BBM – GENERATION OF REQUIREMENTS MOUNT KENYA UNIVERSITY (MKU) PDF NOTES

CHAPTER ONE
THE PURCHASE DESCRIPTIONS

 

1.1 Introduction

Determining what materials and services to purchase is the first and one of the most crucial steps in the procurement process. Responsibility for this determination varies with the requirement. In many cases, the using department is responsible. For example, Plant Engineering is responsible for developing equipment requirements. Plant Operations develops requirements for operating supplies such as drill bits, lubricating oils, and related items. Administrative Services initiates requirements for office supplies, equipment, and services.
The responsibility for determining which component materials to specify for newly designed products is a complex issue, complicated the frequently conflicting interests, orientations, and biases of the many departments that have an interest in the end item or service. For example, Engineering may desire design excellence. Marketing may demand nonstandard and unique features. Operations prefers long production runs utilizing existing equipment, requiring few operators, and using high-quality, easy-to-work materials. Purchasing prefers to buy readily available materials from several dependable sources at reasonable prices.
Historically, Purchasing contributions to the organization’s success have been seen as being in two basic areas:

  • Ensuring the timely availability of required supplies and services and
  • Obtaining them at economic prices.

However, these contributions are greatly expanded when purchasing is included at the beginning of the design process. For instance, as material requirements are developed, purchasing should ensure that only essential needs are incorporated in the requirement. The description of the requirement (usually a specification) should not contain features that unduly limit competition among qualified suppliers. Further, purchasing can help the designer to be sensitive to the relative availability and cost of the alternative materials that may satisfy product requirements. Timely availability of required materials and services usually is enhanced the availability of two or more qualified sources or carefully structured strategic alliances.

1.2 Purchase requisitions/statement of work

The most common method of informing purchasing of material needs is through a purchase requisition. Users may also transmit their needs phone, word of mouth or through a computer generated method.
Although there are a variety of purchase requisition formats, every requisition should contain the following;
Description of required material or service
Quantity and date required
Estimated unit cost
Operating account to be charged

  • Date of requisition (this starts the tracking cycle)
  • Date required
  • Authorized signature

Although varieties of formats exist, at a minimum a purchase requisition should include a detailed description of the material or service, the quantity, date required ,estimated cost and authorization.
This form of communication for a specific need is called a requisition. A requisition is an electronic or paper form that provides some critical information about the need. A typical
requisition will provide a description of the product (e.g a valve) the material and color (brass, red valve), the quantity required (20 red brass valves), the intended purpose (20 red brass valves to be used in a maintenance project for equipment XYZ) and the required date for delivery (three weeks).
Sometimes a service is required. For instance, marketing may want to purchase an advertising campaign R & D may need a clinical trial or human resources may need to print a brochure. In this case, the user will complete a statement of work (SOW) that specifies the work that is to be completed, when it is need and what type of service provider is required.
A standard purchase requisition or SOW is used most often for routine, noncomplex items that are increasingly being transmitted through online requisitioning systems linking users with purchasing.
An online requisition system is an internal system designed primarily to save time through efficient communication and tracking of material requests. Users should use these systems only if they require purchasing involvement. It is possible that users have access to other systems that will allow them to purchase an item directly from a supplier such as corporate procurement card. In that ease requisitions forwarded to purchasing are unnecessary.
There are wide differences across organizations in the quality and use of electronic purchase requisition systems. A system that simply requires users to submit to purchasing what they require for electronic transmission is similar to electronic mail. This type of system provides little added value except to speed the request to purchasing. Conversely, one system was so complex that users were afraid to use it.
This type of system provides little added value except to speed the request to purchase.
They bypassed online requisitioning and relied instead on the phone or intracompany mail.

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