Procurement

A. Description

In Bahasa Procurement means Pengadaan

Procurement (Procurement) is an activity to obtain goods or services in transparent, effective and efficient in accordance with the needs and desires of its users. (Christopher & Schooner (2007)

It can be concluded that the procurement is an activity to obtain goods and services needed by the company seen from its use as well as the needs and the quality, quantity, delivery time and affordable price. 

Why do we need one?

For visibility of management information which is key to controlling and reducing costs.

B. The Purpose and Function

• Purpose: to ensure that the procurement process is going smoothly so that the products and services which is needed to be had in the right time, in the right amount, the right quality and with the right price.
• Function: in practice, is to be in line with company strategy and business plan of the company, to ensure that each activity supports to the company's goal.

c. The Category of Procurement

Based on the involvement :

a. Direct Procurement

Direct procurement is purchasing of raw materials or finished goods which result in direct operation and sustainability of the production process. Costs for the purchase of this type is large and routinely do. 

Ex: Samsung buying a procecor for making their smartphone, for making cake we need flour, eggs, sugar, milk,etc.

b. Indirect Procurement

Indirect procurement is purchasing that indirectly affect the company's operations. Costs incurred for the purchase of this type are relatively smaller and not done routinely, the procurement can be done programmatically or when certain conditionals as needed. 

Ex: rearview mirror on car (without them car still can move.

Based on the method :

a. Traditional Procurement Methods

is which the procurements departments and the suppliers in two different organizations.

b. Alternative Procurement Methods

is the development of the traditional procurements system that felt not longer able to keep up with technology.

D. Procurement Principle

• Efficients

The principle of efficiency in the procurement of goods and services is to use the available resources acquired goods and services in quantity, quality expected and obtained the optimum time.

• Effective

Effective principles in the procurement of goods and services is the available resources acquired goods and services that have the highest value of the benefit.

• Fair Competitions

Principles of healthy competition in the procurement of goods and services is competition among potential providers of goods and services based on ethics and procurement norms in force, not fraud.

• Transparrants 

The principle of transparency in the procurement of goods and services is the provision of comprehensive information on the rules of the procurement of goods and services to all potential suppliers of goods and services and the public interest.

• Accountability 

The principle of accountability in the procurement of goods and services is the accountability of the procurement of goods and services to the parties concerned and society based on ethics, norms and provisions of the legislation in force.

E. Quality of Goods

Quality of Goods that Procurement must have are:

• Performance, related to the functional aspects of an item and is the main characterisitics of the envisaged customers in buying such items.
• Featured, secondary or complementary characteristics are useful for adding basic functions relating to product choices and development.
• Reliability, related to the probability or likelihood of an item successfully run its function each time it is used in a particular period of time and under certain conditions.
• Conformance, related to the level of compliance with the specifications set out earlier based on the wishes of the customer.
• Durability, related to how long a product can be used.
• Service Ability; characteristics associated with speed, ease and accuracy of competence in providing services for the repair of the goods.
• Aesthetic, the subjective nature of the characteristics about aesthetic values related to personal considerations and reflections of individual preferences.
• Fit and Finish, characteristics that are associated with subjective feelings of customers about the existence of the product as a quality product.

F. Process of Procurement

Planning : is the process set organizational goals and how to achieve it.

Organization : is the process of setting and allocation of tasks, authority and resources to achieve goals.

Actuating : is the process of moving people to be motivated to do the taks.

Controling : is the process to ensure that the activity remains on target.

G. The Task of Procurement Departmen (Generally)

1. Plan the right relation with the supplier.

 A relationship with a supplier can be a long-term partnership as well as transactional relation in short term. Either the model of relation, the relation, or how many suppliers.

2. Choose a supplier.

Activity in choosing a supplier can take time and resources are not small. A potentially key supplier to establish a long term relationship, this selection process may involve an initial evaluation, invite them to presentations, site visit and so on.

3. Choose and implement suitable technology.

Procurement activities always require the help of technology. Nowadays many companies are using electronic procurement (e-procurement) internet applications for procurement activities.

4. Maintaining the required data items and data supplier.

Procurement section should have the complete data about the items that are needed as well as suppliers data. Some important data by suppliers the name and address of each supplier, what items they supply, the price per unit, the shipping lead time, past performance, the qualifications of the supplier as well as qualifications like ISO.

5. Do the buying process.

The purchase process can be done in several ways, for example purchase routine and purchases through a tender or auction (auction). Regular purchases and purchases with tenders pass through different processes.

6. Evaluating the performance of suppliers.

The results of this assessment are used as feedback for the supplier to improve their performance.

H. Procurement Life Cycle

1. Requirement Determination

Determining the need of goods or services that will be purchased based on the company’s need in accordance with the standard of each department.

2. Source Determination

Looking for individual / providers of goods or services appropriately.

3. Vendor Selection

Looking for the right supplier / vendor. And do the negotiating to reach an agreement.

4. Order Processing

Goods/services request process, in this phase of procurement party will publish documents of PO (Purchase Order) that have been authorized and legally to be given to the supplier/vendor, as the basis for the creation of production and delivery.

5. Purchase Order Monitoring

The procurement should continue monitoring the progress of its order/order tracking.

6. Goods Receipt

Receipt of goods / services by the vendor / supplier in accordance with the PO documents previously delivered

7. Invoice Verification

Make the process acceptance and billing data input from vendors, to be forwarded to the finance.

8. Payment

Finance and payment is made in accordance with the agreement.

I. The Key on Procurement Process

Procurements have the keys to make the procurements runs better, there are:

• Procurement Strategy, the strategy should be right and well-ordered.
• Supplier Qualification Process, to get a standart supplier.
• Supplier Development & Maintenance, in order to maintain long-term business preferences that cause effective cost relationship.
• Negotiation & Contract Development, good negotiation will allow for the development of the contract.

J. Conclusion

In the procurement process, various activities have to be passed from the point where raw materials are produced, transported to the place of processing to make the finished goods are then distributed to customers that are spread throughout the place should be done efficiently, the right benefit, in a short time so that the product price can be affordable for consumers.

Logistics is essentially aimed to optimize the factors of production, are to optimize the cost, time and quality.

Thankyou~:)