What are the 5 Procurement Rights?

5 Procurement Rights

The 5 Procurement Rights are: 
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1. Right Quality
2. Right Quantity
3. Right Place
4. Right Time
5. Right Price

​Purchasing & Supply Chain expert Naomi Clews, MBA MCIPs provides her own personal experience of the 5 Procurement Rights and provides a practical guide on how to use the 5 Procurement Rights to help you Get Procurement Right! 
​© Naomi Clews Consultancy Limited 2019

Why are the five Rights of Procurement important?

​The 5 Rights of Procurement are inter-linked, each having an effect on the other. Therefore, the importance of the five Rights of Procurement is the impact the failure to achieve one Right has on the success of achieving all 5 Procurement Rights. 

Collectively, the achievement of all 5 Procurement Rights, provides a framework for effective purchasing and supply chain management that applies to all industries, sectors and countries.  

My Personal Experience 
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In the noughties, I worked as a demand planner for a wholesaler. I was interested in supplementing my practical procurement experience with procurement theory.

I decided it was the right time to progress, professionally in my career by studying towards the Chartered Institute of Purchasing and Supply Chain Management (CIPS) procurement qualification (MCIPs) at Stoke on Trent college.

The cost of the CIPs course was at the right price, consisted of the right quality of teaching and the right quantity of exams. However, I quickly realised I was not working in the right place. 

I required an afternoon away from work to attend college. My manager was not supportive of my request for flexibility in my working work. He said it was against company policy to allow people time away from work for training and development purposes.

I promptly handed in my notice and submitted my CIPS student membership application. 

My determination and courage was evident to the college, who fully funded my first year of CIPs study. I had no regrets leaving (with no job to go to) and quickly found new employers who understood the benefits of supporting employee professional development and embraced employee learning and skills development.

In 3 years I'd passed all 16 CIPS exams and received a further 3 years support and encouragement to achieve an MBA at Staffordshire University.  

The first thing I learnt in my CIPs foundation year was the importance of the five rights of purchasing which are as relevant today as they were in 2003.

With the management and mitigation of risk at the heart of purchasing and supply chain management, how do you achieve all 5 Procurement Rights? 
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​I will now guide you through each of the 5 Rights of Procurement in more detail.  ​

 

The 5 Rights of Procurement 
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Right 1 - The Right 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 The Right Quality 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 effectively 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 quality at lower cost,
  
• higher quality at the same cost,
  
• higher quality at a lower cost.

Incentivising suppliers to provide higher levels of quality, over and above ‘the quality’ specified in the contract, 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 minimum quality’ to fulfil the contract.
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Right 2 - The Right 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 The Right Quantity By:

Maximise inventory levels by segmenting spend into the following categories:

• critical,
• routine and
• non-critical

and determine for each spend segment the:

• Who,
• What,
• Why,
• When and
• Where.

This supports stock rotation and ‘Just In Time’ deliveries (see ‘Right 4 - Right Time’) to avoid stock depreciation and obsolescence. ​

 

Right 3 - The Right Place

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

Get The Right Place By:

Using a central store for the receipt and onwards distribution of goods, thereby reduces the need for unnecessary movement and handling.

​When choosing suppliers, scrutinise their accepted methods of order placement, minimum orders and lead times.

Determining the optimum location of your suppliers may also involve Corporate Social Responsibility, environmental and ethical considerations. 
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Right 4 - The Right Time

The Right Time is closely linked to the Right Quality, Quantity, Place and Price.

Economic factors such as supply and demand and the urgency of the order, can impact on all the 5 Rights of Procurement.  

The Toyota Production System made the Just in time approach to inventory management a proven way to reduce supplier’s response times. Where 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.

However, as the Covid-19 Coronavirus Pandemic has tested the world's supply chains, they are not always as robust as they first appear. 

Get The Right Time 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 - The Right Price

The Right Price refers not only to the initial price paid but to the: 

• cost of acquisition,
• whole life costs and
• the ‘opportunity cost’ (meaning other alternatives are lost at the expense of the chosen one).

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Get The Right Price By:

Incentivising suppliers to deliver solutions and activities, 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 goods and services.  
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In Summary 
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The 5 Rights of Procurement provide a simplistic view of how to successfully manage your suppliers and your supply chains. Procurement professionals put the 5 procurement rights into practice to manage supply chain risks in real time. ​

About the Author 
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Naomi Clews MBA MCIPS is a qualified and charted procurement professional who owns an independent procurement consultancy business based in Birmingham UK.

With over 25 years knowledge, skills and experience of purchasing and supply chain management (across private and public sector industries) Naomi provides procurement services to her client base to help them Get Public Procurement Right!

​Find out more here: www.naomiclewsconsultancy.com