Subject:- Procurement & Inventory Management

Course Code:- OPRM526

CA:- 01
Instructor:- Ankush Saxena
Section:- Q2154

Mittal School Of Business

Lovely Professional University
Phagwara, Punjab
 Annexure-V- Cover Page for Academic Tasks
Course Code: OPRM526 Course Title: Procurement & Inventory Management

Course Instructor: Ankush Saxena

Academic Task No.: 01 Academic Task Title: Assignment

Date of Allotment: 17.03.2022 Date of submission: 22.03.2022

Student’s Roll no: A16 Student’s Reg. no: 12110909

Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by

students as specified at the time of assigning the task by the instructor)

Learning Outcomes: (Student to write briefly about learnings obtained from the academic
tasks)

Declaration: I declare that this Assignment is my individual work. I have not copied it from
any other student‟s work or from any other source except where due acknowledgement is
made explicitly in the text, nor has any part been written for me by any other person.

Student’s Signature: Robiul Islam Akash, Mamadou Lamine Ndiaye

Evaluator’s comments (For Instructor’s use only)

General Observations Suggestion For Improvement Best part of assignment

Evaluator‟s Signature and Date:

Marks Obtained: Max. Marks: …………………………

Question No 01:- Describe in detail about Procurement Process?
Answer:- Procurement is the act of obtaining goods or services, typically for business
purposes. Procurement is most commonly associated with businesses because companies need
to solicit services or purchase goods, usually on a relatively large scale.
Procurement generally refers to the final act of purchasing but it can also include the
procurement process overall which can be critically important for companies leading up to their
final purchasing decision. Companies can be on both sides of the procurement process as
buyers or sellers though here we mainly focus on the side of the soliciting company.
▪ Procurement is a vital business function. When managed efficiently and done well, it
can help increase your business’s profitability.
▪ It includes a range of activities involved in obtaining goods and services, including
sourcing, negotiating terms, making purchases, tracking when supplies are received and
maintaining records.
▪ It’s important to continuously monitor and assess the procurement process to improve
any weak spots or inefficiencies.
▪ Technology can reduce procurement cost and administrative overhead by automating
and tracking procurement processes.
Procurement is an important step in understanding supply chains, because it helps a company
find reliable suppliers that can provide competitively priced goods and services that match the
company’s needs. That’s the case whether the company is seeking raw materials for
manufacturing, a marketing services provider or new office supplies. Minimizing cost is one
important aspect of improving your procurement processes. But it’s also vital to identify
suppliers that provide the quality of goods and services that the company needs and have the
capacity to deliver reliably and a track record of doing so.
Procurement Process:-
The procurement process generally involves a number of steps. The business identifies
particular goods and/or services that it needs, sources the suppliers that will help the company
reach its business objectives,
negotiates terms and costs
and then purchases and
receives the relevant items.
A small company may have
just one person handling
procurement of all goods and
services. Larger companies
may have a team of people
specialized in dealing with
different suppliers or
supporting specific internal
business groups. For some
items, the team may need to
gather input from several
different business groups in
order to determine the company’s overall requirements. It’s important to remember that
procurement doesn’t consist of a series of isolated acts — it’s an ongoing process. For example,
businesses generally aim to establish relationships with key suppliers to help obtain the best
service and lowest possible costs, which ultimately translate into higher profit margins.
Companies may also need to conduct regular quality assurance checks and performance
analysis to make sure suppliers consistently meet expectations.
Detail explanation of 9 steps:-
1. Identify which goods and services the company needs:- First, a business must identify its
requirements for a specific item or a service. This may be a new item that the company hasn’t
previously purchased, a restock of existing goods or a subscription renewal. This step typically
involves delving into the nitty-gritty details of what the business needs, such as the precise
technical specifications, materials, part numbers or service characteristics. At this stage, it’s a
good idea to consult all business departments affected by the purchasing decision to ensure the
procured items accurately reflect the needs of each department.
2. Submit purchase request:- When an employee or business group needs to procure a
significant quantity of new supplies or services, they make a formal purchase request (also
known as a purchase requisition). A purchase request notifies the company that a need exists,
usually via department managers, purchasing staff or the financial team, as well as
specifications such as price, time frame needed, quantity and other important things for the
purchasing team to keep in mind. The department overseeing the purchase can then approve or
deny the purchase request. If approved, the procurement team can proceed with selecting a
vendor and making the purchase.
3. Assess and select vendors:- With a clear list of requirements and an approved purchase
request, now is the time to find the best vendor and submit a request for quote (RFQ) – this is
what the purchasing team sends to potential suppliers in order to receive a quote – it is
important to be as detailed as possible so you can compare apples to apples. Vendor assessment
should focus not only on cost but also on reputation, speed, quality and reliability. Many
companies consider ethics and social responsibility as well, since procurement is often
intertwined with corporate identity. A retailer that prides itself on sustainability would stand to
benefit from partnering with environmentally responsible suppliers, for instance.
4. Negotiate price and terms:- A common best practice is to get at least three quotes from
suppliers before making a decision. Examine each quote carefully and negotiate where
possible. If you need to walk away from a deal, be sure that you have concrete alternative
options. Once you’ve agreed on final terms, be sure to get them in writing.
5. Create a purchase order:- Fill out a purchase order (PO) and send it to the supplier. The
PO should be sufficiently detailed to identify the exact services or goods needed and to enable
the supplier to fill the order.
6. Receive and inspect the delivered goods:- Carefully examine deliveries for any errors or
damage. Make sure everything is delivered as specified in the PO and that the quality meets or
exceeds expectations.
7. Conduct three-way matching:- Accounts payable should conduct three-way matching by
comparing the purchase order, order receipt or packing list and invoice. The goal is to ensure
the goods or services received match the purchase order and to prevent payment for
unauthorized or inaccurate invoices. Highlight any discrepancies between the three documents
and resolve issues before arranging payment.
8. Approve the invoice and arrange payment:- If the three-way match is accurate, approve
and pay the invoice. Businesses should strive to have a consistent invoice payment process
through accounts payable that checks that payments match the invoice amount and due date. A
standardized process can help make sure invoices are always paid on time, which can prevent
late fees and build good relationships with suppliers.
9. Recordkeeping:- It’s important to maintain records for the entire procurement process,
from purchase requests to price negotiations, invoices, receipts and everything in between.
These records may be useful for multiple reasons. They help the company reorder goods at the
right price in the future, as well as assist with auditing processes and calculating taxes. Clear,
accurate records can also help resolve any potential disputes.

Procurement can play a key role in a business’s profitability and overall success. It includes a
broad range of related activities, each of which requires attention to detail to ensure the business
gets the most value. Supply chain management software solutions can help accelerate,
simplify, analyze and reduce the cost of the entire procurement process.

Question No 02:- Specify the various activities in Procurement.

Answer:- Procurement management is a strategic function within an organization. From
sourcing quality products to vendor management and controlling costs to ensuring the correct
quantities of inventory are available to be sold to customers, purchasing management is key to
the success of an inventory-centric organization. Effective purchasing is more than finding a
vendor and issuing a purchase order – it is a process that can provide great value to an
organization not just from a monetary standpoint, but also by sourcing the highest quality, high
demand products at the lowest cost and making sure those products are in stock and available
for customers when they need them.
While each company’s specific sourcing and purchasing activities vary, most businesses that
have implemented a purchasing process do so to improve forecasting, determine stocking
levels, handle and control purchasing tasks, monitor vendor performance, and identify savings
opportunities. Many of these activities would be extremely difficult, if not impossible to do,
without advanced purchasing tools integrated with inventory management and sales functions.
Procurement Activity Using Example:-
When structured efficiently, the procurement lifecycle can be leveraged to improve cashflow,
minimize operational expenses, and maintain positive customer relations. Unfortunately,
procurement activities often reflect historical decisions rather than current business needs. This
results in a high cost of service, frustration, and missed opportunities for institutional savings.
The following operational symptoms are indicators that procurement operations should be
assessed for potential improvements:
• Manual Processing of purchase orders and invoices
• Lack of standardizing staff training
• High invoice exception rate
• Lack of reporting and analysis of internal teams and supplier performance
• Long average time for invoices, including delayed approval times (>9 days)
• Poor sourcing methods (Not sourcing for the best quality and competitively priced
goods/services; Not realizing supplier incentives such as discounts/rebates)

The root cause of these inefficiencies can

be attributed to a lack of collaboration
and synergy between the key players.
These departments go by many
names depending on the
organization but represent the
activities of the procure-to-pay
actors vendor data
management, purchasing,
and accounts payable as well
as their peers in strategic
sourcing and contracts. In
some organizations, it can also
include treasury. To identify
the root causes, organizations
should assess their procurement
activities based on three factors:
people, process, and technology.
Reviewing the people, or organizational
structure, will ensure that the various
departments are best positioned to effectively collaborate
and execute on their mission. Examining processes will ensure that the
correct flow is in place to allow for efficient administration. Lastly, evaluating technology can
identify redundant systems, underutilized functionality, and/or gaps that may limit an effective
lifecycle. Combined, these three factors can be concurrently assessed to reduce operating costs,
enhance vendor relations, and augment cash management.
Once the assessment is complete, the organization should transition the results into an
actionable plan. This document serves as a “roadmap” to resolve the identified issues and guide
all future actions. Implementing the defined solutions will require a collaborative approach to
ensure synergy, a readiness to put the plan into action, and mechanisms to effectively monitor
and support the improvements.
Question No 03:- Mention 5 difference between Sourcing and procurement
process.
Sourcing and procurement are two related processes that are often talked about
interchangeably. But much like a set of twins, just because they look and sound similar does
not mean they are the same.
Parents of identical twins can
alter a hairstyle or change up
some clothing to help
differentiate between the two.
In the world of business,
however, we need a clear idea
of how these two ideas differ
and how procurement
software can make them
easier.
procurement is impossible
without sourcing, sourcing can’t function correctly without data from procurement specialists.
Procurement managers gather information on supplier performance during the purchasing
process, and the sourcing team uses it to evaluate vendors and either continue working with
them or terminate the contract. Sourcing takes place mainly before the purchase is made.
However, the sourcing team can also step in during the purchasing process if suppliers can’t
fulfill their responsibilities in compliance with a contract.

In the following comparison table, you'll discover the main differences between these
two essential processes:-
Sourcing Procurement
▪ Tasked with choosing suitable ▪ Tasked with acquiring the high-
suppliers quality goods
and negotiating the most favorable at the right time to meet company
contract terms needs
▪ Contains fewer steps ▪ Involves multiple processes and
numerous steps
▪ Involves defining the need, ▪ Comprises sourcing, requisitioning,
researching the market, purchase ordering,
running sourcing events, vetting making a payment, examining data,
suppliers, and negotiating contracts and managing contracts
▪ Focuses on who provides the supplies ▪ Focuses on what and how is supplied
▪ Takes a strategic approach ▪ Includes both strategic and tactical
components
▪ Aims at minimizing costs and ▪ Aims at fulfilling internal needs and
building a robust supply chain gaining a competitive advantage
▪ Creates vendor and supplier relations ▪ Manages supplier relationships to
procure goods
 ▪ Builds supply channels and systems ▪ Uses supply systems developed by
sourcing
▪ Makes the flow of supplies possible ▪ Emphasizes streamlining the flow of
supplies

Now that procurement and sourcing play an even more important role in business, it’s useful
to understand what tendencies they recently display. Sourcing is a subset of procurement. It
focuses on evaluating the market, selecting the most favorable suppliers, and negotiating with
them. Strategic sourcing ensures that the lowest possible pricing and the highest value are
locked in the contracts. Procurement is a broader process than sourcing. It involves all the
activities related to procuring goods: from purchase requisitioning to record keeping. Sourcing
has long-term goals like establishing relationships with reliable suppliers. Procurement also
has short-term purchasing objectives. The sourcing team creates relations with vendors and
oversees how procurement specialists leverage these relations to purchase necessary
commodities. Sourcing aims to set up supply chains while the procurement function is running
and improving these supply chains.
Going digital and installing cloud-based procurement tools can help improve collaboration
between sourcing and procurement teams, reduce spending, and optimize the buying process.

Question No 04:- Specify the Advantages of IT in Supply Chain.

Answer:- The exponential growth of Information Technology (IT) with communication
technology in Supply Chain Management (SCM) is playing critical role in optimising decisions
of the supply chain network flow for achieving organisational competitiveness, improving
higher service level, lowering inventory, supply chain costs and reducing electronic risks (e-
risks). To achieve integration and
effective information sharing
across and beyond the
organisations, IT in SCM is also
required. The organisations are
moving towards the virtual supply
chain with help of rapid changes
in technology and IT applications
viz; Electronic Data Exchange
(EDI), Radio Frequency
Identification (RFID), Bar Code,
Electronic Commerce, Decision
Support system, Enterprises
Resource Planning (ERP)
package, etc. The role that IT
plays in supply chain management or SCM is so important. IT provides the tools which can
pick up relevant information, break it down for proper analysis and execute it for optimum
performance of the supply chain. Data is pivotal to the execution of the supply chain, primarily
because it provides the base on which the supply chain managers can take decisions.
Real-time or almost real-time information is the key to proper supply chain management. With
information about the various stages of the supply chain, decision-makers can plan, manage,
and adjust processes to achieve goals in procurement, inventory, manufacturing, etc. Business
processes have been digitalized in the past couple of decades, and it has become a necessity
rather than an option. IT integrates various operations carried out by different companies in the
supply chain. It speeds up the business processes and prevents bottlenecks. Companies are
closer to achieving on-time procurement, shorter inventory, and better efficiency, especially in
manufacturing. IT allows companies in the supply chain to meet the needs of consumers.
Benefits Of Technology In Supply Chain Management
1. Improved Access To Information:- Supply chain technology that works well connects
previously isolated data. When distinct sections of your supply chain (such as individuals,
software systems, or external trading partners) don’t exchange information in a consistent,
reliable, and repeatable manner, you have an information silo. When functions and departments
inside a corporation (sales, production, distribution, and so on) do not communicate
information, silos can form. This results in inaccurate forecasts, flawed executions and longer
reaction times.
Information is gathered and made available to all supply chain participants through supply
chain technology. When it comes to your power to see through and across your complete
ecosystem, the term “visibility” starts to make sense. Visibility into consumer behaviours and
network-wide visibility on important supply chain activities, demands, and disruptions are
critical, both internally and with supply chain partners. Improvements in mobile technology
now allow organisations to check inventory status, warehouse activity, product movement and
much more quickly and easily, allowing them to satisfy the demands of their customers in a
better way. Orders, inventories, workforces, transportation networks, warehouses, and partner
activities are visible to companies with best-in-class supply chains.
2. Improved Insight:- The foundation for essential decision-making is insight. Supply chain
technology makes it easier to evaluate data, gain insights (on things like customer demand,
transportation/warehouse restrictions, and supplier lead times), and make decisions that have
direct and indirect effects on overall supply chain performance.
Furthermore, supply chain technology includes decision support features to help people make
better decisions faster. This allows businesses to churn data and perform real-time simulations
based on various scenarios, allowing them to assess multiple solutions. Smarter decisions can
be made by better understanding the trade offs involved with each scenario response.
3. Improved agility:- Technology in the supply chain enhances agility. It’s easier for
executives to address problems or generate new company prospects much faster when they
have better insight, thanks to enhanced access to information and simulations.
If your processes, systems, or organisation have obstacles (or silos), you won’t work with
agility. You need to see events across your whole supply chain, evaluate their impact, and plan
proactive fixes. Good supply chain technology will most likely recommend “best” activities,
which you can adjust if those actions become available. In today’s fast-paced business climate,
this capability is critical. Providers who can connect planning and execution excel at ensuring
that the entire organisation is on the same page and aware of new decisions.
4. Better Collaboration:- Collaboration is a process in which two or more individuals or
organisations work cooperatively to accomplish a shared goal. Successful supply chains embed
systems and technology that enable, monitor, and evaluate collaboration between individuals,
departments, and organisations in order to maintain a consistent flow of information, analysis,
and choices. Collaboration is critical as omnichannel consumers’ demands for choice, speed,
and flexibility increase. Successfully negotiating these expectations needs agility and reactivity
that technology-enabled businesses can only deliver. The ability to maintain synchronisation
across an extended network is a defining characteristic of highly competitive supply chains.
Retailers and manufacturers who have mastered this degree of collaboration regularly
outperform on various critical financial indicators, including greater inventory turns, cost
savings, and service levels.
5. Improved customer loyalty:- Supply chain technology is more crucial than ever to
customer happiness and loyalty, owing to the challenges faced by the omnichannel consumer.
Customers want to know that the goods they’re looking for are in stock before they come into
the shop and purchase. Retailers want on time, complete shipments to ensure that they have the
necessary goods in stores when customers buy locally or fulfil online orders from them. As a
result, consumer experience and loyalty are enhanced. This would not be possible without
supply chain technology’s visibility, accuracy, and agility.
A technology-enabled supply chain can significantly reduce costs by speeding the movement
of materials or subassemblies from suppliers to the plant in the appropriate proportions.
Manufacturers might anticipate a reduction in materials/parts inventories due to more efficient
raw material utilisation and a more efficient factory floor. Effective forecasting and distribution
should result in a smaller completed goods inventory, which equates to lower warehouse and
transportation costs for both retailers and manufacturers.

Question No 05:- Describe the process Involved in RFP.

Answer:- RFP or request for proposal is a document released by business organizations,
government organizations or not-for-profit agencies to call for proposals for new projects or
for outsourcing existing operations. This document contains details about the project and
intimates interested parties to revert with their proposals to take up the project. RFPs are
published in national newspapers, trade journals, websites and can be distributed to potential
bidders.
The major reason for publishing RFPs is to attract multiple bids for the project. The
organization publishing the RFP can get bids from multiple parties interested to take up the
project. Each bid presents a unique perspective of handling the project as the bidders will
include their action plan to handle the requirements. For instance, if a business organization is
planning to automate its business operations and wants to finalize IT services companies for
the job, it can float an RFP inviting companies interested to apply for the project. Once the
organization receives bids from different companies interested in IT project management, it
can go through each bid and know the action plan of different companies. It can then finalize
an IT service company that has a comprehensive action plan and quotes the most competitive
rates.
A Request for Proposal generally consists of the following information
1. Introduction to the company publishing the RFP 8. Contract terms
2. Scope of the project 9. Evaluation criteria to finalize the contract
3. Nature of the project 10. Last date of submitting the bids
4. Bidding process 11. Incentives and penalties
5. How to format and present the bids 12. Payment details
6. Information required to be provided in the bid 13. Timeline to provide the finished work
7. Contact information
There are three major reasons to start the RFP process.
▪ Finding a Suitable Vendor - Publishing an RFP in trade journals and national
newspapers helps business organizations to find suitable vendors to handle the project.
▪ Improve Accountability and Transparency - Publishing an RFP helps an
organization to solicit bids from familiar as well as unknown companies. The
organization can then compare the bids and select the most competitive bid with a
suitable plan of action to handle the project. This process encourages transparency and
eliminates corruption.
▪ Government Regulations- In some cases, government regulations need certain
companies to float RFPs and attract bids.
The steps in the RFP process can vary from one organization to another. However, these are
some of the common steps in the RFP Process.
▪ Identify the Stakeholders- Writing RFP is a time-consuming process, which requires
a detailed understanding of your organization, nature of the project and unique
requirements of the project. It is essential to identify the stakeholders that can guide the
RFP writer in identifying the project requirements and constraints, receiving and
evaluating the bids and finalizing them.
▪ Understand the Project Requirements and Boundaries- The first step in writing an
RFP is to understand the project requirements and major constraints. Speak to all the
stakeholders and know about the budget of the project, non-negotiable deadlines, and
compulsory technical requirements.
▪ Determine the Scoring Criteria- You have to determine the scoring criterion to
evaluate the prospective bidders. You can take advise from the stakeholders of the
project and other advisors to draft the scoring criterion. The scoring criteria mostly
depend on the priorities of the organization in selecting the bidders. For example, You
can select prior experience, location, price quote, size of the company as the scoring
criteria.
▪ Writing the RFP- The next step involves writing the request for proposal. The RFP
document should contain information about the organization, short description of the
project, project objectives, budget, milestones, and deadlines to achieve them,
 information required in the bid and deadline for submission of the bid. You can either
create the RFP from scratch or use the RFP templates available online if you are not
confident about how to write an RFP.
▪ Publishing the RFP- Once the RFP is ready, the next step is to publish and circulate
the RFP so that the potential bidders can know about the opportunity. You can publish
the RFP document in the classifieds sections of local and national newspapers or in the
trade journals relevant to the project. For example, if your project involves construction,
you can publish in the trade journals related to the construction and Real Estate industry.
▪ Review the Bids - After the deadline for submission of bids, review all the bids. Pay
attention to the plan of action, price quotation, experience, size of the company and
other scoring criteria drafted by you.
▪ Research New Technologies- If a bidder mentions a new technology or unique
solution to handle the project requirements, take your time to research the new idea or
technology. Technology is changing at a lightning pace and advanced technologies
provide cost-effective solutions to complex problems. Research about the technology
and its benefits and how it is suitable for your project.
▪ Research the Track Record of the Selected Bidders- You can shortlist a few bidders
with impressive proposals. Research the track record of these shortlisted companies.
You can ask them to provide a list of references or past clients. You can also find
feedback about companies on internet forums and local business directories.
▪ Schedule a Meeting- After the background check, shortlist a few bidders and schedule
in-person meetings. Discuss the various issues and challenges related to the project and
how the vendor plans to handle them. Score the responses and finalize a vendor for the
project.
▪ Negotiation and Contract- The last step is to negotiate with the vendor and arrive at
the final terms agreeable to both parties. Finalize details regarding deliverables,
milestones, and deadlines. Document these details in the contract.
There is no hard and fast rule about the duration of the RFP process. However, it takes
approximately 3 months to complete the entire RFP process steps. The duration of the RFP
process depends on the size of the company, nature of the company, number of stakeholders,
compliance regulations and scope of the project. These items are purchased through relatively
a smaller number of, validated suppliers. The purchasers maintain long term relationship with
the vendors. These items are classified under mission critical category and purchased in large
quantities with close monitoring.