Professional Knowledge: Procurement, Distribution and Supply Chain Management
Procurement, Distribution and Supply Chain Management tests purchasing methods, public procurement discipline, buffer-stock operations, PDS logistics, inventory control and distribution performance.
Core rules
- Procurement cycle: need identification, specification, sourcing, tender or quotation, evaluation, award, contract, receipt and payment.
- Public procurement must follow transparency, competition and value for money; lowest price is not always lowest total cost.
- FCI operations involve MSP-based procurement, buffer stock norms, warehouse receipt, quality checks and PDS movement.
- Inventory: EOQ balances ordering and holding costs. Reorder point = demand during lead time + safety stock.
- Distribution: plan mode, route, loadability and cold-chain or dry-storage requirements; monitor lead time, fill rate and stock-outs.
Worked example
Daily demand is 200 bags. Lead time is 5 days. Safety stock is 300 bags. Find the reorder point.
Demand during lead time = 200 × 5 = 1000 bags. Reorder point = 1000 + 300 = 1300 bags. Order when stock reaches 1300 bags. Using only 1000 ignores demand variability and delays during replenishment; using safety stock alone ignores normal lead-time consumption.
Traps
- Confusing EOQ, which minimizes total ordering and holding cost, with the reorder point.
- Selecting the lowest bid without landed cost, quality and delivery reliability.
- Forgetting that safety stock responds to variability and service level, not average demand alone.
- Treating procurement as a one-time purchase rather than a contract and supplier-performance cycle.