Selection of potential suppliers
This is an important function of the purchase department. If the material under reference is a standard item covered by company standards, then the standards will have a list of approved suppliers for the item under reference. This item would have been approved after due analysis of samples and ensuring its compliance with national or international standards. If the material/component under reference is a mechanical item/equipment, list of suppliers for this type of item may be identified based on historical data.
In case items under reference are first buy category, suppliers? catalogue or trade journal directory will be of use. Number of potential suppliers depends on factors like value, importance of the part and so on. The sources of specifications are:
- Standards.
- Buyer specification.
- Engineering drawing.
- Suppliers catalogue.
- Miscellaneous like part sample.
Procurement is the sourcing process that a company uses to get the goods and services it requires.
- Sourcing: There are three types of sourcing:
1. Sole source for proprietary items.
2. Multiple sources for general/off the shelf items to get price competitiveness.
3. Single source, as decided by organisation for critical items.
- Contract buying: Material requirement planning sometimes encounters a situation wherein it needs a few items of general nature in small quantities at short notice. The shortage would have occurred due to some unforeseen circumstances in supply chain. We can deal with this type of buying at planner level in material requirement planning. The purchaser sometimes issues the raw material for such requirement on chargeable basis.
After selecting the potential suppliers, buyers may request bids and quotes. It is generally termed as Invitation.