At a time when international companies are focused on Supply Chain resilience and security the ‘six rights’ of procurement can play an important part. Procurement is a large part of any business and supply chain disruption can very quickly impact on the procurement operation of any business.
What are the six rights?
The six rights are a series of checkpoints to ensure your company procurement process is ethical, effective and efficient.
- Right Source – are you purchasing from the correct source? This is especially important for international transactions. Will import duties and taxes or licences apply? Does the company you purchase from look after its workers? Do they operate ethically? Are they respectful to the environment? Buying an item at the cheapest isn’t always the best option – consider your corporate social responsibility (CSR).
- Right Price – are you purchasing within the budget? Are you monitoring the cost to ensure you are receiving quality for money? Check if the cost is affected by quantity such as minimum order quantities (MOQ) or volume discounts.
- Right Quantity – can you manage the quantity required against the price? Do not overstock on items unnecessarily as this can tie-up company cash flow in overstocked items. Can the supplier deliver in the volumes you require? Consider systems such as Just in Time (JIT).
- Right Time – Delivery needs to happen as planned so you can manage your inventory effectively. Is the most efficient shipping method being utilised? Can the goods be delivered within the specified timeframe? Can the supplier plan efficiently from manufacture to delivery without delays? Goods not delivered within the given timeframe can have disastrous consequences and lead to cancelled orders and loss of customer faith.
- Right Place – can the goods be delivered to the correct place as required? Some international shippers are only willing to ship to the nearest port – can you effectively arrange onward delivery? Have you investigated the international commercial terms (Incoterms)? Some remote locations only have limited delivery services (such as Scottish highlands) and additional delivery surcharges may apply.
- Right Quality – if the product up to the standard required? What standards are taken to ensure quality is maintained? Do you require third party validation from systems such as ISO 9001? Cheaper is not always better it it is not up to the required standard.
These simple ‘six rights’ can help tackle procurement issues early on before they become an issue. Asking the these exploratory questions when assessing a new supplier can help you make the decision whether or not to make the supplier part of your supply chain.