PURCHASING PROCEDURES, E-PROCUMENT AND SYSTEMS CONTRACTING

PURCHASING PROCEDURES

What is purchasing procedures? Purchasing procedures is cycles which involve a lot of document and department before the purchasing will be done to make the production run the product.

The things that included in purchasing procedures:
1. Work area involved
2. Material required
 3. Specification
4. Point of need
5. Procedure –  the departments that handle the documents

The objective of purchasing is to get the right material, right quality, right quantity, right place and the right time.

Why purchase procedure important?

·         1. To eliminate waste

·         2. Purchase with the 5 right

·         3. Reduce lead time

·         4. Smooth the management

·         5. Reduce the ordering cost

 6. Purchasing also to determine the supplier, negotiate with supplier and choose the delivery date.

SYSTEM CONTRACTING 

What is System Contracting? 

·         System contracting is a stockless inventory method for ordering and stocking MRO and related items.

·         The systems contracting will aid the firm in reducing ordering and inventory costs.

·         The systems contracting process require the use of a negotiated agreement between buyer and sellers.

·         Systems contracting are an efficient form of purchasing.

The total cost of ownership (TCO)

·         The true cost of an item is its purchase price, plus fixed, variable, and overhead costs.

·         Beyond the direct costs are the total procurement costs.

·         The costs of procurement include:

1.  Identify need

2.  Requisition material

3.  Inquire with the potential suppliers

4.  Evaluate bids

5.  Issue purchase order

6.  Expedite order

7.  Document receipt of material

8.  Receive and handle invoice

9.  Issue payment 

E- PROCUREMENT

What is E-procurement?

·         The commercial purchasing literature on e-procurement has suggested that significant savings for business.

·         The organizations can be realized by migrating to electronic procurement systems for all of their purchasing requirements.

Categories of broad  E-procurement purchasing.

·         Indirect Materials Purchasing.

1. Operating resource management (ORM)

- Use for purchasing office equipment.

2. Maintenance repair and operations (MRO)

-  Concerned with critical maintenance and replacement parts.

·         Direct Materials Purchasing.

1.  Critical items.

2. The systems that not the first place to apply a new e-procurement system.