Managing Purchasing Relationship

PSM-504:
Managing Purchasing and Supply
Relationships

Developed by Rashed Morshed MCIPS

1

A Generic Procurement Cycle

Developed by Rashed Morshed MCIPS

2

Purchasing Process

• Pre-contract-award Stages
• Post Contract-award Stages

Developed by Rashed Morshed MCIPS

3

Procurement

Procurement means the purchasing or hiring of Goods, or acquisition of Goods through purchasing and hiring, and the execution of Works and performance of Services by any contractual means

Procurement is a systematic PROCESS

Developed by Rashed Morshed MCIPS

4

What is Sourcing

• Sourcing is basically that part of the procurement process that is concerned with
‘how and where services or products are obtained’ (CIPS)
• Lysons and Farrington define it as ‘the process of identifying, selecting and developing suppliers.

Developed by Rashed Morshed MCIPS

5

Difference between Purchasing, Procurement and Sourcing

Purchasing refers to the specific activity of committing expenditure and which tends to focus on issues of price rather than of value.
Put simply, procurement is the complete process of acquiring goods, services and works from suppliers. The procurement process takes into account factors such as the cost over the life of the good or service, and the quality necessary to meet users' requirements.
Sourcing goes to a more strategic level and for long-term benefits, wherein supplier selection is critical and efforts are focused towards joint risk management activities. However, this also includes everything explained under Procurement and purchasing.

Developed by Rashed Morshed MCIPS

6

Difference between Purchasing, Procurement and Sourcing

Simple procurement may involve nothing more than repeat purchasing.
‘Purchasing’ was still viewed by much of the business world as an administrative function, linked back to order management. Whilst
‘procurement’ steps away from the transactional side and is