By:- Israr K. Raja

All stages and parties involved, directly or indirectly, in fulfilling a customer request

Internally, the procurement process includes all functions involved in fulfilling a customer request (product development, marketing, operations, distribution, finance, customer service).

Externally, it includes the suppliers, vendors, manufacturers, transportation, and distributors, that exist to transform raw materials to final products and supply those products to customers.

Requisition Financial approval Market Assessment Purchase decision Ordering Delivery Receipting & Accounting for Goods/Service Received Payment

Uninterrupted Flow of material Manage Inventory Improve Quality Develop Suppliers Standardize Cost Improve Competition Improve Cross Functional Relationships

Reduce Administrative Cost

Right :- Material Quantity Condition Time Price Service

Raw material Parts Maintenance Packaging Services Tools Re-sale Items Equipment

The overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. A business's inventory is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold. It also costs money to store, track and insure inventory. Inventories that are mismanaged can create significant financial problems for a business, whether the mismanagement results in an inventory glut or an inventory shortage.

EOQ Fixed Order Interval System Fixed Order Quantity System Operational Replenishment System

HSDEOQ

2

Inventory Turnover:- Order Cycle

It is a production planning, scheduling, and inventory control system used to mange manufacturing processes.

Most MRP systems are software-based, while it is possible to conduct MRP by hand as well.

Materials requirements planning (MRP) systems take a “push-through” approach that manufactures finished goods for inventory on the basis of demand forecasts.

An MRP system is intended to simultaneously meet three objectives:

Ensure materials are available for production and products are available for delivery to customers.

Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing

activities.

Just-in-time (JIT) production systems take a“demand pull” approach in which goods

areonly manufactured to satisfy customer

orders.

The JIT inventory system requires a company to buy or produce only the materials necessary for production as it is needed.

Customer demand drives the purchase or production of inventory and materials.

Companies employing JIT systems reduce the amount of materials on hand to the lowest possible levels. In some cases, the company can reduce the level of inventory to zero on hand.

The concept of JIT requires companies to order enough materials for production, complete all work in process at the end of the day and ship finished goods to customers as they are produced.

Lean manufacturing uses a pull system of material movement instead of the traditional push approach.

Production organized into manufacturing work cells :-Each work cell produces a product or product type. Each worker in each cell knows how to operate all the machines in that cell and can perform supporting tasks within that cell. This reduces the downtime resulting from breakdowns or employee absences.

 Multiskilled workers:- Cross-functional training of workers so they can perform a variety of operations and tasks on an as-needed basis to maintain smooth production flow.

 Reduced setup times:-Reduction of the time required to get tools, equipment, and materials ready for a production run.

Reduced manufacturing lead times:-o reduction of the time from when an order is initiated to when a finished good is produced.

Reliable suppliers :-o careful screening of suppliers to ensure on-time deliveries of high-quality goods for just-in-time use possibly within a day or less. Supplier’s dependability is crucial in JIT system because inventory levels are kept low in a JIT system, the company must have a very close relationship with its suppliers to make certain that the supplier makes frequent deliveries of smaller amounts of Inventory, thus long-term contracts are typically negotiated to reduce order costs.o Buyer-supplier relationships are further facilitated by electronic data interchange (EDI), a technology that allows the supplier access to the buyer's online inventory management system. Thus, electronic messages replace paper documents (purchase orders and sales invoices), and the production schedules and deliveries of the parties can be readily more coordinated.

Cost savings: inventory reductions, reduced scrap, fewer defects, fewer changes due to both customers and engineering, less space, decreased labor hours, les rework.

Revenue increases: better service and quality to the customer.

Investment savings: less space, reduced inventory, increased the volume of work produced in the same facility.

Workforce improvements: more satisfied, better trained employees.

Uncovering problems: greater visibility to problems that JIT allows, if management is willing to capitalize on the opportunity to fix these problems.

- Capacity (Does the organization have the capacity to deliver the order)

- - Competency (Is the organization, its people or its process competent)

- - Consistency (Does the organization produce a consistent output)

- - Control of process (Can the organization control its process and offer flexibility)

- - Commitment to Quality (Does the organization effectively monitor and manage quality)

- - Cash (Has the organization got a strong enough financial base) - - Cost (Is the product or service offered at a competitive price)

- - Culture (Are the supplier and buyer cultures compatible) - - Clean (is the organization ethical, funded legitimately, doesn't engage Child labor, etc)

ProductSelection

QualityAssurance

SupplierSelectionDistribution

Forecasting

ProductProcurement

Rational Use

Receipt andStorage

Procurement

Needs identified

GovtsCSOs

Supply System contextSupply System context• Product selection, Product selection, • standard setting, standard setting, • quantification of needs.quantification of needs.• clarify budgets and fundsclarify budgets and funds• check status of product registration, check status of product registration, • marketing authorization, marketing authorization, • national procurement lawsnational procurement laws• customs duty, customs duty, • patents, patents, • LicensesLicenses

Supply System Supply System OrganisationOrganisation• TENDER MANAGEMENTTENDER MANAGEMENT:: supplier supplier prequalification, bid evaluation, prequalification, bid evaluation, adjudication, Contracting.adjudication, Contracting.

• QUALITY ASSURANCEQUALITY ASSURANCE:: pre and post pre and post quality control, supplier quality control, supplier performanceperformance

• LOGISTICSLOGISTICS:: port clearance/receipt port clearance/receipt from suppliers, transportation, from suppliers, transportation, Storage, distribution. Storage, distribution.

• MANAGEMENT INFORMATION SYSTEMSMANAGEMENT INFORMATION SYSTEMS:: data data and information control, and information control, feedback/actionfeedback/action

IN-COUNTRY LOGISTICS IN-COUNTRY LOGISTICS

• Supply Chain

Assessment Planning

Good Clearance

Procurement

Warehousing and Inventory Management

Shipping

Inland Transport

and Distribution

Supply Tracking and Evaluation

Receiving & checkingsupplies

Storing supplies

in locations

Authorising

delivery

Shippingsupplies(FIFO/FEFO)

StoreReceipt

Stock Card WayBill

DailyWarehouseOperations

Documents

Notifying lossesdamages whenreceiving

MonitoringInventoryControl

Performance

Notifying lossesdamages

during storage& transport

Monitoring& Control

The Inventory database is updated for each transactionand reports generated regularly and upon request

InventoryDatabase

Receipt

Acknowledgement

WayBill

Receip

t

PhysicalCount(IMAT)

Claimref: Book G

Property SurveyBoard

Loss/Adj.ReportDisposal Report

Processes

DispatchRequest

Author

ising

HUMAN

RESOURCES

M&E: SUPPLIES ALSO MOVE ON PAPER

Sample Sample Sample Sample

Sample Sample

VMI is essentially an integrated approach whereby the inventory at the distributor/retailer (downstream) is monitored and managed by the manufacturer (upstream)

By pushing the decision making responsibility further up the supply chain, the manufacturer/vendor will be in a better position to support the objectives of the entire integrated supply chain resulting in sustainable competitive advantage

Determining appropriate order quantities

Managing proper product mixes Configuring appropriate safety stock

Lower inventory investments (raw and finished)

Better scheduling and planning Better market information Closer customer ties and preferred status

Fewer stock-out with higher inventory turnover

Better market information More optimal product mix Less inventory in channels (transfer costs)

Lower administrative replenishment costs

Top management commitment Focus on effort Trust and partnership between supply chain stakeholders

Highly effective computer/information systems (EDI, Bar coding, Scanning)

Competent manufacturers and the ability to forecast

Willing stakeholders partners and patience

The first problem relating to VMI is that it is in fact an inventory system and by its very nature that makes it imperfect. 

VMI is dependent on big business. For a VMI system to be effective and cost effective then the customers have to be ordering frequently and in bulk.

All the stakeholders who are involved within the process have to be 100% behind it and this can be extremely difficult to achieve in practice. 

Trust cannot be achieved overnight VMI is often reliant on process and technology. Although technology is now quite

reliant it only takes one failure and the trust that has been established breaks down and in addition the supply chain can go into meltdown.

Smaller businesses are more likely to find VMI more challenging to deploy, barriers to technology and supplier buy in can prevent an organization from getting off the ground.

A VMI system often requires the vendor to make more deliveries of goods, especially if the customer prefers to keep stocks quite low and this can be problematic

VMI requires the vendor to take more responsibility overall because they are now responsible for the delivery.

VMI is also dependent on the vendor and the customer being able to work together to accurately determine forecasts for demand in both the long and the short term.

Work hard to obtain the trust of the end user – they will feel the sharp end of any problems and difficulties. 

By improving the supply chain inventory management systems  continuously. Reduce the storage costs for inventory: By holding only the stock you

need.  If JIT manufacturing is not an option, then make sure that you can base

the amount of ‘safety stock’ that you hold by using demand forecasting. Automate wherever possible. Use technology to help your improve inventory management,  Ensure that there is joined up thinking in your organization with the

procurement team working closely with the inventory management section  Consider implementing joint procurement systems with common suppliers, so

that you can ensure that your costs per item are reduced. Extend the time that is required before you have to pay. This will ensure

that the stock that you are holding is not paid for until the last minute Consider using vendor managed inventory systems, where the vendor actually

manages your stock for you. Never assume that you have made all the improvements that you possibly

can. There are always new automated systems or new technological aids coming on the market all the time that will help bring about improvements to your inventory management; so strive for continuous improvements!