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5 Rights in Procurement

procurement

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334 views6 pages

5 Rights in Procurement

procurement

Uploaded by

michael
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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5 Rights in Procurement &

Supply Chain by CIPS


Why are the five Rights of Procurement important?
The five procurement rights are interconnected, with one
having an impact on the others. As a result, the significance
of the five Procurement Rights is the influence that failing to
attain one Right has on the success of obtaining all five
Procurement Rights. The attainment of all five procurement
rights, taken together, offers a foundation for successful
purchasing and supply chain management that applies to all
industries, sectors, and nations.
The 5 Rights of Procurement
The first thing I learned in my CIPs was the significance of the
five purchasing rights, which are as important now as they
were in 2003. How can you attain all 5 Procurement Rights
when risk management and mitigation are at the center of
purchasing and supply chain management? I will now go
through each of the 5 Procurement Rights in further detail.
Right 1 - The Right Quality
The Right Quality is a product or service that fulfills the
specifications' criteria, features, and performance. There is
frequently a trade-off between Right Quality and Right Price.
Get The Right Quality By:

 Analyzing what you are buying

 Evaluating if it meets your needs - If not, why not?

 Measuring supplier performance

 Investigating how a reduction in costs may impact


quality

A collaborative approach to continuous improvement may


reduce the expenses associated with quality enhancements.
If you can push your suppliers to innovate, they can
successfully fix your quality concerns for you. Output-based
requirements, for example, foster a performance partnership,
which frequently results in the:

 Same quality at lower cost,

 Higher quality at the same cost,

 Higher quality at a lower cost.

Incentivizing suppliers to deliver better levels of quality


above and beyond "the quality" stated in the contract may
aid in harnessing the suppliers' particular talents and
competencies and creating efficiencies. Among the many
claimed benefits for suppliers that connect with buyers in this
manner are increased profitability, longer term contracts, and
loyal customers.
This strategy is preferable to the traditional cost plus or fixed
price transactional contract, in which the supplier has no
incentive to go above and beyond providing "the minimal
quality" to meet the contract's requirements.
Right 2 - The Right Quantity
Accurate demand predictions for products and services on a
daily, weekly, and monthly basis are used to attain the Right
Quantity. It is feasible to estimate future demand with a
high degree of confidence by analyzing previous demand.
However, taking into account new discoveries that may boost
or reduce demand is critical.
Get The Right Quantity By:
Maximize inventory levels by segmenting spend into the
following categories:

 Critical,

 Routine and

 Non-critical

and determine for each spend segment with 5 W's:


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To minimize stock depreciation and obsolescence, this
promotes stock rotation and 'Just In Time' delivery (see 'Right
4 - Right Time').
Right 3 - The Right Place
The Right Place is often the optimum receipt and delivery
point for goods and services.
Get The Right Place By:
Using a central location for products reception and
distribution avoids the need for needless transit and
handling. Examine their approved order placing methods,
minimum orders, and lead times when selecting suppliers.
Determining the best location for your suppliers may also
include concerns for Corporate Social Responsibility, the
environment, and ethics.
Right 4 - The Right Time
The Right Quality, Quantity, Place, and Price are
inextricably intertwined. Economic considerations such as
supply and demand, as well as the urgency of the purchase,
can have an influence on all 5 procurement rights. The
Toyota Production System established the Just in Time
approach to inventory management as a tried and true
method of reducing supplier response times.
Consumption increases the desire for greater inventory and
removes the 'Just In Case' ordering attitude, which
frequently leads to waste. However, as the Covid-19
Coronavirus Pandemic has demonstrated, global supply
networks are not always as strong as they look.
Get The Right Time By:
Using wholesalers or digital marketplaces to fulfill modest,
regular purchases at the expense of a yearly delivery fee.
Stationery and other low-value non-critical products are good
candidates for consignment stock. The stationery firm will
track inventory levels and refill supply as needed, only billing
for items used.
Right 5 - The Right Price
The Right Price refers not only to the initial price paid but to
the:

 Cost of acquisition,

 Whole life costs and

 The ‘opportunity cost’ (meaning other alternatives


are lost at the expense of the chosen one).

Get The Right Price By:


Providing incentives for suppliers to offer solutions and
activities can result in greater service levels at the same or
lower cost. Furthermore, using gain sharing agreements and
collaborating to share the risk and benefits (from pooling
resources) is a fantastic approach to motivate suppliers to
innovate and reduce the cost of their goods and services.
In Summary
The 5 Procurement Rights give a simplified understanding
of how to properly manage your suppliers and supply chains.
Procurement experts employ the five procurement rights to
control supply chain risks in real time.

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