Supplier Selection Criteria

Steps to undertake when you have a relationship with a current or potential suppliers employee. Disclose
To advise management of a relationship that may appear to be a conflict of intrest. Recuse To remove yourself from participation in a decision in order to avoid conflict of intrest. Documents To produce and retain written correspondence about your disclosure. Ethical accusations often arise months/years after decision is made. Good documentation can prove that a decision was reached ethically. What Justifies an Increase in Purchasing Scope? Purchasing personnel are measured on their performance of purchasing processes. Other departments are measured on different contributions to the organizations. Assigning purchasing responsibility to these departments keeps them from spending time on their primary functions within the organizations. Purchasing personnel are trained in cost savings techniques like negotiation and strategic sourcing. Engineers, department heads and other internal customers are typically not, which can lead to paying higher prices. The purchasing department has savings generating tools such as eSourcing systems at their disposal. Other departments do not. The purchasing department is goods at identifying alternatives, then guiding the organization to select the best option. By working with all departments, the purchasing department is aware of enterprise wide standards. As such, it can leverage aggregated volume for lower costs, minimize inventory and avoid pitfalls.

Purchasing personnel are trained at evaluating supplier viability, Engineers, department

heads and other internal customers are not which can result in the selection of a supplier that goes out of business during the course of the relationship.

 By having the purchasing department provide centre led oversight, the organization can have more assurance that all departments are benefitting from the organizations leveraged buying power.

Steps to commodity price forecasting Properly categorize the commodity against an existing price index and be more specifice.g. Newsprint instead of paper. Price levels historical fluctuation, Historical price levels can help you determine whether current levels are relatively high or low. Look at Micro and Macro economic factors that may give hints as to where pricing may go. Evaluate your starting point, if your original price was established at the peak of the market and was not established through best practices like strategic sourcing. E-Sourcing The process of obtaining bids from different suppliers via a single portal. Benefits of E-Sourcing Streamlining the sourcing process Reducing prices by maximizing supplier competition. Creating a repository for sourcing information. Helps in gathering of supplier information.

Goals of Strategic Sourcing To save money To reduce risk, Strategic sourcing helps should enable one to sustain continuity of supply in the face of unexpected disruption to the operations of one or more suppliers. To improve supplier performance To bring innovations from the supply base-in todays competitive world. Every business needs constant flow of innovative ideas to keep their competitors from stealing their market share.

 To support the organizations social responsibility goals.Todays organization support diversity, environmental responsibility and other goals, so decisions made as part of strategic sourcing should consciously help move the organization towards those goals. What you should do at the end of a negotiation? Enter the last negotiation session with the authority to commit, if you lack the authority to commit to a deal in that last negotiation session, you lack full control over the negotiation run the risk of the supplier going around you and negotiating directly with those who do have decision making authority. Have at least one week of slack time between the last scheduled negotiation and the actual day you must commit. Creating uncertainty by stating a need to think it over a week-even if you dont really have to can make your supplier nervous and more susceptible to agreeing to more favorable terms. If the supplier tries to dissuade you from thinking it over ask would there be any benefit to my organization for deciding now as opposed to next week,. Share this negotiation strategy with management in order to get full support on the importance of leveraging last negotiation strategy.

Ways by which Procurement Department with Finance Dept. Agreeing on cost savings reporting standards By agreeing with finance on standards and using income statement to keep score. Procurements cost savings reporting will be more believable. Considering the downside of certain cash flow strategies Determine a balanced inventory approach Considering supply market forces when setting financial goals.

Tips on how to Renegotiate a Supplier Contract Approach your supplier carefully If you contracted for the product/service they are no obligation to concede to you. You are essentially asking them for a favor. Address specifications and expectation. Be careful about specifying that you want the same product/service that you are getting today for a lower rate, often when suppliers renegotiate, they look out for quality, delivery or service. Convince the Supplier that a price reduction is fair; use persuasion techniques to petition the supplier. Consider the possibility that the relationship could devolve into an opportunistic one Consider ethics and cultural norms, renegotiating a contracted price may be considered unethical. Put your reasoning into context Fundamental features of Management Is universal i.e. basic principles of mgt are universally accepted? Is purposeful i.e. the aim of all managers is the same, to attain organization objectives. It applies at all levels of the organization. An interactive process Is concerned with productivity? Functions of Management Directing Planning Staffing Organizing Controlling

Methods of Controlling Budget-Plan expressed in numbers for purpose of controlling operations. Auditing Associated with verification of financial records & practices. Types of Budgets Balance sheet budgets Cash budgets Revenue & Expense budget Time Budget Capital expenditure budget Non-budgetary Controls Statistical data Special reports & analysis Breakeven point analysis Personal Observation Gant chart Network analysis
Benefits of contracting out Cost savings Competitive edge Increased mkt accessibility Expertise in distribution function used Relieves manufacture from non-core function Enhanced customer satisfaction due to timely delivery

Demerits of contracting out Loss of confidentiality Loss of control Inflexibility Insensitivity to customers Loss or lack of direct contact with customers Delayed feedback from customers.

Strategies used to reduce cost of purchased services

Using reverse auctions Outsource service purchasers i.e. advertising,insuarance Considering consortium buying Take advantage of volume aggregation to negotiate quantity discounts Developing integrated purchasing strategies so that purchasing professionals can work with users of services to enforce financial controls.

Problems encountered in measuring & evaluating purchasing performance Lack of definition Although frequently used in practice as well as in theory,terms like Purchasing,performance,purchasing effectiveness & purchasing efficiency, Havent been precisely defined. Lack of formal objectives & performance stds Most purchasing depts. Operate without the Guidance of a well defined performance stds. Problems of accurate measurement Purchasing performance is a result of many activities Which due to their intangible character are difficult to Evaluate. Difference in scope of purchasing - Purchasing tasks & responsibilities differ greatly from one Company to another. This produces the devpt of broadly Based, uniform benchmarking & evaluation systems. Purchasing performance evaluation is the quantitive/qualitative assessment over a given time towards achievement of corporate or operational goals/objectives relating to purchasing economies, effectiveness & efficiency. Importance of measuring purchasing performance Purchasing performance evaluation can lead to better decision making since it identifies variances from planned results. May lead to better communication with other depts. Makes things visible.i.e regular reporting of actual versus planned results enables a buyer to verify whether his/her expectations have been realized. May contribute to better motivation.

Factors influencing purchasing performance measurement Strategic business area Purchasing is actively involved in deciding the companys core business Reinforces the companys competitive position. Part of intergrated logistics Mgt introduces targets to buyers on quality improvement lead the & improving supplier deleivery reliability. Operational,administrative activity

What Justifies an Increase in Purchasing Scope? 1. Purchasing personnel are measured on their performance of purchasing processes. Other departments are measured on different contributions o the organizations. Assigning purchasing responsibility to these other departments keeps them from spending time on their primary functions within the organization. 2. Purchasing personnel are trained in cost savings techniques like negotiation an strategic sourcing. Other depts. Are typically not which can lead to paying higher prices. 3. The Purchasing dept has savings generating tools e.g. eSourcing systems while other depts. Do not. 4. The Purchasing dept is good at identifying alternatives, then guiding the organization to select the best option. Too often, the internal customers just go with the first supplier found commiting the organization to a suboptimal arrangement that endures for years. 5. By working with all depts.,the purchasing dept is aware of enterprise wide standards.As such it can leverage aggregated volume for lower costs,minimize inventory and avoid pitfalls previously identified with competing products. 6. Purchasing personnel are trained at evaluating supplier viability while other depts. Are npt which can result in the selection of a supplier that goes out of business during the course of the relationship. 7. Its not uncommon for suppliers to harge different departments within the same organization different prices when they can get away with it.By having the purchasing dept provide centre led over sight .the orgns can hav more assuarance that all departments are benefitting from the orgns leveraged buying power.