Module 1 Introduction to Procurement

and Logistics Management

• Introductionof procurement
• Evolution
• Types of purchasing
• Procurement methods
• Procurement process
• Types and functions of logistics
• Logistics planning and process
• Distribution management
 Introductio
The development
n and implementation
of acquisition and movement of goods
has become a critical issue in the
organization and companies.
This training will help the participant
to understand the fundamental
aspect in procurement and logistics
operation including organization
procurement practices, and logistics
management system
 Cont.…..
During this training we will explore,
negotiation skill, risk management,
warehouse management, inventory
management vehicles and
transportation management, office
and communication management.
Definition of Public
Procurement System
The Procurement System is a function of
government involves using government
resources (public funds) to obtain goods,
works and services to meet the needs of
the government as it carries out its
responsibilities to the citizens.
Procurement is the process of acquiring
goods and services by purchasing, renting,
or leasing.
 Evolution

 First procurement order- Syria, 2400-2800

B.C.
• Silk trade between China and a Greek
colony-
• 800 B.C.
• Oklahoma State Government creates the
first bureau responsible for purchasing -
1810
 Cont..

Procurement can now be considered a strategic

and key element for achieving governmental goals
and providing public safety and services.
 Purchasing

• Purchasing describes the process of buying. It is

the learning of the requirement, identifying and
selecting a supplier, negotiation price. Purchasing
is an element of the wider function of
procurement and it includes many activities such
as ordering, expediting, receipt and payment.
Purchasing is responsible for obtaining the
materials, parts, supplies and services needed to
produce of a product or provide a service
 Cont.…

• Purchasing can be divided into two broad

categories, large and small purchases, based on
seven characteristics of purchased product –
volume, specificity, technological complexity,
essentiality, fragility, variability, and economic
value.
 Cont..

• Bulk Purchase
• In case of bulk purchases there are high volume
items, large amount, and more frequent
utilization with more specific use. Bulk purchases
are handled in large organizations and
multinational organizations with the
standardized purchasing process, where as some
other organizations use separate purchasing
process
 Cont..

• Small Purchase
In case of small purchase there are low volume
items, small amount, less frequency of utilization,
high variety and low technical complexity. Mainly
small purchases include machine parts, auto parts,
machine repairs, in frequent sullies of offices and.
Small purchases are urgent in nature.
 Types of Purchase

There are mainly two types of purchases; the

individual purchase and the organizational purchase.
 Individual Purchase Individual or personal
purchase includes those types of items or products
which are purchased for personal or family
consumption. Factors influencing individual
purchase behavior: In general mainly there are four
types of influence factors:
 Cont.…

 Cultural Factors
 Social Factors
 Personal Factors
 Psychological Factors
 Organizational Purchase

Organizational Purchase A purchase will be

considered to be organizational if it is made in the
name of a company or organization, regardless of
size, from a medium sized company up to a
multinational or state company.
Organization consists of business, industries,
retailers, wholesaler, government and non-
government organizations
 Organizational Purchase

 Business and industries purchase materials for

business use or as a raw material to produce other
product.
 Wholesalers/Retailers/traders buy product for
resell at profit.
 Government organizations purchase products for
use in offices or provide services to people.
 Non-government organizations purchase products
to provide services to their client.
 Purchasing Cycle

The purchasing cycle begins with a request from

within the organization to purchase
material, equipment, supplies, or other items from
outside the organization, and the cycle
ends when the purchasing department is notified that
a shipment has been received in
satisfactory condition, and managerial accounting is
actively involved in each step.
 The main steps in the cycle are as
under:
 Recognition of need
 Description of need
 Selection of suppliers
 Determination of prices
 Preparation of purchase order
 Placing the order with a selected supplier
 Monitoring and follow up the order
 Receiving the ordered materials
 Checking and approving for payment to supplier
 From a Top Management
Perspective:
There are five rights that every management expects
from their purchasing executives:
Right Quantity Right Quantity Right quality Right
Time Right Supplier Right Cost
 Why the principles?

The public procurement system should be fair, open,

and transparent. It should provide a means to obtain
required goods, works and services in a timely,
effective manner at a efficient costs that are
competitive.
 The Principles

 Efficiency/
Effectiveness
 Fairness
 Openness
 Competition
 Transparency
 Accountability
 Efficiency and Effectiveness

 Obligation to spend public funds efficiently –

value for money
 Obligation to obtain goods, works and services
needed for intended purpose – effectiveness and
quality considerations
 Timeliness
 Fairness

The system needs to operate in a manner that is

perceived as offering an opportunity for participants
to win contracts in accordance with an agreed set of
rules that are not “prejudiced” against participants
without a reasonable explanation.
 Openness

 Relates to fairness, but is more specific as to ability

of wide range of participants to participate in a
competition
 An example of lack of openness might be
restricting procurement to national or local firms
 Another example might be restricting participation
to small businesses only
 Competition

 Having multiple demands for limited

resources creates competition
 Having more than one participant trying to
win creates the potential for a competition
 Transparency

The ability to understand and see through the

process to determine if the process has adhered to
the principles and achieved the objectives that the
system is trying to implement.
 Accountability

Assuming responsibility for actions taken and

being held to account for those actions.
 New principles

 Proportionality
 Socially responsible
 Green
 Sustainable
 Innovative
The End