Procurement PresentationSAMANTHA COOMBS

Procurement Policy

Why do we need one?

For visibility of management information which is key to controlling and

reducing costs. Developing a set of principles and guidelines for all

employees with purchasing roles to adhere to ensuring optimal value for

money is obtained though strategic methods which follows the values of the

organisation.

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Benefits of a Policy

Compliance - Logically the higher the compliance, the deeper the penetration of the procurement team to create an opportunity to deliver greater bang for buck.

Sustainability - practicing sustainable procurement meet needs for goods, services, utilities which maximising net benefits for the organisation and the wider world.

Contract and Supplier management – Contracts provide cost savings delivered through commercial agreements and good indication of how in control you are of your total spend.

Performance monitoring - It is important to deploy a balanced scorecard approach to procurement activity to ensure improvement across the end-to-end process. Good scorecards measure savings, compliance and capability to improve both the commercial and risk positions within the organisation.

Contract and Supplier

management

Contract Management, which can be defined as the execution and monitoring of a

contract for the purpose of maximising financial and operational performance and

minimising risks, involves tracking purchases against contracts to insure preferred

suppliers are used, rates adhered to, and discounts and rebates collected. Contract

Management is important, because, as mundane as it sounds, it is another part of the

sourcing process that can bring a number of benefits to the organisation

Seven Benefits of Contract

Management

1 Standardised Processes and Procedures

This helps to decrease maverick buying and decrease supply risk while increasing spend leverage. The net effect is that buys as a whole become less costly and more valuable and a much greater percentage of negotiated savings are captured by the business.

2. Spend Visibility

Probably the most valuable benefit of a contract management system – which lets you know if you are buying from the suppliers you’re supposed to be buying from at the right times, quantities and prices – it can also help an organisation standardize on consistent contract terms and conditions. Furthermore, it also allows for easy identification of contracts with suppliers in high risk zones due to natural disasters, political unrest, or economic uncertainty, which is critical to the development of appropriate organszational risk management strategies.

Contract Management cont…

3. Improved Compliance

According to CIPS (Practical Approaches to Contract Management Deployment) compliance management is improved 55% with a contract management system.

4. Solid Foundation for Spend and Performance Analysis

With all of the contract conditions and negotiated prices and fees in a central location, it’s a lot easier to compare actualpurchases against contracted buys. This allows policy or regulation violations to be caught and dealt with immediately and insures that all spend is known and available to be appropriately leveraged in sourcing projects.

5. Rebate Management

Contract Management systems make it easy to track rebates and insure that all of the savings negotiated in a sourcing cycle are captured.

Contract Management cont…

6. Reduced Maverick Spending

With a contract management system, a buyer can immediately determine if a contract exists, who the contracted suppliers are, and what the contracted prices are. No longer is “I didn’t know we had a contract” or “I didn’t know I wasn’t supposed to do that” a valid excuse!

7. Evergreen Contract Elimination

Without a contract management system to automatically alert a buyer of contracts coming up for automatic renewal, many auto-renewing contracts are likely to go unnoticed and automatically renew, locking the buyer in for another buying cycle. With a system in place, the buyer can be alerted weeks or months in advance, depending on how long a sourcing cycle normally takes for that commodity or service, and take appropriate action.

Supplier Management

Modern manufacturers work with a wide range of suppliers, and supply chains

are growing increasingly complicated. The growing need to cut prices for the

consumer means margins are being squeezed like never before.

And in order to maintain profitability and drive efficiencies, these companies

are turning to supplier relationship management as a controlled and

systematic approach to sourcing the goods and materials they need.

There are several benefits associated with supplier relationship management,

and they all culminate in a healthier bottom line.

7 Benefits of Supplier Management

1. Reduced costs: There are usually some significant costs involved in setting

up deals with new suppliers, but a supplier relationship management

programme can eliminate many of those costs.

By cooperating in a mutually beneficial relationship with key suppliers, a

company can strive for cost savings over the long term.

Good working relationships with suppliers will not only deliver cost savings,

they will reduce availability problems, delays and quality issues - and that

means a better service for the consumer.

Benefits of Supplier Management

2. Increased efficiency: As a defined and establish supplier relationship

develops, communication improves. Suppliers gain a more complete

understanding of the businesses they serve, and this allows them to meet their

needs more effectively. Delays in the supply chain will decrease, and the flow

of operations will greatly improve.

And when issues in the ordering process do arise, the healthy working

relationship between supplier and client will make such issues easier to

resolve.

Benefits of Supplier Management cont

3. Minimises price volatility

Nothing spooks consumers more than huge fluctuations in market prices. In

some cases, these fluctuations are as a direct result of increase volatility of

commodity prices. However, by adopting the principles of supplier

relationship management, companies can often take advantage of fixed

pricing or scaled increases in exchange for lengthier contract terms, minimum

order levels or various other qualifying criteria.

Having a clear and unambiguous cost base allows a business to set its own

pricing structures with some certainty, and that often translates to happier,

more loyal customers.

Supplier Management Benefits cont.

4. Consolidation of the supply chain

As specific areas of both the supplier's and buyer's business work together, this

allows both parties to better understand the inner workings of the other. In

some cases, both parties will be able to adapt their own working practices

and operations to better accommodate the other, and that can lead to

further efficiencies and operational advantages.

The consolidation of the supply chain may allow buyers to reduce the number

of suppliers they purchase from - streamlining the purchasing process and

making budgeting a far simpler task.

Supplier Management Benefits cont.

5. Outsourcing certain activities

A successful supplier relationship management programme will often create

a trusting partnership between a buyer and a supplier. In some cases, this

may result in many key activities being transferred to the supplier on a

permanent basis. This may include entrusting a supplier with the management

of inventory levels and some elements of customer service.

Supplier Management Benefits cont.

6. Continual improvement of operations

A long-term relationship between supplier and buyer allows for the free-flow of feedback and ideas. Over time, this will create a more streamlined, effective supply chain that could have a positive impact on both costs and customer service.

The areas of product development, instigating new ordering processes and inventory control can become a joint venture, and that can deliver a range of financial and operational benefits to both parties.

An integral component of many P2P software solutions is supplier relationship management. Working together with its suppliers, a company can tailor its supply chain to meet its individual needs. Processes can be consolidated, costs can be reduced and the end product for the consumer can be improved. Through a combination savings and efficiencies, companies can create a healthier bottom line despite underlying weakness in their sector.

Monitoring Supplier Performance

7. Supplier performance Monitoring Benefits - KPIs

Companies across industries have become highly dependent on their

suppliers. As a result, their business performance is now closely intertwined

with the performance of their suppliers. A failure to manage and monitor

supplier performance can lead to major supply chain disruptions, delivery

problems, poor quality, and other issues that damage a company’s

credibility, as well as their bottom line. On the other hand, an effective

supplier performance management program can help a company spot

supplier issues early on, and ensure that they are remediated in a timely

manner, thereby reducing business risks and revenue losses

Example of KPI

Morris KPI Supplier Evaluation Tool

Morris KPI evaluation tool provides a comprehensive solution to streamline

and automate supplier performance management processes across the

extended enterprise. Using the solution tool, companies can configure and

distribute supplier performance surveys and self-assessments, manage

certifications, define and monitor supplier KPIs, and create and manage

supplier scorecards with closed-loop support for performance sustenance /

improvement. In addition the Morris KPI is used to manage supplier contracts

and SLAs, and to define quality, operational, and financial metrics in the

contracts.