Type of Procurement Strategies
PROCUREMENT:
The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment. The process of procurement is often part of a company 's strategy because the ability to purchase certain materials will determine if operations will continue. A business will not be able to survive if its price of procurement is more than the profit it makes on selling the actual product.
Types of procurement:
Following are the most common strategies for procurement being used by organizations:
Stock procurement
Stock procurement means that goods are shipped to stock in periodically defined terms without any specific order of a customer. The important principle is that the demand can be forecasted. When finishing the production process, the goods will be stocked until the next order is received from the customer. One way of applying stock procurement by the customer is to define the minimum stock level. If the stock level falls below this defined limit, the procurement process is initiated. This type of procurement offers high flexibility to the customers, but the procurement costs tend to be higher.
Vendor Managed Inventory (VMI)
This is the type of procurement strategy in which the supplier is responsible for the stock at the customers company. A crucial premise to achieve optimized processes, lower costs and high flexibility is a close network with the supplier. In such strategy the relationship of organization is very strong.
Sole Source Procurement
Sole source procurement is however refers to those purchases where there 's only one supplier that provides the product. Usually these are unique products that you cannot find anywhere but only through one supplier/manufacturer. So keeping good relationship with such organization is very important for the organization.
Supplier Optimization
The company chooses an optimum mix of vendors who can provide the best prices and terms. This
The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment. The process of procurement is often part of a company 's strategy because the ability to purchase certain materials will determine if operations will continue. A business will not be able to survive if its price of procurement is more than the profit it makes on selling the actual product.
Types of procurement:
Following are the most common strategies for procurement being used by organizations:
Stock procurement
Stock procurement means that goods are shipped to stock in periodically defined terms without any specific order of a customer. The important principle is that the demand can be forecasted. When finishing the production process, the goods will be stocked until the next order is received from the customer. One way of applying stock procurement by the customer is to define the minimum stock level. If the stock level falls below this defined limit, the procurement process is initiated. This type of procurement offers high flexibility to the customers, but the procurement costs tend to be higher.
Vendor Managed Inventory (VMI)
This is the type of procurement strategy in which the supplier is responsible for the stock at the customers company. A crucial premise to achieve optimized processes, lower costs and high flexibility is a close network with the supplier. In such strategy the relationship of organization is very strong.
Sole Source Procurement
Sole source procurement is however refers to those purchases where there 's only one supplier that provides the product. Usually these are unique products that you cannot find anywhere but only through one supplier/manufacturer. So keeping good relationship with such organization is very important for the organization.
Supplier Optimization
The company chooses an optimum mix of vendors who can provide the best prices and terms. This
References: http://searchcio.techtarget.com/definition/e-procurement http://www.intechopen.com/books/supply-chain-management-new-perspectives/improving-e-procurement-in-supply-chain-through-web-technologies-the-hydra-approach http://www.purchasing-procurement-center.com/purchasing-strategies.html