Slide 6.

Purchasing Procedures and Supporting Tools

Purchasing procedures required for key phases of purchasing cycle

Identification of need and specification development

Notification of authority to purchase
Requests for Quotations (RFQs) and Invitation to Tender (ITTs)
Creating a legally binding contract
The contract management phase

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.2

Purchasing Procedures and Supporting Tools

Notification of authority to purchase

the procedure will set out

How to raise an appropriate requisition

Budget approval and appropriate finance code
Issue of bills of material when these apply
Management of emergency needs to purchase

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.3

Purchasing Procedures and Supporting Tools

E-commerce, e-business, e-SCM and e-procurement
Definition
E-commerce

Any forms of business transaction carried out

electronically over public telephone systems.

e-business

IBM define e-Business as e-Commerce above!

The two terms are used synonymously.

e-SCM

Concerned with streamlining and optimising the whole

supply chain through internal applications with the aim of
ensuring maximum sales growth at the lowest possible cost.

e-procurement

Is using the internet to operate the transactional aspects

of requisitioning, authorising orders, receiving and payment
process for the required services or products (CIPS)
Lysons & Farrington, Purchasing and Supply Chain Management
PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.4

Purchasing Procedures and Supporting Tools

Comparison of E-procurement models
Kalakota and Robinson
Trading models
EDI networks
Business-to-employees (B2E)
Corporate procurement portals
First-generation trading exchanges
Second-generation trading exchanges
Third-generation trading exchanges
Industry consortiums

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.5

Purchasing Procedures and Supporting Tools

EDI (EPOS) at the supermarket
benefits

Reduction in lead times

Reduction in cost of inventory
Release of working capital
Better customer service
Facilitation of global purchasing
Facilitation of invoice payments
Integration of functions
Enhanced buyerseller relationships

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.6

Purchasing Procedures and Supporting Tools

E-catalogues

Advantages
Facilitates real-time effective communication between buyers and sellers
Enables closer relationships
Enables suppliers to respond quickly
Virtual elimination of time lag in purchasing process
Maverick purchasing is reduced
Lysons & Farrington, Purchasing and Supply Chain Management
PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.7

Purchasing Procedures and Supporting Tools

E-auction definition
An electronic market, which can exist in both business-to-business
and business-to-consumer contexts. Sellers offer goods or services to
buyers through a website with a structured process for price setting
and fulfilment.

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.8

Purchasing Procedures and Supporting Tools

E-auctions
Web auctions may be: English bid
Dutch bid
Sealed bid
Reverse bid
Advantages

Disadvantages

Better savings than through negotiation

Reduction in acquisition lead time
Access to more suppliers
Global supply place
Enhancement of market knowledge
More efficient RFQs and problems
Anonymity

Based on winlose
Adverse shift in relationships
Long-term adverse effects for buyer
& seller

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.9

Purchasing Procedures and Supporting Tools

Benefits of reverse auctions for the buyer

Savings in the excess of those achieved by negotiation

Reductions in acquisition lead times
Access to a wider range of suppliers
Global supply base can be achieved
Sources of market information are enhanced
More efficient administration of RFQs and proposals

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.10

Purchasing Procedures and Supporting Tools

Purchase cards benefits

Compliance levels can improve

Average transaction costs can drop dramatically
Implementation costs much less than an ERP system
Suppliers are paid faster
There is improved data
Less purchasing employee time spent on paperwork

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.11

Purchasing Procedures and Supporting Tools

Purchasing manuals
Content may include:

Statement from C.E.O or similar

Purchasing organisation
Policy statements
Procedures
Emergency purchasing arrangements
Supplier development
Relationship management
Managing risk
Lysons & Farrington, Purchasing and Supply Chain Management
PowerPoints on the Web, 8th edition Pearson Education Limited 2012

Slide 6.12

Purchasing Procedures and Supporting Tools

Legal aspects of purchasing

Essentials of a contract: English law

Intention to enter into a legal relationship
Agreement
Consideration
Form
Definite terms
Legality

Lysons & Farrington, Purchasing and Supply Chain Management

PowerPoints on the Web, 8th edition Pearson Education Limited 2012