L4M8 Procurement Cycle Flashcards
Stage 1 of Proc Cycle
Understanding business needs and creating specification
- Is it a rebuy, modified rebuy or new buy
- Challenge stakeholder if its needed
- Identify requirements (quantity, quality, delivery, service)
- Conformance or performance specification?
Communicate with internal stakeholders (not external).
Think about KPIs
Stage 2 of Proc Cycle
Market commodity options
- Research market to understand what options there are
- Make / buy decision (is it a core competency)
- Competition in market (use Porter’s 5 forces to understand power of buyers - do we have power in this relationship?)
- Economic position of the market (STEEPLE?) if this is a core activity should we keep in house? Think about risks and how we would overcome them
When you’ve conducted your research you will have determined if we are going to buy or keep in house
Stage 3 of Proc Cycle
Develop strategy / plan
Using the requirements and knowing the marketplace will help us to think about our strategy (steps 1 and 2)
- Route to market - RFQ (Quote - cost of meeting a specific need) or RFI (Information - explores potential solutions that vendor offer)
- What type of supplier? (local, global, sme, partnership, one off purchase)
Carter’s outsource matrix
USE DURING STAGE 2 (MARKET COMODITY OPTIONS)
up axis - strategic importance
along axis - Contribution to operational performance
Top left going clockwise - strategic alliance, retain, outsource, eliminate
Best for ‘buy’ decision are high contribution to operational performance, but low strategic importance
STEEPLE
USE DURING STAGE 3 - DEVEOP STRATEGY PLAN
Used to asses outside circumstances to to help form their strategy
S - Social
T - Technological
E - Economic
E - Environmental
P - Political
L- Legal
E - Ethical
Stage 4 of Proc Cycle
Pre-procurement market engagement
Now we know we are going to buy - we can engage further with the market and see if its the right time to buy
Is the plan we made in stage 3 going to work?
- Competitors actions
- Currency fluctuations
- Is this the right time to buy given product lifecycle and current external trends
- Attract interest with supplier base (focus groups)
- New legislation / regulations
Taking all of this info to refine specification
Stage 5 of Proc Cycle
Developing documentation
Create the docs that will be sent out
- ITT = Invitation to tender OR RFQ = Request for quotation
- Clear final specification (with KPIs and requirements)
- Draft contract T&Cs
- Pricing schedule
5 Think about our evaluation criteria - we would say to suppliers ‘we are going to assess your submission on this criteria’ - Cover letter
Stage 6 of Proc Cycle
Supplier Selection
Select the supplier we want to participate
(could be short, could just select from our approved vendor list for request for quote)
Could be in depth - send PQQ (pre-qualification questionnaire) They have to give info on policies, insurance details etc
Could assess them using Carter’s 10 Cs
Carters 10 Cs
Competency
Capacity
Consistency
Control
Cost
Commitment
Cash
Clean
Culture
Communication
Stage 7 of Proc Cycle
Issue tender or RFQ
Send all docs to suppliers participating
- Must all go at same time
- Must all get same docs
- Questions - all answers to all questions need to be sent to everyone for fairness
Might use an eProcurement portal
Stage 8 of Proc Cycle
Evaluate bids / quotes
- Check for errors
- Reject any late or incomplete
- Should be evaluated by the documents created in step 5
- Work with technical teams to evaluate technical aspects
- Negotiation on price
Stage 9 of Proc Cycle
Contract award
- Advise winning supplier in writing
- Notify unsuccessful bidder and explain why
- Contractual negotiation and signature
- Develop implementation plan
Stage 10 of Proc Cycle
POST-CONTRACT AWARD
Warehouse logistics and receipt
- Prepare for delivery
- Product coding and classification
- Storage requirements (layout, temperature, racking)
- Perishable? Last in, first out approach?
- Frequency of deliveries
- Enter data into the system - batch sizes, delivery times, might have to put into an MRP system
Stage 11 of Proc Cycle
Contract performance and improvement
- Manage performance (review meetings, KPIs)
- Contract review meetings (performance, any conflicts that arise, minor changes to contract) - Might discuss service credits or invoice queries
- Continuous improvement
Stage 12 of Proc Cycle
Supplier Relationship Management
Kraljic matrix to determine the kind of relationship to have with supplier
Will also depend on length of contract and the marketplace
Main focus on strategic suppliers - high supply risk and high cost impact - will want to drive innovation, streamline processes and reduce waste
Might bring in JIT methodology, and focus on LEAN principles
Supplier development activity - joint development of a warehouse or product
