Procurement and Purchasing Management
This domain tests the purchase-to-pay cycle, sourcing methods, supplier evaluation and the commercial rules that govern buying in India. Questions usually ask you to sequence the cycle correctly or to justify a sourcing decision.
The purchase cycle
Indent/need recognition, specification, sourcing (RFQ, tender or e-auction), technical and commercial evaluation, negotiation, purchase order, receipt and inspection with a goods receipt note (GRN), three-way match of PO, GRN and invoice, payment, then vendor rating and record-keeping.
Sourcing choices
- Tender types: open, limited, single-source or negotiated; reverse auction on GeM is used where specifications are standard.
- Single sourcing gives volume leverage and control but creates dependency; multiple sourcing spreads risk and maintains competition.
- Kraljic matrix (profit impact vs supply risk): non-critical (simplify), leverage (compete), bottleneck (secure supply, dual source), strategic (long-term partnership).
- The MSMED Act 2006 requires payment to a registered MSME supplier within 45 days of acceptance, with compound interest on delay.
- Total cost of ownership adds freight, duty, inspection, rejects, inventory and administration to the quoted price.
Worked example
Weights: price 40%, quality 30%, delivery 20%, service 10%. Vendor P scores 90, 70, 80, 60, giving (0.40x90)+(0.30x70)+(0.20x80)+(0.10x60) = 36+21+16+6 = 79. Vendor Q scores 70, 95, 85, 80, giving 28+28.5+17+8 = 81.5. Q wins on total score although P is cheaper: the evaluation rewards quality and delivery reliability, which is why weights must be fixed before bids are opened.
Traps that cost marks
- Describing a two-way match (PO and invoice) instead of the three-way match including GRN.
- Awarding on lowest price when the question asks for best value; state TCO.
- Mixing up a reverse auction (sellers bid down) with a forward auction.
- Forgetting that weights and scoring criteria must be published before evaluation.