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2nd Group

1.

Achsana Miftahul J.

I0114002

2.

Belviana Dyas T.

I0114022

3.

Nabilla K. Ishadi

I0114084

4.

Sabila Rahmatika

I0114111

5.

Suci Indah P.

I0114116

Procurement
Procurementis the act of acquiring, buying goods, services
or works from an external source. It is favourable that the
goods, services or works are appropriate and that they are
procured at the best possiblecostto meet the needs of the
acquirer in terms of quality and quantity, time, and location.
Corporations and public bodies often define processes
intended to promote fair and open competition for their
business while minimizing exposure to fraud and collusion.

Almost

all purchasing decisions include factors such as


delivery and handling, marginal benefit, and price
fluctuations. Procurement generally involves making buying
decisions under conditions ofscarcity. If good data is
available, it is good practice to make use of economic analysis
methods such ascost-benefit analysisorcost-utility analysis.

An

important distinction should be made between analyses


withoutriskand those with risk. Where risk is involved, either
in the costs or the benefits, the concept ofexpected value
may be employed.

Direct procurement and indirect procurement


TYPES
Direct procurement

Indirect procurement

Raw material and


production goods

Maintenance, repair,
and operating
supplies

Capital
goods and
services

Quantity

Large

Low

Low

Frequency

High

Relatively high

Low

Industry specific

Low

High

Operational

Tactical

Strategic

Crude oil in
petroleum industry

Lubricants, spare
parts

Crude oil
storage
facilities

Value
FEATURES

Nature

Examples

Based on the consumption purposes of the acquired goods and services,


procurement activities are often split into two distinct categories. The
first category being direct, production-related procurement and the
second being indirect, non-production-related procurement.

Direct procurement occurs in manufacturing settings only. It


encompasses all items that are part of finished products, such as raw
material, components and parts. Direct procurement, which is the focus
insupply chain management, directly affects the production process of
manufacturing firms. In contrast,Indirect procurementactivities
concern operating resources that a company purchases to enable its
operations. It comprises a wide variety of goods and services, from
standardized low value items like office supplies and machinelubricants
to complex and costly products and services, like heavyequipmentand
consulting services.

Procurement life cycle in modern businesses usually consists of seven steps:

Identification of Need

Supplier Identification

Supplier Communication

Negotiation

Supplier Liaison

Logistics Management

Additional Step - Tender Notification

Fraud

Procurement fraud can be defined as dishonestly obtaining an


advantage, avoiding an obligation or causing a loss to public property or
various means during procurement process by public servants,
contractors or any other person involved in the procurement. An
example is thekickback, whereby a dishonest agent of the supplier pays
a dishonest agent of the purchaser to select the supplier's bid, often at
an inflated price. Other frauds in procurement include :

Collusion among bidders to reduce competition.

Providing bidders with advance "inside" information.

Dividing requirements to qualify for small-purchase procedures to avoid


scrutiny for contract review procedures of larger purchases.