By: ProcurementIQ Staff Writer, Ashley McKay
In a recent article on Procure-Web, Eman Abouzeid highlights the Five Rights of Procurement. But, they might not be the rights you’re thinking of! These rights more pertain to the responsibilities of procurement – and, not your moral or legal rights.
So, What are Procurement’s 5 Rights?
- The “Right Quality”
The quality of the good or service you’re procuring is extremely important. During the RFP process, it is critical that procurement and other internal stakeholders are specific with their needs when communicating with suppliers.
According to Eman there are several things that can happen if the right quality isn’t achieved, for examples:
- Stock may have to be rejected or scrapped
- Production machinery may be damaged
- Finished products may be defective and have to be scrapped or re-worked.
- The “Right Quantity”
Procurement will also have to be sure their organizations is received the right quantity of the particular goods. In some cases an excess might make sense, but there can also be risks. A deficit, on the other hand, could have huge impacts on your supply chain, especially your customers and their businesses.
In Eman’s words:
- Stockouts may cause bottlenecks or shutdowns in production; costs of idle time; late delivery to customers; lost credibility, goodwill and sales.
- Excess stock may be ordered and/or held: tying up capital in ‘idle’ stock; wasting storage space; risking deterioration, theft or damage; risking obsolescence or disuse; incurring ‘holding costs’.
- The “Right Place”
It is also crucial that goods are delivered to the right place. Some companies may have multiple warehouses and storage sites throughout the country, state or region in which they do business.
What’s are some results of goods being delivered to the wrong place? Here are two of four that Eman mentions:
- Goods may be delivered to the wrong place, creating delay and correction costs.
- Goods may be subject to unnecessary transport and handling (and related costs).
Why are These Important?
While these may all seem obvious, it’s important to double and triple check that these vital details are correct when submitting an RFP. If the supplier doesn’t get these five things right, there could be severe repercussions on not only your organization, but also the procurement department.
As we all know, procurement already struggles to gain credibility throughout the organization. Internal partners and stakeholders will feel they can’t trust procurement and may be even more reluctant to consult the department on the next sourcing project. With most procurement departments wanting to increase their spend under management, they must make sure that they are including the correct details and specifications in their RFPs.