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CHAPTER 2
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].
2.7.4 PROCUREMENT PROCESS REDESIGN
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].
2.7.5 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