Procurement training course -introduction to procurement

DELIVERED BY:BSS Management ConsultancyProduced By Sheila Elliott Bsc Hons, FCCA, MBA

DAY 1INTRODUCTION TO PROCUREMENT

COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011

INTRODUCTION & OVERVIEW

OBJECTIVESSTRUCTURE & OUTLINEKEY OUTCOMESABOUT THE TRAINER

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PROCUREMENT FUNDAMENTALS

Clarifying Industry Jargons & Acronyms

MANY WORDS MEAN THE SAME THING

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Supply Chain Management Procurement Purchasing Tendering

Bidding RFI RFQ RFx

ITT SpecificationReqs

(pronounce wrecks)

Sourcing

Competitive Bidding



Component of Supply Chain Management

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SUPPLY CHAIN MANAGEMENT

CUSTOMERS

PRODUCERS

SUPPLIERS OF PRODUCERS



Supply Chain Management Oversees & Optimises

The processes of buying goods and services from suppliers (purchasing)

Converting those goods and services into a finished product (production)

Delivering those products (or outputs) to customers (fulfilment)

Our focus here is bullet point 1

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Procurement Legislation v Organisational Impact

What is the legislation

What is the underlying principles of the legislation

Ethics /code of conduct

Where to get information

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PROCUREMENT FUNDAMENTALS TACTICAL FOCUS

Nine Steps of a Purchasing Process- Procurement Cycle:

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Determining a need

Communicating the need

Reviewing the need

Finding potential suppliers

Conducting bidding and/or

negotiation

Selecting a supplier

Formalizing the commitment Following up Closing out the

transaction

1 2 3

4 5 6

7 8 9


DETERMINING YOUR ORGANISATION’S NEEDS

Key controls and strategic objectives of procurement activities

Purchase should never be made without an appropriate budget

Ordering time is critical- lead time v safety stock

Formal write up of needs via specification document- functional, performance, design , chemical, drawings, brand/trademark

Component of specification- what is needed & acceptance criteria

Controls should underpin purchasing activities

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DETERMINING YOUR ORGANISATION’S NEEDS

The importance of specification and how to design them

Description of what is required by buying organisation to ensure potential buyers bid for opportunity with absolute clarity

Must be clearly understood and contains terminology known by industry supplier- avoid internal jargons

Contains functional, performance, design , chemical, drawings, brand/trademark

Includes acceptance criteria

Lets now review some examples and work through a case study

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COMMUNICATING NEEDS TO PROCUREMENT DEPARTMENT

The creation of a document called a requisition kicks off the procurement process

Requisitioning is defined as the process that users initiate to convey to the buyer their wants, needs, parameters

Different Reqs- standard and electronic, Bill of materials, automatic reqs.

Reqs should be issued in line with corporate policy for – proper authority, approved limit, social responsibility, green buying

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PROCUREMENT FUNDAMENTALS REVIEWING NEEDS

When requisitions arrive in the purchasing department, they are generally distributed to buyers for further processing.

Purchasing departments usually have a predetermined scheme to guide which buyer gets which requisition. Here are some of the most common schemes:

REQUISITION ROUTED BY

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Category Of Product Or

ServiceSupplier Requisitioning

DepartmentWorkload Of The Buyers


PROCUREMENT FUNDAMENTALS FINDING POTENTIAL SUPPLIERS

Know your market- very important

Sourcing methods-directories, B2B directories, trade associations,

internet, chambers of commerce, trade show, telephone books etc

Some organizations assign various internal classifications to their

suppliers.

The purposes for such classification include:

to communicate the desirability of the supplier

to encourage the use of certain suppliers

eliminate costly inspection processes when unneeded

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PROCUREMENT FUNDAMENTALS CONDUCTING BIDDING AND/OR NEGOTIATION

Competitive Bidding VS Negotiation (caveat)

Bid Where: lot of suppliers, you have time, value of savings justify costs,

specification is clear, selection criteria is clear, no likelihood of changes...

Negotiate Where:few suppliers, not enough time, lack of clear specification and

selection criteria, strong likelihood of changes...

Soliciting quotes or proposals from suppliers requires: RFI, RFQ, RFP, ITB or ITT

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PROCUREMENT FUNDAMENTALS CONDUCTING BIDDING AND/OR NEGOTIATION

Competitive Bidding VS Negotiation (caveat)Bidding Format:

Sealed bidding Two-step bidding Online

bidding Internet Reverse Auctions

Your solicitation document should be comprised of at least the

following sections:An overview of the need for the product or service

A description of the evaluation and award process

Response instructions, including a deadline

A specification

Your quantity requirements

The delivery location and schedule

Terms of both the solicitation and the order

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PROCUREMENT FUNDAMENTALS SELECTING A SUPPLIER

A system of evaluating or scoring suppliers

Financial & Non Financial Financial:

price analysis, total cost analysis, total cost of ownership & financial stability

Non Financial: resource capacity, operational

capacity, reliability

More checks: site visits, financial

statements, references etc

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Here are a few internal supplier classifications:Approved Suppliers

Preferred Suppliers

Single Source Suppliers

Certified Suppliers

Barred Suppliers

SUPPLIER STRATEGYMake or Buy, Manufacturer or Distributor, Multiple Source or Single

Source, Currently Used Suppliers or New Suppliers, Domestic or

Foreign, Diversity or not, national or local, Large or small

suppliers etc16



Pre-Qualification Questionaire (PQQ) v Invitation to

tender (ITT)What is PQQ

Why is PQQ important

What is ITT

Why is ITT important

When/how to produce PQQ

When/how to produce ITT

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PROCUREMENT CHALLENGESF O R M A L I S I N G , F O L LO W U P & C LO S I N G T R A N S A C T I O N S

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NEGOTIATION

CONTRACT WRITING

Procurement training course -introduction to procurement

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