The Purchasing Process
Training Presentation
Joseph Roundy

Materials Covered
• Purchasing Process Defined
• Purchasing and Your Organization
• The Nuts and Bolts of Purchasing
• How the Purchasing Process Works
• An Example
• An Exercise

Purchasing Process Defined
• Purchasing- the process of acquiring goods, services, and equipment from another organization in a legal and ethical manner.

Purchasing Process Defined Cont.
• The 5 “Rights” of Purchasing
1. Purchasing the right item or service
2. In the right quantity
3. At the right quality level
4. At the right price
5. At the right time

Purchasing and Your Organization
• Brainstorming Activity
– Think of all items purchased within the organization
– List them (3 minutes)
– Get into small teams and categorize (3 minutes)

Nuts and Bolts
• The nuts and bolts of the purchasing process include the following
– Requirements
– Supplier Selection
– Purchase orders
– Performance measures

Requirements
• Requirements are the attributes and specifications a product or service needs to posses in order to fulfill its specific purpose.

Supplier Selection
• Supplier selection is the process of identifying potential sources of supply for the product or service that is to be purchased.

The Purchase Order (PO)
• The purchase order is the means by which products and services are procured.
– Pictured at the right is a generic copy of a purchase order

Performance Measures
• Performance measures are used to track and evaluate suppliers.

How It Works
• The purchasing process consists of six main stages
1. Identify user requirements
2. Evaluate potential suppliers
3. Bid, negotiate and select supplier
4. Purchase approval
5. Release and receive purchase requirements
6. Measure supplier performance

Identifying Requirements
• Identify a need (product or service to be purchased)
• Identify needed requirements
– For example: size, color, length, thickness etc.

Evaluating Potential Suppliers
• Find Qualified Suppliers
• Request Bids/ Quotes
• Gather External Data

Selecting a Supplier
• Identify the pro’s and con’s of each suppler
– Location, cost, relationship, financial stability etc.
• Rank the suppliers according to their strengths
• Choose the best supplier
• Negotiate agreements where possible

Purchase Approval
• Purchase Order
• Department/ Company Approval
• Legal contract

Release and Receive Requirements
• All Requirements need to be accurate and clearly communicated
– Quantity
– Quality
– Price
– Delivery and Shipping
– Product or Service Specifications

Measure Supplier Performance
• Supplier Scorecard
• Relationship Status
• Is the supplier meeting our needs?
• Is our product or service meeting customer needs?

Process Flow Chart

A Real World Example
• Buying A Car ( what is the process?)

Other Things to Consider
• Total Cost of Ownership
– Sometimes the cheapest initial option isn’t always the cheapest long term option.

Scenario
• You are a purchaser for your organization. You were asked to buy a fence. The fence is to be installed on the west side of your office building; periodically the wind can blow hard from that direction. You have a choice between a wood fence that costs $1,200, a vinyl fence that costs
$3,200, and cinder block fence that costs $5,000.
Which fence would you choose and why?

Exercise
• Pair off into groups of two
• Assign each pair to be either a buyer or supplier
• Buyers go through the purchasing process

Exercise
• Switch roles and repeat the exercise (10 minutes)
• Report
– What went well?
– Which parts were difficult?

Summary
• The purchasing process is important to every organization
• Through the purchasing process you can create value for your organization

Reading List
•
Straight to the bottom lineRobert Buzki
• Supply Chain Gains- Dan Barnes
• Managing Purchasing: Making the Supply Team Work-
Kenneth Killen
• The Relationship Driven Supply ChainEmmett Stuart
• Business-to-Business ProcurementRichard Pinkerton