Answer to Question #308179 in Economics of Enterprise for thobekile

Question

Amandla Ltd is an electronics manufacturer based in the Vaal Area in the Gauteng province in South Africa. Amandla Ltd has partnered with an international company to export its products and as a result will be expanding its operations and its product portfolio. Based on this expansion, the company’s management has decided to establish a new business function dedicated to procurement. 

Amandla Ltd has requested your Procurement Consultancy to provide a memo to inform them on the following issues so at to inform their decision making:

The procurement process

The role and importance of procurement

Centralisation vs Decentralisation

Outsourcing vs In-sourcing

The role of e-Commerce and 4IR in the procurement

Answer 1

Date: March 9, 2022

To: Amandla Ltd

From: Procurement Consultancy

Subject: Procurement process

I am writing to discuss a few points on the procurement process.

The procurement process

Procurement process It's a set of procedures that must be followed in order to get goods or services, from request through purchase order to invoice approval. Every procurement management process, irrespective of its uniqueness, has three Ps: Process, People, and Paperwork. The process is the set of guidelines to follow while evaluating, ordering, purchasing, and paying for products and services. The number of checkpoints/steps increases as the purchase becomes more complicated. The people are the stakeholders and their roles in the procurement process. Every stage of the procedure is initiated or authorized by them. The number of stakeholders participating is proportionate to the purchase's risk and value. The paper refers to all of the paperwork and documentation generated throughout the procurement process, which is gathered and preserved for future reference and auditing.

The role and importance of procurement

A procurement department's primary responsibility is to manage the organization's spending. A strong procurement function is essential for implementing a successful Annual Buying Plan that incorporates comprehensive forecasting, market analysis, purchasing procedures, and cost-cutting strategies.

Centralisation vs Decentralisation

Centralized procurement refers to purchasing that is controlled at the headquarters level, whereas decentralized procurement refers to purchasing that takes place across several business units and locations.

Outsourcing vs In-sourcing

Outsourcing entails enlisting the assistance of non-affiliated third parties to execute certain jobs. Insourcing, on the other hand, is a corporate process carried out within the operational infrastructure of a company.

The role of e-Commerce and 4IR in the procurement

E-commerce and 4IR aid businesses in lowering total costs, improving data accuracy, streamlining supply chain services, speeding up business cycles, and improving customer service in the procurement process.

I hope the above explanations help you to decide on the best procurement practices. Thanks.