What are the 5 Procurement Rights?

5 Procurement Rights

The 5 Rights of Procurement and Supply Chain Management are the: 
​
Right Quality,
Right Quantity,
Right Place,
Right Time,
Right Price.

​Purchasing & Supply Chain expert Naomi Clews provides a practical guide of how to use the five rights of procurement to Get Procurement Right! © Naomi Clews Consultancy Limited 2019

What are the five Rights of Procurement?

​How to explain the five rights of Purchasing in a nutshell. The Procurement Rights are 5 inter-linked Rights that provide a framework for effective procurement and supply chain management. The 5 Rights provide a simplistic explanation of procurement and supply chain management that applies to all industries, all sectors and all countries.  

The importance of the 5 Rights is the impact the failure to achieve one Right may have on the success or failure of all of the procurement 5 Rights.

For example, it may become necessary to compromise on Right Quality or Right Price in order to achieve the Right Time. The management and mitigation of risk is at the heart of purchasing and supply chain management. 

I will know talk through each of the 5 Procurement Rights in more detail.  ​

Right 1 - Quality

The Right Quality is a product or service that meets the standards, features and performance set out in the specification. There is often a compromise in the Right Quality to achieve the Right Price.  

Get it Right by:

• Analysing what you are buying
• Evaluating if it meets your needs - If not, why not?
• Measuring supplier performance 
• Investigating how a reduction in costs may impact quality

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A partnership approach to continuous improvement, may mitigate the costs associated with quality improvements. Suppliers could solve your quality problems for you if you can motivate them to innovate.

For example, output-based specifications encourage a performance partnership often resulting in the same services at lower cost, higher levels of service at the same cost, or better still, higher service levels at lower costs.

Incentivising suppliers to provide a great service rather than just ‘the service’ may help to harness the suppliers’ unique skills, capabilities and create efficiencies. Greater profitability, longer term contracts and loyal customers are amongst the many reported benefits for suppliers who engage with buyers in this way.

This approach is superior to the conventional cost plus or fixed price transactional contract where the supplier has no incentive to do anything above and beyond provide ‘the goods or the service’.
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Right 2 - Quantity

The Right Quantity is achieved through accurate demand forecasts for products and services on a daily, weekly and monthly basis. By interrogating historical demand, it is possible to forecast future demand with a degree of certainty. However, factoring in new developments which may either increase or decrease demand, is paramount.

Get it Right by:

Segmenting products and services into categories such as: critical, routine and non-critical and knowing the Who, What, Why, When and Where for product and service demand, will maximise inventory levels. This supports stock rotation and ‘Just In Time’ deliveries (see ‘Right 4 - Right Time’) to avoid stock depreciation and obsolescence. ​

Right 3 - Place

The Right Place the optimum receipt and delivery point for goods and services.

Get it Right by:

Using a central store for the receipt and onwards distribution of goods, thereby reducing the need for unnecessary movement and handling. When choosing suppliers, scrutinise their accepted methods of order placement, minimum orders and lead times.
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Right 4 - Time

The Right Time is closely linked to the Right Quantity. Just in time is an inventory control methodology, proven to reduce supplier’s response times. Kan Ban cards are used to signal a depletion of inventory which triggers the replenishment of stock. Consumption drives demand for more inventory and eliminates the ‘Just In Case’ ordering mentality which often leads to waste.

Get it Right by:

Using wholesalers or digital marketplaces to fulfil small, frequent orders at the expense of an annual delivery cost. Low value non-critical items such as stationery are a candidate for consignment stock. The stationery company will manage the inventory levels and replenish the stock as required, invoicing only for inventory consumed.

Right 5 - Price

The Right Price refers to costs. For example: The cost of acquisition, whole life costs and the ‘opportunity cost’ (meaning other alternatives are lost at the expense of one being chosen).

Get it Right by:

Incentivising suppliers to deliver solutions and not just activities. This can result in higher service levels at the same or lower cost.

​Furthermore, the use of gain share agreements and working collaboratively to share the risk and rewards from pooling resources is an excellent way of motivating suppliers to innovate and take cost out of their service.  

In Summary 

The 5 Rights of Procurement provide a simplistic view of what procurement and supply chain professionals do. The real work starts when you are in the role, managing supply chain risks in real time. ​

About the Author ​

Naomi Clews ® is a qualified and charted procurement professional who owns an independent procurement consultancy business based in Birmingham. With over 25 years knowledge, skills and experience of purchasing and supply chain management (across all industries and sectors) Naomi provides procurement services to her client base to help them Get Procurement Right! Find out more here: www.naomiclewsconsultancy.com