Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

2.2 PROCUREMENT OBJECTIVES The objectives of a modern purchasing organisation go far beyond the traditional objectives of purchasing. The key objectives for a purchasing organisation are covered in this section and include supporting operational requirements; managing the procurement process; working with other functional groups; supplier management; supporting organisational goals and objectives; and developing sourcing strategies. Procurement has an important role to play in supporting the day-to-day operational requirements of a firm. It accomplishes this through the acquisition of raw materials, components, sub-assemblies, finished goods, maintenance and repair items and services. Procurement supports supply chain functions including, for example, transportation and distribution centre functions. In this regard, procurement would play a role in ensuring that end customers receive replacement parts or finished products. Procurement supports engineering functions and technical groups within an organisation during new plant or product development, commissioning and installation of new machinery and provision of replacement parts. Modern enterprises are also looking to concentrate on core competencies and this has seen a dramatic rise in outsourcing to, and reliance on, external suppliers to provide not only materials and products but also services, including, for example, information technology support, design services, etc. In addition, global business activity continues to increase. Companies are looking to foreign countries to provide sources of services and products at lower costs, including lower labour costs. This presents a whole new set of challenges for today’s procurement organisation. As more emphasis is placed on the use of external suppliers, including global suppliers, procurement’s role must include the close support and management of these suppliers to ensure an uninterrupted flow of high-quality goods and services. Procurement has a key responsibility to meet the needs of its internal and external customers; in this regard, by buying products and services: 2.2.1 SUPPORTING OPERATIONAL REQUIREMENTS

• From the best sources. • At the correct specifications. • At the right price.

• In the correct quantities. • Delivered at the right time. • To the satisfaction of internal and external customers.

Ultimately, procurement must support the strategic objectives of the greater organisation, including helping to ensure overall profitability and an adequate return on investment for the organisation’s shareholders [1].

29 CHAPTER 2