This document provides an overview and outline of a procurement training course. The course will cover procurement fundamentals including clarifying industry terms, the procurement process, determining needs, finding suppliers, bidding, negotiation, selecting suppliers, and formalizing agreements. It will be delivered by Business Services Support Limited and produced by Sheila Elliott, an expert in business, accounting, and management. The objectives are to provide an introduction, structure the content, and convey key outcomes.

1. Procurement Training Course
DELIVERED BY:
Business Services Support Limited
Produced By Sheila Elliott Bsc Hons, FCCA, MBA
www.businessservicessupport.com Tel: 0845 226 4315

2. Introduction & Overview




copyright© to Business Services
Support Limited 2011
OBJECTIVES
STRUCTURE & OUTLINE
KEY OUTCOMES
ABOUT THE TRAINER

3. Procurement Fundamentals
Clarifying Industry Jargons & Acronyms
MANY WORDS MEAN THE SAME THING
Supply Chain
Mana
gemen
t
Purchasing
Tendering
Bidding
RFI
RFQ
RFx
ITT
copyright© to Business Services
Support Limited 2011
Procurement
Specification
Reqs (pronounce
Sourcing
Competitive
Biddi
ng
wrecks)

4. Procurement Fundamentals
Component of Supply Chain Management
PRODUCERS
SUPPLIERS OF
PRODUC
ERS
CUSTOMERS
SUPPLY CHAIN
MANAGEMEN
T
copyright© to Business Services
Support Limited 2011

5. 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
copyright© to Business Services
Support Limited 2011

6. Procurement Fundamentals
Procurement Legislation v Organisational Impact


What is the underlying principles of the legislation

Ethics /code of conduct

copyright© to Business Services
Support Limited 2011
What is the underpinning legislation
Where to get information

7. Procurement Fundamentals
Tactical Focus
Nine Steps of a Purchasing Process- Procurement Cycle:
1
2
Determining a need
4
Finding potential
suppliers
7
Formalizing the
commitm
ent
copyright© to Business Services
Support Limited 2011
Communicating the
need
Conducting bidding
5
and/or
negotiatio
n
8
3
Reviewing the need
6
Selecting a supplier
9
Following up
Closing out the
transactio
n

8. Determining Your Organisation’s Needs
Key controls and strategic objectives of procurement
activities


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

copyright© to Business Services
Support Limited 2011
Purchase should never be made without an appropriate budget
Controls should underpin purchasing activities

9. 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
copyright© to Business Services
Support Limited 2011

10. 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
copyright© to Business Services
Support Limited 2011

11. 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
Category Of
Pro
duct
Or
Ser
vice
copyright© to Business Services
Support Limited 2011
Supplier
Requisitioning
Dep
art
men
t
Workload Of
The
Bu
yers

12. Procurement Fundamentals
Finding Potential Suppliers


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.

copyright© to Business Services
Support Limited 2011
Know your market- very important
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

13. 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:

copyright© to Business Services
Support Limited 2011
RFI, RFQ, RFP, ITB or ITT

14. 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 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
copyright© to Business Services
Support Limited 2011

15. Procurement Fundamentals
Selecting A Supplier
A system of evaluating or scoring suppliers

Financial & Non Financial

Financial:


Non Financial:


resource capacity, operational
capacity, reliability
More checks:

copyright© to Business Services
Support Limited 2011
price analysis, total cost analysis, total cost of ownership & financial
stability
site visits, financial
statements, references etc

16. Procurement Fundamentals
Finding Potential Suppliers
Here are a few internal supplier classifications:





Approved Suppliers
Preferred Suppliers
Single Source Suppliers
Certified Suppliers
Barred Suppliers
SUPPLIER STRATEGY
Make 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
copyright© to Business Services
Support Limited 2011

17. Procurement Fundamentals
Finding Potential Suppliers
Pre-Qualification Questionaire (PQQ) v Invitation to tender
(ITT)






copyright© to Business Services
Support Limited 2011
What is PQQ
Why is PQQ important
What is ITT
Why is ITT important
When/how to produce PQQ
When/how to produce ITT

18. Procurement Challenges
formalising, follow up & closing transactions
NEGOTIAT
ION
CONTRACT
WRITI
NG
copyright© to Business Services
Support Limited 2011