25 New rights of Purchasing

http://www.nextlevelpurchasing.com/articles/5-rights-of-purchasing.html

So, I present you with Part I of the "25 New Rights of Purchasing," starting with modern variations on the original "5 Rights”.

1. Right Total Cost or Value - The original label of "right price" is insufficient today, as complex purchasing decisions are based on total cost or value not price, which is only one component of total cost. Total cost and value vary from product to product, service to service, and supplier to supplier. As such, the lowest priced product or service isn't necessarily the one with the lowest total cost or highest value.
2. Right Availability - Originally called "Right Time," this "right" meant getting a product or service when you wanted it. Today, many options beyond the classic delivery model such as consignment, integrated supply, vendor-held inventory, just-in-time, and other practices require more up-to-the-minute supplier flexibility than just meeting a date on a PO.
3. Right Place - Indicating that the product or service has to be delivered where needed makes the name of this "right" still relevant. However, modern supply chain design makes use of central warehouses, distribution centers, and drop-ship destinations worldwide, requiring greater logistical proficiency.
4. Right Quality - This "right" can also keep its name, although the widespread adoption of newer quality programs like Six Sigma, Lean, and Lean Six Sigma have raised the bar for what the "right quality" is!
5. Right Quantity - What's "right" about quantity is now beyond simply ensuring that the number of items in a box matches the packing slip. Today's suppliers can help you optimize inventory levels, work towards lead time reductions, and do other things that help you not buy more than you need to.
6. Right Product or Service - As a purchasing professional, part of your job is ensuring that demand is satisfied by supply. Traditionally, this meant ordering a product that matched what the end user specified and getting the proper quantity delivered on-time. Today, you are counted on to know the products and services you buy at least as well as your internal customers to verify that the ideal product or service is being specified.
7. Right Warranty - As businesses now focus on lifecycle costs and cradle-to-grave value, getting a product that works upon delivery isn't enough: you now must secure assurances that the products or services you buy will serve your organization for the long-term. You should negotiate the optimal warranty for all significant purchases.
8. Right Payment Terms - With interest rates being so low for years and little upward movement expected, organizations rely on purchasing professionals more than ever to improve cash flow. You do so by negotiating longer payment terms and obtaining early payment discounts that exceed returns from alternate cash uses.
9. Right Innovation - Almost every organization wants to build an advantage over competitors. As such, you must look to your supply base for innovative ideas that will give your organization a unique value proposition unmatched by competitors.
10. Right Social Responsibility - In order to compensate for past societal inequities, broaden their appeal to certain demographic segments of their client bases, and/or to improve their public image, today's organizations try to direct percentages of their spend to diversity suppliers, local suppliers, small businesses, and other classes of suppliers. You need to ensure that these special groups are given the opportunities desired.

11. Right Environmental Responsibility - Today, organizations seek to either gain a competitive advantage or assuage consumer concerns by ensuring that their supply chains are environmentally-friendly. Therefore, you are expected to select suppliers and products that embrace recycling, avoid deforestation, show care for animal welfare, and utilize other methods of preserving elements of the environment.
12. Right Ethics - As a purchasing professional, you are expected to act ethically and should expect the same of your suppliers. Whether it be adhering to "no backdoor selling" policies or refusing to participate in international dealings that may be deemed "bribery" in their customers' countries, you must hold your suppliers to a high standard for respectability so that your organization doesn't get associated with unethical behavior.
13. Right Supplier Support - Your internal customers expect your suppliers to "be there" when they are needed. This may mean offering a 24x7 call center, providing on-site assistance, or having some other form of on-demand support. Having operational difficulties prolonged due to unavailable or inadequate supplier support can damage your credibility with internal customers.
14. Right Risk Management - Force Majeure events used to give suppliers excuses for failing to perform. Not anymore. Great suppliers are expected to have risk management strategies that enable them to recover quickly from such events. You should evaluate a prospective supplier's risk management strategy for all critical buys.
15. Right Financial Stability - Being negatively impacted by a supplier's seemingly sudden downsizing or insolvency is usually preventable if you have a decent knowledge of finance and you evaluate a supplier's financial statements before agreeing to an important deal.
16. Right Commitment to Continuous Improvement - The world constantly changes. In business, competition seems to get fiercer and fiercer every day. As such, organizations need to improve just to maintain the success they have today. For an organization to achieve maximum improvement, its suppliers must continually improve. Therefore, you need to seek out suppliers with a track record and culture of continuous improvement.
17. Right Technology - Technological developments make doing business faster, easier, and less expensive. If your organization is ahead of the pack in terms of technology, you need to find suppliers who can work with that technology for maximum efficiency. If your organization is a technological laggard, you can find suppliers who can help your organization catch up and remain competitive.
18. Right Contractual Terms - It's ideal for you if your suppliers simply accept your organization's standard contractual terms. Unfortunately, some suppliers will resist agreeing to certain terms as-is and changes to some of those terms - like indemnity, limit of liability, etc. - can increase the risk that your organization bears. Sometimes, one supplier's resistance to your contractual terms solely justifies selecting a different supplier.
19. Right Reputation - Whether they are involved in a fatal factory fire, bribery scandal, or other newsworthy controversies, suppliers with bad reputations negatively affect public perception of your organization. To protect your organization's brand, it is important to do business with suppliers who are thought of positively by the public.
20. Right Experience - Anyone can say that they can meet a buyer's requirements, but a history of doing so becomes more important when you purchase more expensive and/or critical goods or services.
21. Right Agility - Business - and the world - is constantly changing. Procurement professionals like you need to be agile in order to keep up with and take advantage of change. This means that you need suppliers who are at least equally agile and can adapt their products, services, processes, and the like as business conditions change.
22. Right Convenience - The accelerating pace of business means that everyone is trying to do things fast. Sometimes, quality unacceptably suffers in the pursuit of speed. This requires you to ensure that the best thing for your internal customers to do is also their most convenient option. Therefore, it's important to select suppliers that offer convenience in their ordering and other processes.
23. Right Safety Practices - Your organization probably has high standards for ensuring employee safety. Therefore, you should ensure that your suppliers have equally high standards. Public blame for a safety lapse at a supplier's facility is often placed as much on the customer as on the supplier.
24. Right Compliance - Just as a supplier safety violation can reflect poorly on your organization, so can a supplier violation of law, particularly if related to child or slave labor. Plus, your organization could be charged with violating a law as the result of illegal activity in your supply chain. Evaluate a supplier's compliance during the sourcing process as well as throughout that supplier relationship.
25. Right Country - A decade ago, "low cost country sourcing" was all the rage. Today, global sourcing looks at more than just cost to determine if a country is the "right country" for finding suppliers. From safety standards to susceptibility to natural disasters to political stability and more, there are many things to evaluate when deciding on a country in which to source.

Purchasing Principles  - 5 rights of Purchasing

http://www.citeman.com/7140-purchasing-principles.html

The success of any manufacturing activity is largely dependent on the procurement of materials of right quality, in the right quantities, from the right source, at right time and at right price – popularly known as five ‘R’s of the art of efficient purchasing .

They are also described as the basic principles of purchasing as under:

1) To purchase the right quality of materials;
2) To purchase the materials in right quantities;
3) To make the materials available at right time;
4) To purchase the material at right price;
5) To purchase the materials from the right source.

They briefly explained as under:

Right quality: The materials are the basic input and the quality of the output. It should be noted that best quality is not always the right quality. The right quality is determined by the cost of the material and the technical characteristics as suited to the specific requirements. The right quality should be defined clearly and should be described in terms of specifications. Generally the quality decisions are made by the technical staff. The quality specifications are controlled before the materials are issued for the manufacturing processes. The quality testing is done through the inspection either at supplier’s plant or at buyer’s plant.

Right quantity: The right quantity of the materials is determined on the basis of economic ordering quantity (E.O.Q). It is advantageous to purchase the materials on the basis of EOQ lots. The EOQ describes the size of the order at which the ordering costs and the inventory carrying cost will be the minimum. The ordering cost consists of the cost of paper processing such as paper, typing, postage, filing, cost of personnel; the costs incidental to order placing such as follow up, receiving, inspection etc. If the size of the order is large, the annual requirements will be met with little of the ordering cost as the number of orders placed would tend to be less. Conversely, storing cost consists of interest on funds locked up in storing, cost of storing, cost of insurance and taxes etc. If few orders involving large quantities are placed, the carrying cost will increase; however, the ordering cost will decrease due to less number of orders. Thus ordering cost and carrying costs are mutually exclusive. At EOQ level both these cots equate each other and at this point, the total inventory cost would be at the minimum. The EOQ is calculated on the basis of the following formula:

EOQ = √2RD /CS

Where R = annual requirements of the materials in units

D = Ordering cost per order

C = Cost per unit

S = Storing cost as the value of materials stored.

Right time: The materials should be purchased at right time so that it may not result in either excess investment in the stocks or may result into stock outs. Efforts must be made to replenish the materials at a point where they are reaching at the reordering level. The purchase action is initiated at a tome when the material reaches to its pre-decided reordering level. The reordering level is decided on the basis of the rate of consumption and the lead time. It should be decided on the basis of the probability of maximum periodic consumption and maximum lead time. As stock holding is directly related with the lead time, efforts should be directed towards the reduction of the lead time so that carrying costs can be reduced to the minimum.

Right price: The investments in inventories are determined by the prices charged for them. All attempts should be made to procure the materials at right price because a slightest reduction in the price results in substantial absolute monetary gain. It should be noted that the low bidder is not always the best bidder. The right price can be availed through searching for the proper sources of supply and comparing all such sources on some scientific basis. The quotations of various suppliers are compared after bringing them all on some common footing. Due considerations are also given to the factors such as regularity of supply, character of the supplier his financial standing etc. The price is an agreement between the buyer and the suppliers the former considers his utility while the latter takes into account his cost of production. The market conditions greatly effect the price determination.

Right source: The right source is a key consideration in purchasing as all other ‘R’s. The suppliers are not only supplying the required materials but they also supply the information such as probable market conditions and the resultant price trends, general industrial climate and the business environment. The selection of right source involves the considerations such as search for the more and more sources, selection of the appropriate source through some scientific analysis, negotiating with the selected supplier and post purchase rating of the supplier.