Page 45 - DMGT525_MATERIALS_MANAGEMENT

Materials Management

Notes 5. The purpose of scientific purchasing is to create a …………… and enhance the company’s
reputation for being fair and maintaining integrity through its dealings with the suppliers.
6. A function of purchase department is to scrutinizing …………… and deciding the method
of purchase.
7. Acquisition and analysis of supplier’s proposals is a ……………… function of purchase
department.

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Caselet Purchasing Software: Procurement Management

ith all the discussion of procurement and how it works in businesses, the
biggest question is does it actually save money? After all, that’s the real bottom
Wline. One large company that had an annual purchasing expenditure of about
$10 billion was able to shave over 15% off that amount annually just by leveraging the
buying power of all their worldwide divisions. Those numbers clearly illustrate that,
when done correctly, a procurement system can definitely save a company money, as well
as provide a number of other benefits, particularly to large companies that spend a sizable
chunk of their revenue on puchasing goods and services for their business.
Besides the impressive cost savings, procurement management can also save valuable
time and can streamline the workforce. With procurement systems, many of the steps
involved in purchasing are either not necessary or are automated so that the entire process
runs smoother and faster. Also, because most corporations divide up the purchasing
responsibilities among their multiple divisions, they typically have several staff members
who are technically doing the exact same job in different locations. By centralizing all of
a company’s procurement needs into a single department or firm, these redundant job
positions can be eliminated. Additionally, the excess office space and equipment can
either be liquidated or used for more productive business endeavours.

In order to achieve these and the other benefits procurement management offers, companies
must be willing to go through many steps. Implementation does require some changes
both in technology, in personnel, and in attitude. Without these changes, the procurement
system simply won’t be effective.
One of the first of these changes is to adopt a positive sourcing methodology. Many
corporations simply place orders; they don’t form relationships with suppliers. While the
distinction may not seem great, the reality is that these sellers are critical components of
a business’s success, and they need to be treated that way. The overall goal of a strong
sourcing methodology is to achieve a mutually satisfying agreement that will provide the
buyer with the goods he needs at a reasonable price and that will secure the seller a steady
customer in the future.

Another change with procurement is the workforce. Employees who will be dealing
directly with vendors need to be highly trained and experienced in the industry in which
the business is involved. For example, a pharmaceutical company would need to hire
individuals who are familiar with the types of chemicals used in the creation of prescription
drugs. By hiring individuals who are experts in their field and who are then trained in the
procurement process of the company, suppliers feel more comfortable doing business
with the buying firm.
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