Purchasing implies a monetary transaction.
Procurement is the responsibility for acquiring the goods and services the organisation needs.

Goods:

Raw materials
Production parts
Maintenance, repair and operating supplies (MRO)

Services:

Logistics and Supply Chain Consulting services
Utilities
Workers health care benefits.

Evolution in Strategies for Purchasing Preparation:

Identifying needs such as dependability, long term availability
Evaluate user requirements to ensure suitability of purchase Forecast when and how purchase will be needed
Identify, select suppliers
Develop an efficient ordering system for control

Negotiation:

Bidding processes
Contracts

The Procurement Process

Order placing via appropriate channels (i.e. authorised purchase order)
Receiving including adjustments for damages, short or over-shipping, incorrect costs
Monitoring supplier performance.

Elements of supply uncertainty:

Lead-time to supply
Quantity supplied
Quality of supply
Data accuracy on products prices.

Selecting a Supplier

In selecting a supplier, a number of factors must be analysed:
Price
Quality
Reliability
Credit terms
Shipping costs
Look at the whole transaction cost of dealing with a supplier (not just the cheapest price).

Positive trends in purchasing and procurement include:

Reduced number of suppliers
Long-term relationships with suppliers
Suppliers located close to customers for improved access
Integrated information infrastructure: EDI, electronic catalogs
Suppliers considered being an essential part of the business
Suppliers involved in future product development programs.

Key considerations in analysing the purchasing process:

Annual sales
Annual purchases
Number of suppliers
Number of supplier alliances
Total number of purchased products or parts
Short and long-term cost effective purchasing
Efficient business management of purchasing process.

Suggestions:

Analyse what the suppliers requirements are for:

Goods and services: lot sizes, packaging, delivery frequency, responsiveness.
Look at the following information:
how much you need and when
Financing arrangements and costs.
Compare your needs and abilities against these requirements.

Key Performance Indicators:

The following formula can be used to assess supplier's delivery to schedule performance.

D = monthly delivery performance (%)
L = number of line items delivered later than scheduled
S = number of line items scheduled for delivery during month
Different tolerances for A, B, C-articles
Quality to Specification

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