INTRODUCTION TO PURCHASING AND SUPPLIES MANAGEMENT MOUNT KENYA UNIVERSITY (MKU) NOTES PDF

CHAPTER ONE
THE EVOLUTION AND ORGANIZATION OF PURCHASING AND SUPPLIES MANAGEMENT

1.1 Introduction

Purchasing describes the process of buying: learning of need, locating and selecting suppliers negotiating prices and other pertinent terms, and follow up to ensure delivery. It entails the following activities:

  • Purchase needs identification through liaison with user departments.
  • Identification of potential suppliers and negotiation.
  • Selection of suppliers.
  • Market research for important materials.
  • Analysis of proposals.
  • Issuance of purchase orders.
  • Administration of contracts and resolutions of related problems
  • Maintenance of purchasing records.

Procurement is a broader term and includes purchasing stores, traffic, receiving, incoming inspection and salvage. Procurement and purchasing are used interchangeably, this is however somewhat imprecise. Procurements process or concept encompasses a wider range of supply activities than those included in the purchasing functions .it includes the traditional role, with more buyer participation is related material activities. These activities include;

  • Development of material and service requirements and other specifications.
  • Materials research and value analysis activities.
  • Extensive market research.
  • Conduct of all purchasing functions.
  • Suppliers quality management
  • Management of investments recovery activities (salvage of surplus and scrap)

Essentially therefore procurement tends to be broader and more proactive, focusing on strategic matters, rather than mere implementation of purchasing concept.
Supply management is a system management concept employed some organizations designed to optimize the factors of materials costs, quality and services. It is a process responsible for the development and management of a firm’s material management of a firm total supply system. It includes and expands the activities of the purchasing function and the procurement process. The other activities in supply management are:

  • Early Purchasing Involvement (EPI) and Early Supplier Involvement (ESI) in product design and subsequent specification development for crucial items.
  • Heavy use of cross–functional teams in supplier qualification and selection.
  • It depicts effect to develop better, more responsive supplies than the term purchasing.
  • Purchasing partnering and strategic alliances with supplies.
  • Strengths Weaknesses Opportunities and Threats (SWOT) analysis.
  • Continuous monitoring and improvement in the supply chain.
  • Participation in strategic planning process.

Materials Management is the integration of related materials functions to provide cost effective delivery of material and services to an organization. It is an organizational concept from a managerial perspective designed to enhance coordination and control of the various materials activities. Since action or decision taken at any point in the materials chain, usually impacts on a number of other activities or decision point in the chain, it is imperative to enhance reporting, communication and control procedures designed to enhance a coordinated decision making among the involved groups or departments. Materials management includes the following activities:

  • Purchasing and supply management activities.
  • Inventory management
  • Receiving activities
  • Stores and warehousing
  • In-plant material movement
  • Production planning, scheduling and control
  • Traffic and transportation
  • Scrap and surplus disposal.

Supply chain management is a system approach to managing the entire flow of information, materials and services from raw materials, supplier through factories, warehouses to end customers

 

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