Procurement

### Relationship

Finance (FIN), Retail (RTL), Marketing (MKT), Warehouse / Logistics (WHS), Production (PRD), Maintenance (MNT), Human Resources Management (HCM)

## **Procurement**

Procurement is the act of purchasing or otherwise taking possession of something, especially for business purposes.

In MonsoonSIM, Procurement is one of the core modules. In our model, all purchases must go through Procurement department. Hence, Procurement is one of the most important modules.

MonsoonSIM supports multiple levels of complexity. Learners are encouraged to start with the basic module, called Baseline model, and slowly progress to more advanced functionalities.

### **Here are some of what you will learn in the MonsoonSIM Procurement (Baseline) :**

* How purchasing and payment transactions are recorded in Accounting
* How to analyze vendor performance
* How the entire process from Procurement to Payment works
* Concept of vendor Lead Time
* Concept of late delivery
* Concept of Purchase Order
* Concept of Purchase Request
* Concept of Bulk Discount
* Concept of Price fluctuation due to demand pressure
* Concept of staff impacts (both in terms of staff competency as well as headcounts)

### **Here are some of what you will learn in the MonsoonSIM Procurement (Advanced) :**

* Concept of Future Delivery
* Concept of Blanket PO
* Concept of Vendor Credit Limit
* The effect of currency exchange on product pricing

### **In MonsoonSIM, the Procurement module is related to the following department (modules)**

* Finance (FIN)
* Retail (RTL)
* Marketing (MKT)
* Warehouse / Logistics (WHS)
* Production (PRD)
* Maintenance (MNT)
* Human Resources Management (HCM)

Note: There is no pre-requisite to learning the MonsoonSIM Baseline concepts

## **Operating model of MonsoonSIM Procurement module**

### **Baseline:**

* To make a purchase, one must make a request, called Purchase Requisition (PR)
* PR must be approved, to be converted into Purchase Order (PO)
* All purchases are on Cash On Delivery basis
* Purchase Request approval will fail if:
	+ there are not enough funds at the moment to cover the PR
* PO cannot be canceled or modified
* The PR will clearly state the purpose of the purchase, to whom, due date, amount and other important information
* PO can be generated manually, or by MRP (see more in MRP)
* There are many types of vendors:
	+ Finished Goods (FG) Vendor
	+ Raw Materials (RM) Vendor
	+ Vendors that sell machine
	+ Vendors that provide transport
	+ Vendors that provide services to our HR department such as Training, etc
* Finished Goods and Raw Materials vendors have their own Lead Time
* Goods and materials will arrive based on the Lead Time specified, however, some vendors have the tendency to be late
* Upon the delivery day, delivery can still be a delay if:
	+ there are not enough funds
* When there is a demand pressure, the Finished Goods and Raw Materials vendor may raise their selling prices. The price will stabilize again when the demand on the vendors subside
* FG and RM vendor may issue complaints if our Staff Index is low (see HR for more about Staff Index)
* Unhappy FG and RM may also raise their selling prices
* If a product is an imported product, the selling price of that product will also be raised by the vendor as the foreign currency gets stronger over our local currency. Similarly, if the foreign currency is getting weaker in relation to local currency, the vendors will drop their selling prices for this imported product
* Staff Index affects the effectiveness of our procurement. Hence, it is important to keep our staff index at 100% at all times.
* Players can analyze the purchasing performance and other useful intelligence by carefully examining the information from the vexplorer

### **Advanced:**

* Finished Goods and Raw Materials vendors have their own Credit Limit
* Payment to the vendor depends on the terms of payment specified by the vendor
* Once delivered, an Account Payable is automatically triggered in the Accounting
* When payment date is due, our finance will make the payment and the Account Payable will be reversed
* If there are not enough funds to pay on the due day, a late payment incident will be recorded and payment will be automatically made once enough funds are available
* Teams may place Blanket Order
	+ good for supply chain planning
	+ shipment can be broken down into chunks so the delivery and payment can also be made by chunks
* Teams can also schedule a Future Delivery order
	+ good for supply chain planning
	+ shipments can be scheduled further into the future and so are the delivery and payment