Traditional purchasing procedures and inefficiencies
Apart from pre-procurement activities, such as supply markets analysis, supply planning, participation in the preparation of specifications and budgets, purchasing has traditionally involved three main phases:
1. The identification phase: Notification of the need to procurement by either a requisition or a bill of materials.
2. Ordering phase: Involving the steps of enquiries/requests for quotations, receipt of quotations, preparation of purchase orders.
3. Post-ordering phase: Including activities such as expediting orders, delivery arrangements, quality inspections, storage, payment processing and documentation.
The above traditional procedures are administrative and merely provide a documented logistical trail. The inefficiencies include:
1. A sequence of non-value adding clerical activities.
2. Tendency to result in excessive documentation.
3. Excessive order processing time.
4. Excessive administrative cost for pure transactional activities.
Many organisations that have implemented the ISO 9000 quality management system with the principle of ‘you document what you do and do what you have documented’ are experiencing similar inefficiencies in practice though the quality management system is intended to allow an organisation to run more efficiently with less wastages and rework.
To stay competitive and relevant in today’s business environment, progressive organisations need to transform this administrative function into value-added processes by reducing, eliminating or combining the traditional purchasing procedural steps, and by embracing the strategic implications of IT and e-procurement.