David A. Horvath
INF 336 – Project Procurement Management
May 9, 2011
Purchasing and supply management holds a position of great importance to the business world. Within purchasing and supply management, there are the steps of the creation of project supply, service, and material budget from detailed requirements. It shows how to select the most qualified suppliers and strategies for negotiating prices. Along with this, there are also benefits and costs of outsourcing. This includes the growth of outsourcing. Various organizations will be evaluated on their benchmarks in purchasing and supply management, along with their best practices in this. There ...view middle of the document...
There are also responsibilities of purchasing that go further beyond the traditional meaning. These can include receiving, storage, inspection, scheduling, materials handling, inbound/outbound traffic and disposal. It may also have responsibilities for certain other components that are part of the supply chain. These can include customers of the organization, their customers, and the suppliers of their suppliers. This is an extension that actually represents the other portion of the definition, supply chain management. This is “where the focus is on minimizing costs and times across the supply chain to the benefit of the final customer in the chain. The idea that competition may change from the firm level to the supply chain level has been advanced as the next stage of competitive evolution.”(Leenders, Johnson, Flynn, & Fearon, p.5, 2006)
As part of purchasing and supply management, there is the supply process itself. It consists of nine fundamental steps in the purchasing process. These steps are: (1) Recognition of need, (2) Description of the need, (3) Identification and analysis of possible sources of supply, (4) Supplier selection and determination of terms, (5) Preparation and placement of the purchase order, (6) Follow-up and/or expediting of the order, (7) Receipt and inspection of goods, (8) Invoice clearing and payment, and (9) Maintenance of records and relationships.
The recognition of need refers to the origination of a definite need of an organization being recognized. After this, there is the description of the need. This is important due to the fact that accurate descriptions of needs, articles, commodities, or services being requested are crucial for the purchasers. It cannot be expected for a purchaser to buy if they do not know exactly what the internal customers actually want or need. The identification and analysis of potential sources comes after this. “Supplier selection constitutes an important part of the supply function, and involves the location of qualified sources of supply and assessing the probability that a purchase agreement would result in on-time delivery of satisfactory product and needed services before and after the sale.” (Leenders, Johnson, Flynn, & Fearon, p.65, 2006) Supplier selection and the determination of terms come after this. “Analysis of the quotes, bids, or proposals and the selection of the supplier lead to order placement. Since analysis of bids, quotations, and proposals and the selection of the supplier are matters of judgment, it is necessary to indicate here that they are logical steps in the supply process. Applicable tools range from a simple bid analysis form to complex negotiations.” (Leenders, Johnson, Flynn, & Fearon, p.67, 2006) After supplier selection and the determination of terms are established, the next step in the purchasing process is the preparation and placement of the purchase order. “Placing an order usually involves preparation of a purchase order form...