The Five Rights of Procurement
Introduction
There has been many discussions on the principles of procurements and the outcome has generally been distilled into the 5 Rights of Procurement (or some will say Purchasing). What are these 5 rights? Are there really so meaningful in our practice of procurement?
Every Procurement act must satisfy the following five criteria:
1) To buy goods or services of the right quality,
2) in the right quantity,
3) from the right source,
4) at the right time and
5) at the right price.
As you have rightly hypothesized, the 5 rights have a co-relation between them and the concept is based on this co-relation that are inversely proportional. In other words, there are trade-offs. For example, if we specify a lower quality, we might be able to pay a lower price. Or if we buy more, the resultant price would be lower due to the economics of scale. In another example, you may not be able to purchase from the right source if you do not have the right (required) quantity.
The 5 Rights
The 5 rights of Procurement can be summarised as follows:
• The ‘right’ quality
Purchase goods that are of satisfactory quality and fit for purpose
• The ‘right’ quantity
Purchase sufficient quantity to meet demand and service levels while minimising excess the holding of stock
• The ‘right’ place
Deliver to the right place, packed and transported in a way as to secure safe arrival in good condition
• The ‘right’ time
Deliver at the right time to meet demand, but not early nor late which might incur unnecessary inventory or penalty costs
• The ‘right’ price
Secure all above at a reasonable price, fair, competitive
Price is often listed as the last ‘right’ as it is often the permutation of the other factors that affects what price is paid. In later discussions, there is a rising argument of what is the right rights as purchasing move towards procurement and may be utilised as a strategic tools by management to achieve certain strategic outcomes.
Conclusion
The 5 rights remain a fundamental skillset that all procurement officers must look explore and understand. Failure to do so will lead to a failure in procurement. Understanding them will help the officer delve deeper into the bigger impact of environmental factors like management goals, market situation and other forces affecting procurement.
