Due to the provision of services relating to the public sector has a significant weight in the Spanish economy. In this post I would meditate about the role of procurement of goods and services on organizations, especially on public organizations (See Image I). This post collect my personal experience in management, in Spain this topic is not explained to students in Business Administration and Management.

Image I. Scheme of activities and purchase process threads

Logistics 1

Source: Reproduced from: Torralba et al. (2008).

I’m focused on the purchase process of twenty-two underground units of S/4300 (Tuberlink) to Vossloh by Ferrocarrils de la Generalitat Valenciana (see Image II). This is a company of public law with its own independent legal personality under private law and has autonomy in its organization, private equity and full capacity for the development of its purposes (Ley de la Generalitat Valenciana 4/86). To view the delivery process of an Euro 4021 locomotive see Video I minute 4-5.

Image II. Purchasing process of 22 units of meters / 4300 (Tuberlink) to Vossloh

Logistics 2

Source: Own elaboration.

The special significance of the role of procurement of goods and services in both public and private organizations makes this a key component of any organization that is intended to providing services. Therefore the economy, effectiveness and efficiency of this process depend in part on the success or failure of an organization that satisfies market needs.

Then we will describe briefly the buying process (for more information consult recommended references):

  1. Consultation to suppliers and offers and information of providers

The process can be started either by a query of suppliers about their products and trade conditions, or by an offer to providers, they may be already present (current suppliers) or are expected to be in the future (potential suppliers) being able to support information that contribute in a catalog of vendor products.

  1. Carry out of orders to the suppliers

If the acquiring company will agree the conditions offered by the supplier, then asks it that furnishes products, with certain conditions known through information obtained from the activities and sub-processes referred to above and the negotiating it has been made.

It is at this time when the non-acceptance of the order by the supplier may result if various circumstances are given. In these cases it comes back to negotiate the conditions of the order, being able or not conclude with acceptance, with the new conditions.

It is also possible that the buyer decides to cancel the order or modify it, etc.

  1. Reception of products which the company has asked to providers

If the supplier agrees with the conditions, the risk is not exceeded, etc., the products are delivered to the buyer, so the buyer has to make receipt of the products you order to the supplier.

There may also be returned the product to the supplier.

If the products delivered are stored it is produced an entry in the warehouse and the amount that was stored or stock increases.

The order can be delivered by a direct delivery method or by milk run delivery; and in one delivery products can be in one or more orders. Therefore, there can be orders pending to be received on part of some of the product suppliers.

  1. Transportation

Transport activities consist on to move the product from the supplier to the place where the acquiring company is interested and has been agreed in the purchase receiving at this time the buyer the list of packages.

  1. Reception of invoices, debit notes and credit notes

The supplier communicates the monetary amount of products shipped, including tax and other legal requirements, in a document called invoice that the supplier sent to the company which motivates the activity of receiving invoices, expense notes and credit notes.

The invoice amount and other conditions listed in it, if they comply with the conditions of sale done, modify the balance that the purchase company has with the supplier; that is, it modifies the debtor-creditor position with suppliers.

Although it is presumed that the provider controls the customer risk (buyers risk) the buyer must also check the balance with the vendor (seller).

And considering the possible advances that may have been made to providers need to control the debtor-creditor position with them. Other documents may appear as the note of expenses (costs of buying and selling corresponding to the acquiring company but that has paid the vendor) credit note (to collect situations, somehow, contrary to the bill).

We must also say that there may be circumstances for the acquiring enterprise to non-acceptance of the supplier’s invoice. In the supplier invoice, in the note of expenses and the credit note, the amount of value added tax (VAT) appears.

  1. Claims to provider, warranties and maintenance

In case of present the acquired products any defect a complaint will be formulated to the provider may also request take care of the warranty and maintenance, etc.

Recommendede bibliography:

Torralba José María, et al. El proceso administrativo de compra: Un caso de empresa de proyectos informáticos. Valencia, Ed. UPV 2008

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