presentation describe how effective procurement system can be

1. 1 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Outsource for Purchasing & Supply Systems Training Center Towards Proactive Procurement System Almahi Suliman Adam Certified Trainer by ILLAF Train UK Ex Shell Africa Co, P&G MIC Dammam www.outsource-sd.com

2. 2 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Procurement is Procurement is anorganization systemmeant with specifying and acquiring goods, services and work of the required quality, of the right quantity, on the right delivery (Date & Place), at a reasonable price; and from the right third party considering thewhole life costof purchased goods/services andfocusing on getting bettervalue for moneyinvested in procurement.

3. 3 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Why procurement is important? Departments spend more than 50% of their Budget a year on procuring goods and services to deliver their core services. Failure to purchase them cost effectively can put the achievement of key objectives at risk. Procurement directly influences profit margin and sales volume.

4. 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System 4 The Major Procurement Problems Undesired Quality Of Goods/Services And inadequate Quantity High Cost Of Purchased Goods/Services Increasing cost of maintenance Disastrous Delay In Delivery Of Goods/Services High Cost Of Inventory Increasing Cost Of Procurement Staff And Tools Safety Issues Bad Conditions Of Payment Unsecured Sources And Uncertainty Of Continuous Supply Absenteeism Of Suppliers Management Failure to Meet Customers’ Needs Failure To Get Rid Of Obsolete Assets And else …

5. 5 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System What is the RADICAL Solution for procurement Problems?

6. 6 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Effective Procurement Department?

7. 7 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System As Procurement Department … Can not stand alone and yet, has no magical solution for procurement problems!

8. 8 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Proactive ProcurementSystemis the radical Solution; You Get What you Pay for Right Outputs In the Right Time Right Inputs In the Right Time Procurement Dept

9. 9 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System What’s right Inputs? Right Items’ Specifications and Predefined Standards Efficient lead Time Right Payment System Supportive Organizational Structure Adequate Authorization Right Material Planning System Right inventory Control system Right support from Senior managers Right Technology Right, Enough and Qualified Personnel with ongoing training facilities Right Training for Clients (Initiators) Right Model of Decision making (Rational Model)

10. 10 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System What’s Right Outputs? Enough, Qualified, sustaining and well managed sources (Suppliers) Required quality and adequate Quantity of goods Just In time (JIT) Delivery of Goods, Services and Work Better Value for Money invested in Procurement Zero Stock (Approach) Customer Satisfaction Optimal Payment terms And else …..

11. 11 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Shareholders Company Credibility Social Cultural & Environmental Industry Economic Forces TechnologyForces Global Challenges Competitive Forces Company Mission Political & Legal Issues EnvironmentofProcurementSystem

12. 12 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Before We Cross or Blame Procurement Department? Do We have Strategic Business Plan?

13. 13 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Strategic Business Plan Master Planning Production Plan Planning Master Production Schedule Material Requirement Plan Production Activity Control Implementation Procurement Overhaul The Operational Planning & Control System

14. 14 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Before We Cross or Blame Procurement Department … Has each unit involved in the procurement system given …. The Right Required Inputs? In the right Required time?

15. 15 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Caution!! Dear Procurement Manager NEVER Keep Silent if you don’t get the right inputs in the right time Otherwise …

16. 16 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System You Will Be Responsible for any Procurement Failure that may cause bad consequences in the whole Company system

17. 17 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Get Started:

18. 18 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Build Up a Dynamic Procurement Team Qualified Personnel With Accounting Background and Give Them: Initial And Ongoing Training Needed Technology Needed Authorization Needed Tools Clear Mission, Objectives, Principles, Policies And Code Of Practice. And: Evaluate Their Performance progressively.

19. 19 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Build Up a sustainable Vendor Database System & Never Be a Fireman Scan the market with the predefined items and specifications to discover the most attractive opportunities of sourcing Build up cross functional team for sources’ Evaluation Select the valuable qualified suppliers and give them sufficient consideration. Build up Suppliers Relationship Management System (SRM).

20. 20 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Get the Clients Ready Budget Owners: Inform them with procurement policies and code of processing Have a copy of their planned needs’ Specifications even before the ordering time to make the required preparation. Beaware of their S.O.P Order Originator Any originator should be pre-qualified to Procurement system Any originator should get full training in procurement system – originator Side Any originator should comply with the procurement system needs

21. 21 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Procurement Supportive Activities Primary Activities Storeroom Items Non Storeroom Items Procurement for Primary and Supportive activities

22. 22 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Priority (Demand) Capacity (Resources) Balance Priorities vs Capacity Key Questions: What are the Priorities? What is the Available Capacity? How can variance between priorities & Capacity Be resolved

23. 23 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Working with Value/Quantity Parameter High Value Big Quantity High Value small Quantity Value Low Value Big Quantity Low Value Small Quantity Quantity

24. 24 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Partnership & Alliances Long-term Relationship Continuous Searching for Alternatives Value Streamline & make JIT Delivery Simplify & Decrease Purchasing Efforts Quantity Sourcing Strategies according to Value/Quantity Parameter

25. 25 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Better Value for Money (VFM) Procurement should be based on BetterValue for Money (VFM)= Optimum [whole life cost + quality] BetterValue for money (VFM)≠ initial lowest price cost

26. 26 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System How to Achieve Better Value For Money Getting an increased level or quality at the same cost. Avoiding unnecessary purchases. Ensuring that user needs are met but not exceeded. Specifying the purchasing requirements in output terms so that suppliers can recommend cost-effective and innovative solutions to meet the needs. Sharpen your approach to NEGOTIATION to get a good deal from suppliers. Cut of the mediators and reach the direct suppliers. Optimizing the cost of delivering a service or goods over the full life of the contract rather than minimizing the initial price. aggregating transactions to obtain volume discounts. Collaborating with other Companies to obtain the best prices and secure better discounts from bulk buying. Developing a more effective working relationship with key suppliers to allow both departments and suppliers to get maximum value from the assignment by identifying opportunities to reduce costs and adopt innovative approaches. Reducing the cost of buying goods or services by streamlining procurement and finance processes. Reducing the level of stocks held.

27. 27 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Key Principles To Follow: Adopt a strategic approach to procurement; Make appropriate use of Technology Manage procurement risks; Develop contract strategies and manage supplier relationships; Develop partnerships and longer term collaboration with suppliers when appropriate; Ensure there is reliable procurement financial management information; Measure and evaluate procurement performance.

28. 28 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Competitive Procurement Policy Goods and services should be acquiredbycompetition, unless there are convincing reasons to the contrary. The form of competition should beappropriate to thevalueandcomplexityof the procurement; suppliers should begivenequalopportunitiesto participate.

29. 29 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Typical Stages in Competitive Procurement Key information on suppliers’ performance & Prices End users identify demand for goods and services and manage and evaluate suppliers’ performance Procurement units advise end users on procurement methods & contracts & appoint suppliers Suppliers provide goods & services

30. 30 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System The Conclusion! Regard Procurement as aSYSTEMrather than a department. Consider thewhole life cost(WLC) in procurement process rather than the initial price. Get Bettervalue for money(VFM)invested in procurement.

31. 31 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Procurement System WLC VFM Infodat Training & Business Development Center

32. 32 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System Procurement S.W.V Outsource for Purchasing & Supply Systems Training Center

33. 33 12/15/2010 AlmahiSuliman Adam - Towards Proactive Procurement System How can we Serve Procurement System Establish & Develop New procurement Divisions & Entities. Run Researches & Studies in particular procurement Issues. Train Initiators & Buyers Manage group discussion & Seminars for Procurement Authors. Audit, Evaluate Procurement Entities Performance and Advise.

34. 34 12/15/2010 Almahi Suliman Adam - Towards Proactive Procurement System For More www.outsource-sd.com Outsource for Purchasing & Supply Systems Training Center