Eskom Procurement Book 2015

PRINCIPLES OF SUPPLY CHAIN AND PROCUREMENT MANAGEMENT

1.7 THE IMPACT OF PROCUREMENT ON OTHER FUNCTIONS The procurement function has an influence on the activities performed by other functions. Procurement officers have to act on an equal footing with their internal customers and suppliers/business partners. It is crucial for the procurement officers to examine their relationships with key internal functions/business partners in design engineering, operations, marketing/sales, and accounting/ finance. Procurement officers also have to ensure a continuous supply of inventory to internal business partners to maintain the internal relationships.

1.7.1 THE PRODUCTION AND ENGINEERING FUNCTION

The production function depends on the procurement function to ensure efficient production processes and lower manufacturing costs. Procurement also has to ensure the timely and correct supply of materials to avoid production stoppages and products of poor quality as well as the optimal utilisation of facilities.

1.7.2 THE MARKETING FUNCTION

The procurement function relies on the marketing function to understand the needs of customers. The constant contact between the procurement function and suppliers enables procurement to identify products with good market potential and can help marketing to extend its product range. Marketing depends on procurement for the timely availability of stock.

1.7.3 THE ADMINISTRATIVE AND FINANCE DEPARTMENT

The administrative function relies on procurement for purchases of products such as computers, office furniture and stationery. Finance is more interested in factors such as stock-keeping, conditions of payment and cash flows that affect the procurement budget [22]. 1.8 CENTRALISED VS DECENTRALISED PURCHASING Top management must make the decision on whether to centralise or decentralise the procurement function. This is a major issue within large organisations. With centralisation, the authority and responsibility for the procurement function are assigned to a central function; and with decentralisation the authority and responsibility for the procurement function are dispersed throughout the organisation. Some large organisations opt for a hybrid structure where authority and responsibilities are shared between the central procurement function and business units, divisions or operating plants [10]. However, whether an organisation centralises or decentralises its function depends on the pressures it is facing.

14 CHAPTER 1