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Lysons & Farrington, Purchasing and Supply Chain Management, 7 th edition, © Pearson Education Limited 2005

Purchasing Research, Performance & Ethics

The systematic gathering, recording and analyzing of data aboutproblems relating to the purchasing of goods and services.

• Rapid changes in technology and economic circumstances• Purchasing done in conditions of uncertainty• EDP enables vast amounts of data to be stored• Increased use of outsourcing• Focus on partnering• E-procurement facilitating real time ordering• Purchasing growing in stature

Definition of Purchasing Research

Why It Is Important

Definition and Importance

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Purchasing performance evaluation may be defined as thequantitative or qualitative assessment over a given time towardsthe achievement of corporate or operational goals and objectivesrelating to purchasing economics, efficiency and effectiveness.

Definition

Difficulties in Measuring

Purchasing Performance Evaluation


1. Lack of definition – e.g., “efficiency”2. Lack of formal objectives and performance standards3. Problems of accurate measurement4. Differences in the scope of organizational purchasing

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Purchasing Audits


A comprehensive, systematic, independent and periodic examination of acompany’s purchasing environment, objectives and tactics to identify problems

and opportunities and facilitate the development of appropriate action plans.

Definition

Examples of Auditing Purchases, Suppliers and Prices

1. What are principal purchases?2. Who are principal suppliers?3. What attempts have been made to achieve single and partnership sourcing?4. How and by what criteria are supplies appraised?5. In what ways is value for money obtained?6. What environment purchasing policies are in existence?7. What savings have been achieved in the period under review?

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Benchmarking


Types of Benchmarking

INTERNAL BENCHMARKING

A method comparing the performance of an operating unit or function within an organisation with those of a similar

business within the same industry.

FUNCTIONAL BENCHMARKING

A method of comparing internal

functions with those of the best external

practitioners of those functions irrespective

of the industry in which they are in (this may also be referred to as operational or

genuine benchmarking).

COMPETITIVE BENCHMARKING

A method of comparing

organisational performance against

that of competing organisations.

STRATEGIC BENCHMARKING

A method for evaluating

alternatives, implementing strategies and

improving performance by

understanding and adapting successful organisations who

may be competitors or partners.

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Purchasing Ethics

Concern for the well being of others

Respect for the legitimate authority of others

Honesty and trustworthiness

Compliance with the law (but with the right to express conscientious objection through civil disobedience)

Basic justice i.e., being fair

Refusing to take unfair advantage

Benevolence i.e., doing good

Preventing harm


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Provide a basis for working together

Setting boundaries as to what constitutes ethical behaviour

Provide a safe environment for all subscribers

Provide a commonly held set of guidelines

Benefits of Ethical Codes


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World Bank Purchasing Violations


Contract irregularities and violations of the Bank’s procurement guidelines Bid rigging Collusion by bidders Fraudulent bids Fraud in contract performance Fraud in an audit enquiry Product substitution Defective pricing and parts Cost/labour discharging Bribery and acceptance of gratuities Solicitation and/or receipt of kickbacks Misuse of bank funds or positions Travel fraud Theft and embezzlement Gross waste of bank funds

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The procurement of supplies and equipment is a potent instrument of environmental policy. Careful purchasing of it gives full weight to environmental considerations in the selection of products and can help improve environmental standards by reducing pollution and waste. It can also, through the natural operation of the market, influence purchasers and suppliers in their pricing policies and product ranges.

Department of Environment has stated that:

Environmental Purchasing Policies

Steps Required to Give Effect to the Above Objectives:


STEP 1STEP 2STEP 3STEP 4STEP 5STEP 6STEP 7STEP 8STEP 9

Prepare environmental policy Communicate the policy to stakeholders, employees and suppliersPrepare guidelines for employees and suppliers Appraise suppliers Incorporate environmental requirements into specificationsAdopt life-cycle approaches Prepare guidelines for disposals Provide appropriate training Ensure regular audit of compliance with policy and guidelines

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