by Maddy Grant, Marketing Manager, SR Supply Chain Consultant
SRSCC – The 5 Rights of Procurement
It is typically considered that the five rights of procurement analyse procurement objectives and procurement function. This strategy has proved very effective over the years, but as the function of procurement changes, so does how the five rights are interpreted.
What are the 5 rights of purchasing?
Quality
In the past, the terms “quality” and “standards” referred to the standards required and the quality of the ordered good or service. Even if the product’s or service’s quality is important, today’s methodology also considers other factors, such as the requirement for Total Quality Management (TQM). The philosophy of quality advocates the idea that quality ought to permeate every aspect of an organisation and its supply chain. This viewpoint is supported by contemporary thinking surrounding the five rights of procurement, which also reveals a wide range of other issues that need to be taken into account.
Quality goals are no longer limited to the product or the material. It now includes:
• Quality of relationships
• Quality of communication
• Quality of process
• Quality of management
• Quality of (company) image.
Quantity
Quantity has always required that the customer purchase the appropriate amount of a good or service. A surplus or deficit could lead to higher expenses or unfilled orders. This is still true, but the procurement specialist needs to consider more factors of quantity. There are several things to take into account when focusing on the triple bottom line, commonly known as the three Ps: People, Profit, and Planet. Not only the thing itself must be in the proper quantity.
Quantity objectives no longer simply apply to the material or product as one of the five rights of procurement. It now contains:
• Quantity of Orders
• Quantity of Staff
• Quantity of Suppliers
• Quantity of Products
• Quantity of Customers.
Price
Price is important to everyone, including procurement. Aiming for competitive pricing is a skill taught to procurement experts. Costs are involved with price and must be taken into account, not only the expenditures associated with the good or service. Along with the price we pay to transport them through the environment, there are costs associated with moving the goods through the supply chain.
Price no longer just refers to the cost of the goods or services purchased under one of the five procurement rights. Now it examines the expenses related to:
• The cost of the procurement department
• The cost of acquisition and operation
• The cost of holding and moving stock
• The price to the environment
• The price to society.
Place
Place has traditionally been used to refer to delivering goods and services to the appropriate location. The flow of goods and services from a transportation hub to a final destination is referred to as the “last mile” in supply chain management and transportation planning. This highlights the importance of the proper location in modern supply networks. However, it goes beyond just where the products and services are moving. There are other locations to think about.
Place no longer just refers to the distribution of goods and materials. It now contains:
• The source from which materials are acquired
• The other sources in the chain
• The location of the procurement function
• The location of the customer
• The location of the other activities involved in the supply network
Time
No one can stop time. We no longer limit our consideration of time to the moment of delivery as the only factor that demands attention. In today’s world, time and money are frequently equated, and this is no different. Analysing time is never a waste of time. The procurement professional must therefore consider other aspects of time.
Time no longer simply refers to how long it takes for materials and things to be made. It now contains:
• Time of order
• Time spent negotiating
• Time spent ordering
• Time spent with suppliers
• Time management
• Time spent analysing.
The 5 Rights of Procurement – To sum it up
The wider ramifications of quality, quantity, price, place, and time must be considered while evaluating each of the five rights of procurement. Then and only then will we realise the true significance of the five rights and experience the greatest achievement.
To learn more about the 5 Rights of Purchasing, contact our procurement specialists at Supply Chain Consultants (SRSCC) by calling 01772 282555 or emailing info@srscc.co.uk.