Procurement objectives and analysis of the procurement function are normally set against the five rights of procurement. Over the years this approach has been highly successful, but as the role of procurement develops, so does the interpretation of the five rights.
The five rights of procurement are:
Quality traditionally referred to the quality of the product or service ordered and the standards required. Although the quality of the product or service is relevant, today’s approach considers greater aspects of quality including the need for Total Quality Management (TQM). The philosophy behind quality in the promotes the theory that quality should permeate every area of an organisation and its supply chain. Modern theory behind the five rights of procurement supports this view and opens up a wide range of areas that need to be considered.
Quality objectives no longer only apply to the material or product. It now includes:
- Quality of relationships
- Quality of communication
- Quality of process
- Quality of management
- Quality of (company) image.
Quantity always dictated that the buyer should buy the right quantity of product or service. Too much or too little could result in higher costs or unfulfilled orders. This still rings true, yet there are more aspects to quantity that the procurement professional needs to consider. With the focus on the triple bottom line, (also known as the three P’s: People, Profit, Planet), there are a number of considerations that need to be taken into account. It is not just the product that must be of the right quantity.
Quantity objectives as part of the five rights of procurement, no longer only apply to the material or product. It now includes:
- Quantity of Orders
- Quantity of Staff
- Quantity of Suppliers
- Quantity of Products
- Quantity of Customers.
Price is important to everyone and not least to procurement. Procurement professionals are taught to aim for a competitive price. Price involves costs which need to be taken into account. But not only the costs incurred by the product or service. There are the costs involved in moving the products or service through the supply chain along with the price we pay to transport them through the environment.
Price no longer only applies to the amount paid for materials or product in the five rights of procurement. It now looks at the costs involved in:
- The cost of the procurement department
- The cost of acquisition and operation
- The cost of holding and moving stock
- The price to the environment
- The price to society.
Place has usually referred to goods and services being delivered to the right place. ‘Last mile’ is a term used in supply chain management and transportation planning to describe the movement of goods and services from a transportation hub to a final destination. This emphasises the focus on the right place in today’s supply chains. But it’s not just where the goods and services are going to. There are more places to consider.
Place no longer only applies to the delivery of materials and products. It now includes:
- The source from which materials are acquired
- The other sources in the chain
- The location of the procurement function
- The location of the customer
- The location of the other activities involved in the supply network
Time waits for no man. And we no longer wait to consider the time of delivery as the only aspect of time that needs to be considered. Time and money are often considered together and in modern times this is no exception. Time spent on analysing time is never wasted. Therefore the procurement professional needs to think about other areas of time.
Time no longer only applies to the lead-time required for materials and products. It now includes:
- Time of order
- Time spent negotiating
- Time spent ordering
- Time spent with suppliers
- Time management
- Time spent analysing.
Each of the five rights of procurement must be viewed from a broader angle taking into account the wider implications of quality, quantity, price, place and time. Only then will we achieve the greatest success and understand the true meaning of the five rights.
If you want to find out about the procurement and supply chain management, you may be interested in a CIPS Diploma in Procurement and Supply. For more information about procurement courses, simply get in touch with one of our course advisors on +44 (0)1865 515255 or email firstname.lastname@example.org.