Procurement Training Course

DELIVERED BY: Business Services Support Limited Produced By Sheila Elliott Bsc Hons, FCCA, MBA www.businessservicessupport.com Tel: 0845 226 4315

Introduction & Overview
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OBJECTIVES STRUCTURE & OUTLINE KEY OUTCOMES ABOUT THE TRAINER

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Procurement Fundamentals
Clarifying Industry Jargons & Acronyms
MANY WORDS MEAN THE SAME THING
Supply Chain Management Procurement Purchasing Tendering

Bidding

RFI

RFQ

RFx

ITT

Specification

Reqs
(pronounce wrecks)

Sourcing

Competitive Bidding
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Procurement Fundamentals
Component of Supply Chain Management

PRODUCERS SUPPLIERS OF PRODUCERS

CUSTOMERS

SUPPLY CHAIN MANAGEMENT

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Procurement Fundamentals
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 Fundamentals
Procurement Legislation v Organisational Impact
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What is the underpinning 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:
1
Determining a need

2

Communicating the need

3

Reviewing the need

4

Finding potential suppliers

5 Conducting
bidding and/or negotiation

6

Selecting a supplier

7

Formalizing the commitment

8
Following up

9

Closing out the transaction

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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

Category Of Product Or Service

Supplier

Requisitioning Department

Workload Of The Buyers

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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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Procurement Fundamentals
Finding Potential Suppliers
Here are a few internal supplier classifications:
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Approved Suppliers Preferred Suppliers Single Source Suppliers Certified Suppliers Barred Suppliers

SUPPLIER STRATEGY
Make 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 etc
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Procurement Fundamentals
Finding Potential Suppliers
Pre-Qualification Questionaire (PQQ) v Invitation to tender (ITT)
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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 Challenges
formalising, follow up & closing transactions

NEGOTIATIO N

CONTRACT WRITING
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