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Efficient procurement
acquiring goods and services in a way that minimizes the consumption of resources while still meeting quality and delivery requirements
Efficient Procurement of raw materials is…
crucial for ensuring the success of any manufacturing process
Important factors in procurement
Quality of raw materials - If the raw materials are of poor quality, then the final product may not meet the desired standards
Cost of raw materials - Cost is a critical factor in raw material procurement. Companies need to ensure that they are getting the best possible price for their raw materials without sacrificing quality
Availability of raw materials - Companies need to ensure that the raw materials they need are readily available
Delivery (costs,speed, reliability) - Companies need to ensure that their raw materials are delivered on time, at a reasonable cost, and in a reliable manner, Many companies use an order and delivery process caled JIT
Relationship with suppliers - Companies need to ensure that they’re working with reliable suppliers who can deliver quality materials on time and at a reasonable cost.
Just In Time (JIT) Stock mangement
A process in which raw materials are not stored onsite but ordered as required and delivered by suppliers ‘just in time’ to be used
Advantages of JIT
Stockholding costs are minimised
Close working relationships are developed with a small number of trusted suppliers
Cash flow is improved as money isn’t tied up in stocks
Unused storage space is available for productive use
Teamwork is encouraged so employee motivation is likely to be improved
Disadvantages of JIT
Bulk buying economies of scale aren’t generally possible
The ability to respond to unexpected increases in demand is reduced
Administrative costs related to frequent ordering are increased
Unreliable suppliers (late or poor quality deliveries) can quickly halt production
Significant changes to organisational structure (a system that defines how a business is run, including how employees are grouped and who reports to whom) and production controls are needed