procurement training course
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PROCUREMENT TRAINING COURSE
COPYRIGHT© TO BUSINESS SERVICES
SUPPORT LIMITED 2011
INTRODUCTION & OVERVIEW
OBJECTIVES STRUCTURE & OUTLINE KEY OUTCOMES ABOUT THE TRAINER
2
COPYRIGHT© TO BUSINESS SERVICES
SUPPORT LIMITED 2011
PROCUREMENT FUNDAMENTALS
Clarifying Industry Jargons & Acronyms
MANY WORDS MEAN THE SAME THING
3
Supply Chain Management
Procurement Purchasing Tendering
Bidding RFI RFQ RFx
ITT SpecificationReqs
(pronounce wrecks)
Sourcing
Competitive Bidding
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PROCUREMENT FUNDAMENTALS
Component of Supply Chain Management
4
SUPPLY CHAIN MANAGEMENT
CUSTOMERS
PRODUCERS
SUPPLIERS OF PRODUCERS
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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
5
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PROCUREMENT FUNDAMENTALS
Procurement Legislation v Organisational Impact
What is the underpinning legislation
What is the underlying principles of the legislation
Ethics /code of conduct
Where to get information
6
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PROCUREMENT FUNDAMENTALS
TACTICAL FOCUS
Nine Steps of a Purchasing Process- Procurement Cycle:
7
Determining a need
Communicating the need
Reviewing the need
Finding potential suppliers
Conducting bidding and/or
negotiation
Selecting a supplier
Formalizing the commitment
Following upClosing out the
transaction
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DETERMINING YOUR ORGANISATION’SNEEDS
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’SNEEDS
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
9
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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 Department
Workload Of The Buyers
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PROCUREMENT FUNDAMENTALS
F INDING 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 FUNDAMENTALSCONDUCTING B IDDING 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
13
COPYRIGHT© TO BUSINESS SERVICES
SUPPORT LIMITED 2011
PROCUREMENT FUNDAMENTALSCONDUCTING B IDDING 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
14
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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
15
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PROCUREMENT FUNDAMENTALS
F INDING POTENTIAL SUPPLIERS
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 etc
16
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PROCUREMENT FUNDAMENTALS
F INDING POTENTIAL SUPPLIERS
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
17
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PROCUREMENT CHALLENGESFORMALISING, FOLLOW UP & CLOSING TRANSACTIONS
18
NEGOTIATION
CONTRACT WRITING
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