SCM, Procurement and Procurement Systems
SCM, Procurement and Procurement Systems
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SCM, Procurement and Procurement Systems
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Supply chain management is an external integration of interrelated functions of an
organisation with its customers, vendors and all third party logistics service providers who
contribute in the flow of goods (raw materials, semi-finished and finished products) and
information from the point of inception to the point of consumption with the objective of
ensuring superior value to all stakeholders.
In other words, it refers to managerial process of a joint approach of all supply chain
participants to design, develop and operate a system which respond to customer expectation
by making available the right quantity of right quality products at right time and right place in
the right physical form at a right cost.
The supply chain is all about inter and intra organisations process integration that requires a
variety of planning and control mechanism across the supply chain. For this purpose, it is
always viewed as a single entity. For example, a group consisting of representatives from the
purchase, manufacture, distribution and sales could be the entity for finalizing the marketing
plan, the dispatch plan, the production plan and the procurement plan as a single supply plan.
This has an impact on reducing administrative delays and improving empathy across the
supply chain.
In the global competitive scenario there has been a dramatic increase in the attention of top
management in the procurement management because outsourcings of materials have become
the need of the hour for sustainable growth and competitive effectiveness.
Procurement is a broader activity as it involves the material management of goods and
services in addition to purchasing transactions.
Procurement management is a strategic function of an organisation with the aim of focusing
maximum amount of time and energy on strategic purchases that can provide advantages in
quality, speed and cost effectiveness. It is a strategic process for the development of sound
purchasing setup and an effective supply base so as to achieve supply chain productivity. It
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reduces the total cost of goods and services significantly. The transformation of a traditional
purchasing function to a strategic procurement reduces inventory holding levels and the size
of supplier base that results in economies of scale and long term supplier relationships.
Procurement management enables the organisations to reduce replenishment cycle time
without stock-out by the extensive use of new tools and techniques of supply chain
management in the era of rapid innovations in the field of information technology.
As procurement contributes considerably in the value addition, hence it is essential to
continuously improve procurement productivity, which includes developing enhanced
internal management procedures, adoption of new technologies to deal with suppliers, make
or buy analysis, relationship based supplies and recognizing the purchase function as a
critical factor for overall customer satisfaction.
Selecting a procurement system is a daunting task due to various factors governing an
organisation. The differing needs and requirements vary so considerably, in every respect,
that no single system of procurement can be suitable for every organisation. The most
common criteria influencing the choice of procurement system include time, controllable
variation, complexity, quality level, price certainty, competition, responsibility, risk
avoidance, price completion, government policy and organisation’s familiarity in a
procurement system. The choice of different procurement systems are so varied and this has
resulted in the need to conduct a selection process for any specific need in a disciplined and
systematic manner. A useful guideline can be drawn based on the three criteria of determining
success of time, cost and quality. The Traditional system will benefit in Cost and Quality but
at the expense of Time. The Design and manufacture system will benefit Cost and Time but at
the expense of Quality. The Management Contracting system will benefit in Time and Quality
but at the expense of Cost. The above factors can be used a guideline for the professional
team before any commitment is made on the choice of the procurement system.
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REFERENCE
Crowley, L. G., & Madewell, J. L. (January 01, 1998 Risk assessment of competitive
procurement on Alabama highway projects with Texas comparisons.). Transportation
Research Record, 1649.).
Gourdin, K. N. (2001). Global logistics management: A competitive advantage for the
new millennium. Oxford: Blackwell Publishers.
Monczka, R. M., Trent, R. J., & Handfield, R. B. (2002). Purchasing and supply
chain management. Cincinnati, OH: South-Western College Pub.
