Support Material

Acquisition of resources is cost-effective and consistent with organisational timelines

Organisations require purchasing to be undertaken in a cost-effective and timely manner and to do so the needs of the organisation need to be thoroughly researched. Regardless of the savings made, it is no use purchasing at a sale if the goods are delivered after the need for the goods has passed.

Methods of acquiring resources in a cost-effective manner include:

• bulk purchases - purchasing a large quantity will often attract a discount. This will only be beneficial if the organisation can turn over the goods within the life of the good.
• discounts - often available for bulk purchases, with contracted suppliers, with certain suppliers for given periods of time, as a special introductory offer or deal
• prompt payment policies - a discount given by the supplier to encourage the purchaser to pay the account quickly eg 5% 7 days would indicate that if the account is paid within seven days, the purchaser can take 5% off the bill.
• timing (eg sales) - from time to time the needs of the organisation will coincide with a sale. Forward planning will often identify upcoming needs and staff should be aware of periodic opportunities to make extra savings.

Resources are acquired within available timelines to meet identified requirements

The length of time between ordering and delivery will vary according to the quantity and type of goods or services requested. Stationery consumables may be delivered within 24 hours, a call for tender for the construction of a building may take several months. The needs of the organisation must be considered on an individual basis, as there are times when the timing of provision is the most important factor.

Orders should be recorded and delivery followed up as necessary. If goods do not arrive as requested they should be followed up and a record kept of the inquiry. It may be necessary to arrange for alternate supply if goods are unavailable from the usual stockist.

Resource acquisition processes are reviewed to identify improvements in future resource acquisitions

Organisations may benefit from conducting a regular review of their resource acquisition processes in order to identify areas where future improvements could be made. There may be issues such as

• a breakdown in the supply process
• an overrun of a budget allocation
• the purchase of unsatisfactory goods
• the discovery of an alternate supplier
• a review of practices.

Review strategies should include feedback and discussion with relevant staff, recording problems with particular suppliers and maintaining records of any difficulties in the procurement process.

Strategies for future improvement might involve reviewing the process used for the purchase of a particular item and identifying any problems or issues in that process.

This could include investigating:

• the process of cost analysis (comparing the costs of purchase, operation, consumables, maintenance, contracts, insurance, leasing etc),
• supply contracts (the availability of a range of suppliers, the discounts and terms offered, delivery mechanisms and timeframes, methods of ordering etc) Was the best supplier chosen for the purchase or was the organisation locked into a unfavourable contract.
• technological changes (what methods were used to identify any technological improvements which would impact on the purchase decision; has the purchase been made on the basis of matching existing requirements eg to link into an existing computer network or made to take advantage of new technology to enhance our methods eg adding a label printer and mailing software to take advantage of bulk mail discounts).

Identified areas for improvement, preferably with suggested solutions, should be referred to an appropriate authority so that future resource acquisitions can more effectively managed.

Calculating when to order supplies

It is important to be able to calculate when to order supplies. Each organisation will have different usage patterns.

The business will determine:

• the optimum stock level (how much should be held to avoid running out and to avoid having too much stock on hand)
• the frequency of ordering required (to avoid having too much or too little on hand at any time)
• the usual delivery time (or lead time) of the item
• whether it is better to purchase small quantities or take advantage of bulk discounts
• the storage room available
• associated costs eg delivery
• the safety margin required in case of additional demand or goods being temporarily unavailable

and then work out the ‘economic reorder point’ which will best avoid disruptions.

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