Sourcing Chapter 6 Part 1

• Sourcing/Procurement


  Purchasing is the process a business or organization uses to acquire goods or services to accomplish its goals. Sourcing/Procurement/purchasing are similar.
• Procurement


  Includes buying but more at a strategic, level-long term.
• Suppliers


  Also known as Vendors
• Purchasing


  The purchasing process is a part of procurement and focuses on the transactional phase associated with buying products and services.
• Procurement


  A strategic process of sourcing a product or service. This includes identifying a specific product or service requirement and the steps on how a business finds new or existing suppliers, builds supplier relationships, measures cost savings, minimizes risk and is predominately focused on value and return on investment.
• Procurement


  • An important function in the supply chain
• Retailers


  • Need to purchase goods, in order to re-sell
  • Retailers that manufacture (e.g. VW) also need to buy materials; components, etc. to manufacture a finished product-cars
• There's more than a 1000 different parts that go into a motor car which are sourced from many suppliers
• Retailers


  • Also buy industrial goods: Goods/services that are used in the business to operate e.g. trolleys; security cameras; stationary; equipment; cleaning materials etc.
• Sourcing


  Ensures the availability of the "right products" to consumers
• Sourcing


  Retailers need to (source)-purchase the right products from the "right" suppliers-to satisfy customers
• Sourcing


  "Buy right, sell right"
• Finding the right supplier


  • Can result in: Improved quality of products, Increased profits, Product development, Lower costs, Lower Risk
• General objectives of sourcing (5 rights of procurement)


  • The right quality of goods or services
  • From the right supplier
  • In the right quantity
  • At the right time
  • At the right price
• Operational level goals of Procurement


  • Ensuring retailers always have the "right" stock for consumers
  • Buying goods and services that are lowest cost to ensure maximum value to customers
  • Keeping stock investment to a minimum
  • Continuously find alternative sources of suppliers
  • Develop and maintain lasting relationships with suppliers
• Purchasing Process (5 steps)


  1. Determine business buying needs and specifications

  2. Finding, evaluating and selecting suppliers

  3. Purchasing Contract

  4. Ordering

  5. Follow up and Evaluation
• Determine buying needs and specifications


  Purchasing is completed for various reasons: Buy inputs (materials; components etc.)-to manufacture, To resell (retailers), To buy industrial goods (for use in the business e.g. equipment)
• Determine buying needs and specifications (cont.)


  Retailers will purchase goods based on the retailer's consumer needs and wants. Retailers need to be clear on their needs - Type of product specifications (size; mass; grade etc.), Price, Quality, Quantity, Delivery time, Maintenance, Returns; Refunds; guarantees