Procurement the Transaction Costs Perspective in a...

TI 2007-091/3 Tinbergen Institute Discussion Paper Procurement Frank A.G. den Butter VU University Amsterdam, and Tinbergen Institute. Tinbergen Institute The Tinbergen Institute is the institute for economic research of the Erasmus Universiteit Universiteit Amsterdam. Tinbergen Institute Amsterdam Roetersstraat 31 The Netherlands Tel.: Fax: 1018 WB Amsterdam +31(0)20 551 3500 +31(0)20 551 3555 Rotterdam, Universiteit van Amsterdam, and Vrije Tinbergen Institute Rotterdam Burg. Oudlaan 50 The Netherlands Tel.: Fax: 3062 PA Rotterdam +31(0)10 408 8900 +31(0)10 408 9031 Most TI discussion papers can be downloaded at http://www.tinbergen.nl. This version: 19 November 2007 Procurement: the transaction†¦show more content†¦Obviously purchase and sales play a prominent role in this orchestrating function. Against this background this paper discusses how globalisation and the increasing importance of transaction costs affect strategic decision making in supply chain management which is essential to procurement. Here, in line with the Wikipedia definition, procurement is the acquisition of goods and/or services at the best possible total cost of ownership (TCO), in the right quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or individuals, generally via a contract. Simple procurement may involve nothing more than repeat 2 purchasing. Complex procurement could involve finding long term partners – or even co-destiny suppliers that might fundamentally commit one organization to another. Obviously, procurement becomes a more vital element of value creation in economic activities, when (worldwide) fragmentation of production increases. In a global market procurement decisions are directly linked to sourcing strategies, so that procurement, in abroad sense, becomes an integral part of the general management of an internationally operating company or organization. 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