The question is asking you to explain the following:

The objective of negotiation with a supplier is to ensure the Five Rights of Procurement. Which of the following are part of the Five Rights? Select THREE.

- With this type of question you would be expected to discuss 3- 5 differences, giving examples.

Example Essay Structure

Introduction – explain what is meant by ‘procurement’ and ‘SCM’ – procurement is the traditional

way and is to do with purchasing goods, SCM is the new way which is a more multifaceted way of

securing goods and is the result of longer, more complex and more globalised supply chains.

Paragraph 1 – the objectives of each approach (5 Rights vs added value)

Paragraph 2 – the approach (reactive buying vs proactive ordering)

Paragraph 3 - the way of working (silo working vs cross-functional working)

Paragraph 4 – the relationships with suppliers(transactional vs collaborative)

Conclusion – There are many differences between the two approaches, and different companies may

favour one over the other depending on their specific circumstances. E.g. small organisations that

make low value and low risk purchases may take a traditional procurement approach and large multinational organisations may require a SRM approach due to the volume of suppliers and com-plexities

of the supply chains.

Example essay:

Procurement and Supply Chain Management (SCM) represent two distinct approaches to acquiring

goods, reflecting the evolution of purchasing practices. Procurement, the traditional method, involvesthe straightforward purchase of goods. In contrast, SCM is a more intricate approach, born out

of longer, more complex, and globalized supply chains. This essay explores the main differences

between these two approaches, highlighting their objectives, methods, ways of working, and supplier relationships.

In the traditional procurement approach, the focus is on achieving the "5 Rights" – getting the right

goods, in the right quantity, at the right quality, for the right price, and at the right time. This ensures efficiency in the purchasing process. On the other hand, SCM goes beyond these basic objectives, aiming to add value to the entire supply chain. This might involve developing strategic relationships with suppliers, ensuring sustainability, and aligning with broader organizational goals. For

example, a company employing a traditional procurement approach might emphasize getting the

lowest price, while an SCM approach could involve working with suppliers to enhance product innovation or reduce environmental impact.

Secondly, the traditional procurement approach is often reactive, responding to immediate needs or

demands. Companies using this method typically make purchases as required, without a long-term

strategy. In contrast, SCM involves proactive ordering, anticipating future needs and trends. For

instance, a company employing SCM might engage in demand forecasting, allowing for better planning and inventory management. This proactive approach helps preventstockouts, reduce costs, and

enhance overall supply chain efficiency.

Moreover, traditional procurement often involvessilo working, where different departments operate

independently. The procurement team may not collaborate closely with other departments like production or marketing. In SCM, there's an emphasis on cross-functional working, breaking down departmental barriers for a more integrated approach. For example, an SCM team might work closely

with production to ensure materials are aligned with manufacturing schedules, fostering efficiency

and minimizing disruptions.

Lastly, in traditional procurement, the relationship with suppliers is transactional – focused solely on

the exchange of goods for money. Conversely, SCM promotes collaborative relationships, emphasizing long-term partnerships. A company using SCM might work closely with suppliers to improve

processes, share information, and jointly address challenges. For instance, an SCM approach might

involve collaborating with suppliers to implement just-in-time inventory systems, leading to cost

savings and improved responsiveness.

In conclusion, the differences between traditional procurement and SCM are substantial and nuanced. While a traditional procurement approach may suit smaller organizations with low-value and

low-risk purchases, larger multinational companies with complex supply chains often find SCM more

suitable. Understanding these differences allows companies to tailor their approach based on their

unique circumstances, emphasizing the importance of flexibility and strategic alignment with

organizational goals in the ever-evolving landscape of buying and supply chain management.

Tutor Notes

- This question is taken from learning outcome 1.1.1 (p2 onwards). The new study guide has drastically simplified the information on this topic compared to the old syllabus (the table above comes

from the old syllabus). This may be good news for students in that you don’t need to know as much,

but I do wonder if the study guide gives students enough ‘content’ to write an essay on the subject.

- If a question is to come up from LO 1.1 it would be likely be something like: definitions and differences

between procurement and SCM, difference between a supply chain and a supply network, elements of SCM, or how to add value in the supply chain.