Procurement Training Introduction to Procurement Final Version

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

Procurement Training Course

copyright© to Business Services Support Limited 2011

Introduction & Overview

OBJECTIVES STRUCTURE & OUTLINE KEY OUTCOMES ABOUT THE TRAINER


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 wre

cks)Sourcing

Competitive Biddi

ng



Component of Supply Chain Management

SUPPLY CHAIN MANAGEMENT

CUSTOMERS

PRODUCERS

SUPPLIERS OF PRODUCE

RS



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



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


Procurement Fundamentals Tactical Focus

Nine Steps of a Purchasing Process- Procurement Cycle:

Determining a need

Communicating the n

eedReviewing the

need

Finding potential suppliers

Conducting bidding

and/or negotiation

Selecting a supplier

Formalizing the commitme

ntFollowing up

Closing out the transaction

1 2 3

4 5 6

7 8 9


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


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


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


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 BYCategory Of

Product Or Service

Supplier

Requisitioning Department

Workload Of The

Buyers


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


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


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 serviceA description of the evaluation and award processResponse instructions, including a deadlineA specificationYour quantity requirementsThe delivery location and scheduleTerms of both the solicitation and the order


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



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



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


Procurement Challengesformalising, follow up & closing transactions

NEGOTIATION

CONTRACT WRITIN

G

Procurement Training Introduction to Procurement Final Version

Education

Transcript of Procurement Training Introduction to Procurement Final Version