1.2 The five rights of procurement
Terms in this set (6)
The five rights of procurement LIST
The five rights of procurement: QUALITY DEFINITION
Obtaining goods which are of a satisfactory quality and fit for their purpose such as accurate specification of product. If not achieved stock may be rejected or scrapped, production machinery may be damaged, defective product may reach customer resulting in the firm incurring more costs
The five rights of procurement: QUANTITY DEFINITION
Getting the right quantity to meet demand and maintain service levels while minimising stock holdings (demand forecasting, inventory management), If not achieved wrong amount of stock held will cause shutdowns in production, lost time, late delivery. Too much stock will be wasting storage space, also risking deterioration or theft and damage.
The five rights of procurement: PLACE DEFINITION
having the goods delivered to the correct delivery point, packaged and transported to ensure there safe arrival (distribution planning, transport planning and packaging. If not achieved goods may be delivered to the wrong place, they may also get damaged. They may also be subject to unnessacary transport and handling costs.
The five rights of procurement: TIME DEFINITION
securing delivery of goods at the right time to meet demand (demand management, supplier management). If not achieved goods may be too late causing delays to customers which may result in lost business or on the other hand if it's too early will cause undue costs of holding inventory.
The five rights of procurement: PRICE DEFINITION
Securing all of the above at the right price which is reasonable, fair and competitive (price analysis, supplier cost analysis and competitive pricing and negotiation). If not achieved suppliers will be free to charge what they like, profits will fall or prices charged to customers will have to rise, therefore there will be less profit to motivate shareholders to reinvest in the business.