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Procurement training Training Course- Introduction to procurement
The document provides an introduction to a procurement training course, outlining its objectives, structure, and key outcomes. It covers procurement fundamentals, including the procurement cycle, supply chain management, and the importance of specifications and effective communication in the purchasing process. The content also discusses legislation impacts, sourcing suppliers, and the negotiation and selection of suppliers.
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Procurement training Training Course- Introduction to procurement
- 1. P ROCUREMENT TRAINING C OURSE
- 2. I NTRODUCTION &O VERVIEW COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 OBJECTIVES STRUCTURE & OUTLINE KEY OUTCOMES ABOUT THE TRAINER 2
- 3. P ROCUREMENT 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 wrecks) Sourcing Competitive Bidding COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 3
- 4. P ROCUREMENT FUNDAMENTALS Component of Supply Chain Management PRODUCERS SUPPLIERS OF PRODUCERS CUSTOMERS SUPPLY CHAIN MANAGEMENT COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 4
- 5. P ROCUREMENT 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 5
- 6. P ROCUREMENT 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 6
- 7. P ROCUREMENT FUNDAMENTALS TACTICAL F OCUS Nine Steps of a Purchasing Process- Procurement Cycle: Determining a need Reviewing the need Finding potential suppliers Conducting bidding and/or negotiation Selecting a supplier Formalizing the commitment COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 Communicating the need Following up Closing out the transaction 7
- 8. D ETERMINING YOURO RGANISATION ’ S N EEDS 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 8
- 9. D ETERMINING YOURO RGANISATION ’ S N EEDS 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 9
- 10. C OMMUNICATING NEEDS T O P ROCUREMENT D EPARTMENT The creation of a document called a requisition kicks off the procurement process Different Reqs- standard and electronic, Bill of materials, automatic reqs. COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 Requisitioning is defined as the process that users initiate to convey to the buyer their wants, needs, parameters Reqs should be issued in line with corporate policy for – proper authority, approved limit, social responsibility, green buying 10
- 11. P ROCUREMENT FUNDAMENTALS R EVIEWING N EEDS 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 Product Or Service COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 Supplier Requisitioning Department Workload Of The Buyers 11
- 12. P ROCUREMENT FUNDAMENTALS F INDING P OTENTIAL S UPPLIERS 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 12
- 13. P ROCUREMENT FUNDAMENTALS C ONDUCTING B IDDING AND / OR N EGOTIATION Competitive Bidding VS Negotiation (caveat) Bid Where: 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 lot of suppliers, you have time, value of savings justify costs, specification is clear, selection criteria is clear, no likelihood of changes... RFI, RFQ, RFP, ITB or ITT 13
- 14. P ROCUREMENT FUNDAMENTALS C ONDUCTING B IDDING AND / OR N EGOTIATION 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: COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 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 14
- 15. P ROCUREMENT FUNDAMENTALS S ELECTING A S UPPLIER 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 15
- 16. P ROCUREMENT FUNDAMENTALS F INDING P OTENTIAL S UPPLIERS 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 16
- 17. P ROCUREMENT FUNDAMENTALS F INDING P OTENTIAL S UPPLIERS 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 17
- 18. P ROCUREMENT CHALLENGES FORMALISING , FOLLOW UP & CLOSING TRANSACTIONS NEGOTIATION CONTRACT WRITING COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011 18