By the end of this chapter, you will be able to:
These skills will help you keep the cooperative well-stocked and running efficiently, which is key to its success and growth.
Compiled by: Wesley Rotich
Managing the procurement process in cooperative societies is a critical function that ensures the availability of necessary products and services to support the cooperative’s operations and member needs. Effective procurement management promotes cost efficiency, quality assurance, and timely delivery, which are essential for sustaining the cooperative’s competitiveness and member satisfaction. In the Kenyan context, cooperatives across sectors such as agriculture, hospitality, education, and finance rely on robust procurement processes to maintain smooth operations and compliance with regulatory frameworks. This chapter focuses on understanding the types of products and services commonly procured and the role and management of purchase orders in cooperative stores operations.
Procurement in cooperatives involves acquiring a variety of goods and services tailored to the cooperative’s specific operational requirements and member demands. These products and services range from tangible items such as agricultural inputs and stationery to intangible services like maintenance and consultancy. Understanding the categories and characteristics of these procurements is essential for store managers and procurement officers to make informed decisions that align with the cooperative’s objectives and budget constraints.
Tangible products are physical items that can be seen, touched, counted, stored and inspected on delivery. Because they occupy space and can be damaged, lost or expire, they require storage, stock records and handling procedures. Example: a dairy cooperative that buys milk cans, cooling tank spares and packaging materials receives them at the store, counts them against the delivery note and records them in the stores ledger.
Products procured by cooperatives can be broadly classified into several categories based on their nature and use:
Consumable goods include items that are used up during operations, such as office supplies, fuel, and cleaning materials. These goods require frequent replenishment and careful inventory management to avoid stockouts or overstocking. For example, a county hospital cooperative regularly procures medical consumables like gloves and syringes to ensure uninterrupted patient care.
Durable goods are items with a longer lifecycle, such as furniture, computers, and machinery. These products typically require capital investment and are subject to depreciation. For instance, a university cooperative may invest in durable goods like projectors and laboratory equipment to support academic activities.
Many cooperatives, especially in rural Kenya, procure agricultural inputs such as seeds, fertilizers, and pesticides for their members. These products are vital for enhancing productivity and ensuring food security. A farmers’ cooperative in Meru may source certified maize seeds and organic fertilizers to supply to its members before the planting season.
Some cooperatives operate retail stores selling finished goods such as groceries, clothing, and household items to members and the public. These products are procured from wholesalers or manufacturers and stocked for resale. A SACCO cooperative running a retail shop in Nairobi may stock sugar, cooking oil, and flour for members.
Intangible procurements are services and rights that cannot be touched or stored, so they cannot be counted into a store. They are consumed as they are delivered, and their quality is judged by the result, the time taken and the skill of the provider. Example: a school in Kisumu that hires an accounting firm to audit its books receives a signed report, not a physical product, and must confirm that the work was done to the agreed terms before paying.
Services procured by cooperatives include maintenance, security, consultancy, and transport. These are critical for supporting the cooperative’s infrastructure and operations. For example, a county government cooperative may contract security services to safeguard its offices and assets.
Services cannot be inspected on a shelf, so the procurement officer relies on clear terms of reference, agreed deliverables and proof of completion. Payment is tied to the signed completion certificate, service report or timesheet, instead of a goods received note. Contract duration, penalties for poor performance and who supplies materials must be stated in writing before work begins.
| Feature | Tangible | Intangible |
|---|---|---|
| Nature | Physical, can be touched | Not physical, consumed as delivered |
| Storage | Stored and recorded in stores | Cannot be stored |
| Inspection | Checked on delivery against the order | Checked through reports and completion records |
| Examples | Fertilizers, computers, stationery | Security, audit, transport, insurance |
| Proof of receipt | Goods received note | Completion certificate or service report |
The nature of products and services procured affects procurement strategies and store management practices. Key characteristics include:
Products and services must meet predefined quality standards to ensure they fulfill their intended purpose. A hotel cooperative in Mombasa might require suppliers to provide proof of quality certification for food products to guarantee guest satisfaction.
Procurement decisions are influenced by cost factors, including unit price, bulk discounts, and payment terms. A retail cooperative in Eldoret may negotiate better prices by purchasing in bulk from wholesalers.
Dependable suppliers ensure consistent delivery schedules and product availability, which is critical for uninterrupted cooperative operations. The procurement office of a TVET college cooperative may maintain a list of approved suppliers based on past performance evaluations.
Certain products and services require compliance with government regulations and standards, such as those set by NEMA or the Pharmacy and Poisons Board. A healthcare cooperative must procure pharmaceuticals that comply with national health regulations.
The mode and timing of delivery impact inventory levels and storage requirements. For instance, a cooperative in a remote area may prefer suppliers who can deliver directly to the store to reduce transportation challenges.
Diversity in procured products and services enables cooperatives to cater to varied member needs and operational demands. This diversity:
Managing diverse procurements presents challenges that require strategic approaches:
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Create a free accountThis chapter explored the management of the cooperative procurement process by first distinguishing between tangible products, which are physical goods, and intangible services that support cooperative operations. It then examined the role of purchase orders as formal documents that authorize procurement transactions. The process of package requisition review was outlined, emphasizing the importance of verifying and consolidating requests to ensure accuracy and efficiency. Supplier categorization was discussed to highlight how cooperatives classify suppliers based on criteria such as reliability and capacity. The chapter further detailed the evaluation of suppliers, focusing on assessing their performance and suitability for long-term partnerships. Contract negotiation was covered as a critical stage where terms and conditions are agreed upon to secure favorable procurement deals. Finally, order management was explained as the ongoing process of tracking and controlling orders to ensure timely delivery and compliance with cooperative standards.
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