Scope And Influence Of Procurement And Supply LO1 Flashcards
What is Procurement?
A strategic function of a business and involves a high level of skill. It includes such elements as: • Added Value • Purchasing • Cost • Quality • Inventory • Supply • Logistics • Waste Management
What is Purchasing?
Purchasing is the act of physically ordering and buying something.
What is Supply?
Supply is the infrastructure which ensures that products or services get from the supplier to the customer.
Tangible
Something you can physically see or touch.
Intangible
Something you cannot physically see or touch.
Strategic
High level planning, including setting direction and long-term goals.
Inventory
The stock of foods, materials or products.
Expediting
The process involved in the progress of an order to ensure stock is received as quickly as possible.
Cost usually involves money, but sometimes costs may also be made up of the following:
- Time
- Material
- Effort
- Opportunity
REMEMBER - Cost does not have to be monetary.
Organisational costs may be any of the following:
- Fixed
- Variable
- Direct
- Indirect
Fixed Costs
Fixed costs do not change with the output of the organisation.
Examples:
- Salaries of management team
- Insurance
- Rent on an office or factory
Variable costs
Variable costs do change with the output of the organisation. They relate to the number of goods produced or sold or the number of services supplied.
Examples:
- Raw Materials
- Haulage Costs
- Wages for hourly paid workers
Output
The amount of goods or services an organisation is producing or supplying.
Direct costs
Are associated directly with a job or contract.
For example, the direct costs of the construction of an office block could include bricks, cement and labour.
Indirect Costs
Indirect costs are not directly associated with a job or contract, they are often refferrwd to as overheads.
Examples of indirect costs when constructing an office block would be:
- Salary of support staff
- Rent of head office
- Mobile telephone contracts
Breakdown of organisational costs Capital Purchases
Machinery, buildings or land - one-off purchases.
Breakdown of organisational costs Insurance
Premiums to protect against theft or unforeseen situations.
Breakdown of organisational costs Marketing
Advertising, promotion and customer research.
Breakdown of organisational costs Raw materials
Components required to manufacture end products.
Breakdown of organisational costs
Research and development
Investment into designing new products/ services
Breakdown of organisational costs
Salaries/Pensions
Salary and company pensions for staff
Breakdown of organisational costs
Services
Support services such as cleaning, catering or IT support.
Breakdown of organisational costs
Sundry items
Stationery, caretaker products, uniforms
Breakdown of organisational costs
Training
Staff development
Breakdown of organisational costs
Utilities
Electricity, gas, rent or mortgage.
Breakdown of organisational costs
Vehicles/transport
Company car leases or haulage costs
