The 5 rights of procurement

Each of the 5 rights need to fit together to help your organisation achieve the best outcomes.

Quantity: Buy the right quantity of products or services. Too little could mean you are unable to provide the right service to your customer. Too much could leave you with surplus stock, which could perish or go beyond the best-before date. It will also tie up capital which you could be spending on other things.

However, sometimes you may have the opportunity to buy a larger amount at an advantageous unit price. This is what is known as ‘economy of scale’. It is important to make sure that a process is in place to be able to assess opportunities like this when they arise.

Quality: The products or services must be of the right quality to meet the specifications set out in the contract. Any variation could cause problems further down the supply chain. Lower quality usually means a lower price, but can result in higher costs at a later stage. It may be beneficial to work with suppliers who conform to international standards, such as ISO 9000.

Time: Products and services should be delivered according to an agreed schedule: on the right date and at the right time. Products and services should arrive when an organisation needs them, is expecting them and is ready to take delivery. For example, you don’t want products delivered when your warehouse is closed or it is already at full capacity. Be aware that some suppliers do charge waiting time if they are unable to deliver the goods because you are not ready.

Place: Having the goods delivered to the right address is critical. If goods are delivered to the wrong place this is likely to cause problems up and down the supply chain and could result in additional costs. Make sure that the correct address is always provided, particularly if your organisation has multiple locations.

Price: It is good to have a competitive price for the product. But it should not be the only factor when you chose a supplier. You also need to take into account any additional costs, such as transportation, insurance and storage. Some products from suppliers in other countries may be liable to import tariffs.

Buyers should strive to achieve each of the 5 rights, but be aware that they must work in relation to each other. For example, we can't expect to get the highest quality at the lowest price but the product has to be fit for purpose or conform to the specification agreed.