THE PURCHASING ORGANIZATION Purchasing History Decentralized Purchasing System The Dark Ages...
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Transcript of THE PURCHASING ORGANIZATION Purchasing History Decentralized Purchasing System The Dark Ages...
Purchasing History
Decentralized Purchasing System
The Dark Ages
Individual Departments and Users handle own
purchasing User is better aware of own needs Possibly faster… simply picks up the phone
and orders
Purchasing History
Purchasing Agent position
created and given authority
to make buying decisions.
Move to Centralized
Purchasing
The Middle Ages
Purchasing History
Standardized ProceduresCut down on administrative duplication and lower
administrative costsCombined requirements increase business volume and
get suppliers interestedPolicy and Regulatory complianceBetter control over purchase commitments and dollarsEnable the development of specialization and expertise in
purchasing decisions A better use of City staff time
Centralized Purchasing System
But a Centralized System
• Can be overly bureaucratic
• Cause internal political strife
• Too much “busy work” for the purchasing professional– Questionable value add on individual small value
purchases
Purchasing Today Centralized/DecentralizedApplication of Purchasing Policy Standardized competition methods and specificationsRegulatory compliance: AIT, WCB, Insurance, etc.Centralized agency handling RFQs, RFPs, and Tenders with
user department participationSupplier performance - Involvement from Purchasing and
User DepartmentsManagement of delivery and lead timesDelegation of low value acquisitions to individual departmentsPurchasing Cards
Purchasing History
Contract Management
• Purchasing Manages contracts, individual departments buy items on contract
• Examples– Purchasing Card– Stationery– Consumable supplies
• Large Service Contracts– Janitorial– Construction (partner with Facilities)
Purchasing Procedures
• Recognition of need
• Requisition approval
• Placement of the
purchase order
• Follow-up and
expediting
• Receipt and approval
of goods/services
Purchasing Procedures
• Planned v. Unexpected demands
• Identify quantity and specifications
• Date the item or service is required
• Emergency and rush orders
• Conformance to specification (Approved Products List)
• Small v. large orders
• Stores purchases
Recognition of Need
Purchasing Procedures
• Specifications set by user• Purchasing suggests
alternatives• Authority level• http://www.mala.ca/policies/
policy.asp?rdPolicyNumber=42.09
• Council/Board approval
Requisition Approval
Purchase Order
• Regular PO - linked to requisitions
• Open PO - use where the PO value and purchase quantity are indeterminate
• Reserve or EPO - used sparingly in case of urgency
Purchasing Procedures
Purchasing Procedures
Follow-Up: Ensuring that product is delivered on time as ordered
Expediting: Convincing the supplier to take extraordinary measures to deliver before the agreed date
Follow-up and Expediting
Purchasing Procedures
Central Receiving
Receiving at Point of Use
Verifying that delivery
matches order
Communicate with
Accounting
Receiving
Purchasing Considerations
• Purchasing policy
• Getting the best value
• Dealing with Suppliers
• Ethics and the Law
Purchasing Policy
• Applies to ALL acquisitions of goods and/or services
• Varies by organization e.g.– Acquisitions up to $5,000 - direct purchase or
tender
– From $5,000 to $25,000 require written quotations
– From $25,000 to $100,000 require public tender
– From $100,000 to $250,000 require public tender and approval of deputy city manager
– $250,000 and above require approval by Council/Board
• http://www.mala.ca/purchasing/policy.htm
Purchasin
g Policy
Getting the Best Value
Prequalifications
Expressions of Interest
Cooperative Purchasing
Purchasing Methods
- Direct Award
- Tendering
Direct Award
• Law of contracts
• Purchasing card
• Purchase orders
• Pricing already set
• Low value
• Single source
Getting Best Value
Tendering
• Law of competitive bidding • No fishing expeditions• Obligation on all parties• Very structured• Budget in place• Contract A and contract B
Getting Best Value
Getting Best Value
• May be preceded by pre-qualification (RFEI) Request for Expression of Interest
• Request for quotation (RFQ) • Invitation to tender• Request for proposal (RFP)
Tendering
Getting Best Value
• May be verbal, written fax or e-mail
request
• 3 bids and a buy
• Quick purchases, standard commodities
• Price the dominant decision factor
Request for Quotation (RFQ)
Getting Best Value
• Projects of sufficient size, complexity, political sensitivity,
• detailed specifications
• Prime evaluation criterion is cost
• We know “what” is wanted and “how” it is to be done
Invitation to Tender
Getting Best Value
• Similar to invitation to tender. Award is
determined by several criteria, not just cost
• Seeks creative input of marketplace - details
“what”, “when” and “why” but not “how”
• Greater flexibility in tender wording
• Appraisal Criteria detailed in request
Request for Proposal (RFP)
Getting Best Value
Document preparation (2 weeks)Advertising (1 week)Tendering period (3 weeks)Site meetingClosing date and tender openingEvaluation (1 week)Approvals (1day – 4 weeks)AwardCommencement/Delivery
(2 +weeks)
Competition Timeline
Timeline
Appraisal of Responses
• The key areas for evaluation are summarized as follows:
Mandatory Elements:
Performance on Rated Criteria:
Design Functionality
Aesthetics Life-Cycle Cost
Total
Pass/Fail
Maximum Points to be Awarded:
45 points
10 points
45 points
100 points
Suppliers
• Finding qualified suppliers
– Market the Bid Opportunity!
– BC Bid, Newspaper ads, Call and Fax Notice
– http://www.bcbid.gov.bc.ca/open.dll/welcome?language=En
– http://www.mala.ca/purchasing/tenders.asp
– Search web, Yellow pages and Contact list
• www.city.nanaimo.bc.ca/b_purchasing
• www.bcbid.gov.bc.ca/open.dll/welcome
CITY OF NANAIMOH A R B O U RT H E C I T Y
Supplier Selection
Input from User Departments
Based on the criteria stated in the RFP
Price, specifications, availability, creativity,
personnel, experience, references
Open and Transparent
Be prepared to de-brief the loosing bidders
Suppliers
The Professional Purchaser
• Who Are They?• What Do The Know?• How Did They Get The
Knowledge?• Where Do You Find
Them?• When Do You Need
Them?
Every Business Buys
• Some do it better than others
• Purchasing is a learned skill
• There are accreditation programs that offer purchasing skills
Who Are They?
• Business People• Regular Folks With a
Specialized Skill Set• Good Listeners• Analytical• Astute• Ethical• Negotiators
What Do They Know?
• Lever Your Profits Up– Every dollar saved goes
straight to the bottom line
• How to extract value from the supply chain– Cost of goods
– Transaction costs
What More Do They Know?
• How to organize around the supply function
• Different acquisition methods
• Analysis of what you buy
• How to reduce inventory
Anything Else?
• Integrate the supply function with the strategic direction of the company– Make or Buy
– Strategic Alliances
– Minimize Product Liability
– Project Management
How Did They Learn All This?
• Professional Associations– Purchasing Management Association of Canada– PMAC Accreditation Program
• http://pmac.ca/education/education.asp
– US based Institute of Supply Management• http://www.ism.ws/Certification/CPMEvolution.cfm
– National Association of Education Buyers– And others
PMAC Accreditation
• Business Courses
• 4 Principles Courses– Principles of Buying– Principles of Logistics and Transportation– Principles of Quality– Principles of Inventory and Operations
• 12 Seminar Days
• One week “live in” Course
Business Courses
• Mandatory Courses– Marketing: Consumer analysis, marketing mix, channels of
distribution, market research, advertising, pricing, sales management. – Macroeconomics: Basic understanding of macroeconomics, insight
into the economic policies which affect business conditions and decisions.
– Introduction to Management: Basic management concepts including common management methods in decision making, analysis, planning and control.
– Managerial Accounting: Cost analysis, budgeting, performance analysis, information and control systems.
– Organizational Behaviour: Human behaviour (individual, group and organization), productivity, motivation, and communication.
Electives:-5 Required• Business policy: Organization objectives, strategy, policy, strategic analysis,
environmental analysis, strategy implementation and the role of the top executive. • Microeconomics: Factors affecting the determination of prices, production levels,
employment and wages and profits in individual industries under varying competitive conditions are considered. Particular attention is directed to competition policy, government regulation, income distribution, labor unions and taxation.
• Financial Management: The financial structure of an organization, stocks, bonds, liquidity, leverage, cash flows, ROI, financial statements, funds flow and ratio analysis, financing, earnings retention, dividend policy, leasing, mergers, consolidation of holding companies, etc.
• Law: A review of basic law and the law of contracts, agency, etc. • Public Administration: Management of public institutions, public finance, policy and its
relationship to the political structures of Canada. • Computer Science: Basic computer theory and applications in business, exposure to
programming and systems analysis. • Operations Management: Operations and process analysis, standards, scheduling and
control, technology, capacity and operations strategy. • Visit http://pmac.ca/education/CPP_management_courses.asp for details
Where Do You Find Purchasers?
• Most larger organizations have a purchasing specialist or department
• http://www.pmac.ca/
Gino Di Menna C.P.P. Purchasing Manager, City of Nanaimo
Thanks To:
CITY OF NANAIMOH A R B O U RT H E C I T Y
Professional Purchasing Pays
• Rusty Joerin C.P.P.– Purchasing Manager Malaspina University-College
• [email protected] 250-740-6234• http://www.mala.ca/purchasing/