Procurement Methods

In procurement, primary needs (saleable finished commodity) are differentiated from secondary needs (components, pre-materials) and from tertiary needs (operating supplies and auxiliary materials). It is recommended to organize the procurement process according to this strict differentiation.

For the procurement of needs for goods to be produced a deterministic approach is recommended, which uses the available customer call-offs and a forecast of future call-offs as a basis. The forecast will be based on past data and market knowledge. If such a deterministic approach seems uneconomical or is not feasible, you can use stochastic methods that use only information about past consumption. A prerequisite for this is the availability and evaluation of this database.

If no usable historical data is available or if the data cannot be evaluated in an appropriate manner, you can resort to heuristic procedures, i.e. you estimate the demand and approach reality via trial & error.

Only those involved in the process in the specialist departments are able to define, name and recognize the correct and suitable employees, machines, materials and services which they need to fulfil their tasks. Where a procurement decision has to be made between several alternatives, the specialist departments should be involved in the purchase decision as in the defined and documented processes. A similar effect can be achieved if the specialist departments define functional and technical requirements for the resources to be procured. Ideally, you should link these two measures. Make sure that the purchase price alone is not used as a criterion for assessing the performance of your purchasing department. Rather, the criteria should encompass all impacts of purchasing and procurement activities on your overall business and that of your customers. This includes availability, workability, longevity and many other criteria.

To implement a coordinated purchasing and procurement process, the CyberPractice method developed by Dr. Boysen can be used.

Example: A large industrial service provider for the process industry with a very large number of small sites had organized the entire procurement process via a central purchasing department, which was measured exclusively by the savings realized and acclaimed accordingly.

Tensions arose between the sites and the purchasing department because the specifications of the operational staff, which resulted from direct customer requirements, were generally not adhered to for cost reasons. As a direct consequence, not inconsiderable internal friction losses and conflicts with the customers arose with regard to the execution and adherence to deadlines of the commissioned work, and costs increased as a direct and indirect effect.

The company management reacted by closing the central purchasing department and transferring purchasing responsibility to the respective site managers, with the result that, although customer complaints decreased, costs now rose sharply due to the lack of cost control, and an overview of purchasing activities became virtually impossible despite the use of a new ERP system.

In the company, this oscillation between extremes subsequently also led to massive problems in the context of quality management certification, since the requirements could not be mapped in the process organization with the new structure of the purchasing process.


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