectiveness in
this area is the development of successful supplier (vendor) relationships. In
fact, many professional procurement/materials managers agree that in today’s
global marketplace strong supplier relationships should be developed to create
and sustain a competitive advantage. Some companies go so far as to refer to
suppliers (vendors) as partners and/or stakeholders in their company. When
vendors are ‘partners’, companies tend to rely more on them to provide input
into product design, engineering assistance, quality control, and so on.
The buyer-supplier relationship is important and deserves special discussion.
The next section provides additional discussion of supplier relationship
management.
2.6.2 SUPPLIER RELATIONSHIP MANAGEMENT
Many successful companies have recognised the key role that procurement
plays in supply chain management and that supplier/vendor relationships are a
vital part of successful procurement strategies. As mentioned, this is especially
true when companies reduce the total number of their suppliers, frequently in
conjunction with Total Quality Management (TQM) programmes or Just-In-Time
(JIT) production and inventory systems.
At this stage, procurement professionals recognise that quality management
necessitates quality materials and parts. That is, the final product is only as
good as the parts that are used in the process. Also, they recognise that the
customer satisfaction process begins with procurement.
Another dimension of the supplier relationship is that procurement contributes
to the competitive advantage of the company, whether the advantage is one
of low cost, differentiation, or a niche orientation. Therefore, the procurement
management programme has to be consistent with the overall competitive
advantage that a company is seeking to attain in the marketplace, i.e., firms
may approach the procurement process differently, depending on the products
and/or services provided, target markets, supply markets and so on.