PROCUREMENT AND LABORATORY SUPPLY CHAIN

Presentation by

Timothy Nyanamba

21st June 2013

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Outline

1.  Introduction

1. Supply Chain, supply chain management

2.  Procurement objectives

3.  Methods used in procurement

4.  ILRI purchased product matrix

5.  Inventory Management

6.  Challenges in supply chain

7.  Role of finance 2

Introduction

Supply chain

The movement of materials source to the end customer. - includes procurement, storage, transportation, customer service, demand planning, supply planning, supply chain management

- made up of the people, activities, information and resources involved in moving a product from its supplier to customer.

- Material, information and financial flows 3

Supply chain management

-deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible

-three goals of SCM: i) to optimise inventory;

ii) to increase the speed of transactions

iii) Achieve research objectives satisfying client demands more efficiently.

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Procurement

The process of procurement is often part of a ILRI’s strategy because the ability to purchase research materials and other products will determine if operations will continue.

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Procurement objectives

1.  Support Operational Requirements

2. Manage the Procurement Process and the Supply Base Efficiently and Effectively

3. Develop Strong Relationships with Other

Functional Groups 4. Support Organizational Goals and

Objectives

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1. Support Operational Requirements

Buy products and services

-At the right price -From the right source -At the right specification that meets

users needs -In the right quantity -For delivery at the right time -To the right internal customer

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2. Manage Procurement Process and the Supply Base Efficiently and Effectively

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a) Identify opportunities -Evaluation and selection of suppliers -Review of specifications -Act as primary contact with supplier -Managing the supply base

>Current suppliers are competitive >Identification of new potential suppliers

and develop relationships >Improvement and development of non-

competitive existing suppliers b) Manage internal operations c) Achieve objectives

3. Develop Strong Relationships with Other Functional Groups

By relating with internal customers to achieve greater understanding of requirements

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4. Support Organizational Goals and Objectives

i) Monitoring supply markets and trends and likely impact on ILRI strategies

ii) Identifying the critical materials and services required to support ILRI strategies esp. in research

iii) Developing supply options and contingency plans that support company plans

iv) Supporting the ILRI’s need for a diverse and globally competitive supply base

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The five steps in procurement process

i)  Define the need ii)  Develop specifications iii)  Develop the Procurement Strategy iv)  Supplier Selection and Evaluation v)  Negotiation and award vi)  Delivery vii) Payment

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ILRI purchased materials matrix

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Leverage items  

Strategic items  

Non-critical items  

Bottleneck items  

HIGH

IMPACT ON RESEARCH

HIGH

LOW SUPPLY RISK

Procurement methods

1.  Open tender

2. Other methods -  Restricted tendering -  Direct procurement -  Request for proposals – services or

combination of goods & services -  Request for quotations

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Inventory Management

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Objective To strike a balance between inventory investment and customer service

Functions of inventory

1.  To safeguard against fluctuations in supply/demand

2.  To take advantage of quantity discounts

3.  To hedge against inflation

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The ABC classification of inventory

-  Used to establish policies that focus on the few critical parts and not the many trivial ones

-  Divides inventory into three classes based on annual dollar volume

-  Class A - high annual dollar volume -  Class B - medium annual dollar

volume

-  Class C - low annual dollar volume

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The ABC analysis

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C

A

B

Per

cen

t of

ann

ual

dol

lar

usa

ge

80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 – | | | | | | | | | |

10 20 30 40 50 60 70 80 90 100

Percent of inventory items

Policies employed in managing class A items

-  More emphasis on supplier development for A items

-  Tighter physical inventory control for A items

-  More care in forecasting A items

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Relevant Inventory Costs

1.  Ordering costs 2.  Receiving and inspections

costs 3.  Holding or carrying costs 4.  Shortage costs

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Supply chain challenges

1.  Quality challenges

2.  Cost containment

3.  Shortages in the market/ limited sources

4.  Increasing customer demands; Changing research objectives

5.  Poor supply chain visibility

6.  Risk management

7.  Government procedures e.g. duty exemption 20

Role of Finance

- Make payments as per agreed or contract terms – advance, upon delivery, 30 days credit.

-  Late payments = supply disruptions

-  Caused by: -  Manual processing of payments -  Three-way matching – documents

not consistent -  Missing documentation 21

THANK YOU!

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International Livestock Research Institute Better lives through livestock

Animal agriculture to reduce poverty, hunger and ���environmental degradation in developing countries���

ILRI  ���www.ilri.org

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