2.1 - Analyse the purpose of organisational procedures and processes in sourcing goods and/or services Flashcards
Internal stakeholder
A stakeholder within the organisation such as a department or function
Connected stakeholder
This is a stakeholder that has a strong interest in a companys activities. This is due to its contractual or commercial relationship with the company. This definition includes suppliers
External stakeholder
A stakeholder outside the buying organisation who has a direct role in the delivery of the contractual requirements
Value for money
The most advantageous combination of price and quality that makes a product or service fit for purpose and will achieve the buyers required outcomes. This needs to be reviewed in terms of whole life costs
What is value for money often described as
The 3 E’s
What does the National Audit office often say about the 3 E’s
That in some areas there is a fourth (Equity)
Name the 4 E’s
Economy
Efficiency
Effectiveness
Equity
Name 5 typical factors that CIPS make reference to when defining value for money
- Fitness for purpose
- Quality
- Whole-life costs
- Risk
- Environmental and sustainability issues
Name 6 added value elements that a supplier may include in their tender submissions
- Providing work experience opportunities
- Providing education and training opportunities
- Apprenticeships
- Supplier staff undertaking voluntary work on specific projects
- Donations of products/materials for community projects
- Sponsorship of events
What is value for money often described as
The 4 E’s
Economy
Efficiency
Effectiveness
Equity
What is value for money in the private sector related to?
Shareholder profit and business benefit
What is value for money in the public sector related to?
Ensuring tax payers money is spent wisely
Name 4 ways that lack of compliance with procurement processes can leak value
- Lack of contract coverage
- Maverick buying activity
- If no formal specification it may not be fit for purpose
- Procurement activity not assessed and managed in a consistent way
Name a key way that value for money can be ensured
Apply competition to business requirements
Name the 8 steps of a simplified cips procurement cycle where value can be added
- Requirement determination
- Source determination
- Vendor selection
- Order processing
- Order monitoring
- Goods receipt
- Invoice verification
- Payment
Make or buy
The action of choosing whether to manufacture a product or provide a service in-house or purchase it from an external supplier
Cross-functional team
Teams that involve individuals from different departments who work together towards a common goal. This could be a group of people working on a defined project who come from different functions or departments of the company. It can also include members who are from outside the company, such as suppliers
Value mapping
A process in which value is created by reducing or eliminating waste and operational inefficiencies
Ohno’s eight wastes
The eight wastes identified by Taiichi Ohno of Toyota, often remembered by the TIMWOODS acronym
Name 7 ways procurement can add value when defining the need of internal customers
- Consider the make or buy decision
- Support the formation of cross functional teams to develop the specifications
- Ensure the requirement is not over specified
- Review where branded products could be replaced with substitute non-branded products or materials to reduce costs
- Encourage standardisation of common products and services across a company to benefit from leverage possibilities
- Provide advice on whether a confirmance or performance specification would be most suitable
- Involve suppliers in this stage if this would be added value
Name 8 wastes (TIMWOODS)
Transportation
Inventory
Motion
Waiting
Over-production
Over-processing
Defects
Skills
Name 4 ways category management can allow procurement to leverage expertise and knowledge
- Spend reviews across various areas provide a fuller overview than reviewing spend on a contract-by-contract basis
- Following on from spend reviews procurement can aggregate demand and consolidate spend which can result in reduced costs
- SRM and improved risk management plans can be developed
- Specialist category and supplier knowledge regarding the market and potential sources of supply can be developed
Name 4 ways supplier relationships can result in value for money
- Being able to identify and use an appropriate approach to deal with supplier issues
- Innovation developed as part of collaborative projects with strategic suppliers
- Reduction of waste
- Resilience and risk reduction
Private sector
Organisations that are owned by private individuals and enterprises
Third sector
Charities or not for profit organisations
Public sector
A sector of the economy that is owned, financed and run by the government or state owned enterprises
Name 8 sources of information a buyer in the private sector can identify a suitable supplier
- Internal stakeholders
- Preferred supplier lists
- Internet searches
- Trade shows, exhibitions, and trade press
- Networking
- Advertising the requirement on e-procurement platforms
- Vendor engagement events
- Agents
Benchmarking
Comparing an element of one business, such as price, quality or service against another
What does supplier identification include?
Pre-tender engagement activities
How must the public sector identify suppliers
The buyer is required to advertise the requirement in the Official Journal of the European Union meaning it will be communicated across all the EU member countries in a common language or nomenclature
Nomenclature
A word used to refer to a stable and consistent use of vocabulary to aid translation
Common procurement vocabulary (CPV) codes
Numerical classifications for products and services. The aim of these codes is to standardise the references used by buyers to describe the products and services that they are purchasing
Prior Information Notice (PIN)
A notice released by a buying organisation through the OJEU to make potential suppliers aware of a sourcing competition that it intends to run in the future
Name 3 things included in the supplier assessment and selection process
- Developing RFI docs and criteria
- Evaluating suppliers against this criteria
- Evaluate tenders
Name 5 times when you should use competitive bidding
- When the item or service is of sufficient value
- When there is a clear specification so competitive bids can be evaluated side by side
- When competition exists between a number of good quality suppliers
- When there is enough time for the process to be completed properly
- Where competition has not occurred before
Name 5 times when not to use competitive bidding
- When its not possible to obtain firm prices
- When the specification is likely to change
- When price is not the main driver
- When set up cost and time is prohibitive
- When there are unethical forces present in the market
Name 3 drawbacks to competitive tendering
- It takes time to develop the documents and evaluate the responses
- Bidders may be discouraged if they think that the buyer has no intention of switching suppliers and the buyer is using the process to benchmark its incumbent supplier
- Contract awards may be a one off
Expression of interest
A situation when a supplier has shown an interest in being included in future tender
What is a key method of supplier assessment and selection in the private sector
Request for information
What is the aim of an RFI
To create a shortlist of suppliers that will be invited to the next stage of the process, some of which may have shown an expression of interest
Name 6 pieces of information typically requested at RFI stage
- Information on previous contracts that are relevant to the buyer requirements - references
- Financial info - profit and loss accounts
- Insurances - public, employers and product liability
- ISO accreditations
- Supplier acceptance of the buyers standard payment terms and contractual terms and conditions
- Minimum levels of health and safety standards
Name 4 key principles of procurement in the EU
- Transparency in the process of procurement
- Equality of treatment of suppliers
- Non-discrimination - requirement is advertised to all suppliers
- Proportionality - procurement process must be proportionate to the value of the contract
How often are threshold values reveiewed?
Every 2 years
What is the key procedure used to assess, pre-quality and select suppliers in the public sector
The restricted tender process
What are the two stages of the restricted tender process
- PQQ
- ITT
Prequalification questionnaire
A document sent to potential suppliers asking for information necessary to support their qualification as an approved supplier
Invitation to tender
A formal invitation sent to suppliers inviting them to make an offer to supply goods or services
What is the minimum length of time a PQQ can be issued for
30 days
When is a request for proposal used
Where there are fewer suppliers in the market place or shortlisting has already been undertaken and the requirement is well developed
Name 3 pieces of info required at RFP stage
- Detailed info on how the supplier will produce the products or deliver the service including method statements
- Risk assessments
- Full pricing information
What is award criteria made up from
A mixture of price and quality
Negotiation
A negotiation between a buyer and supplier is a discussion with the aim of reaching agreement, usually on the price of a product or service
Name 4 key procurement procedures used in the private sector for supplier selection
- RFI
- RFP
- E-auctions
- Rounds of negotiations
Name 5 key procurement processes and procedures that buyers can use in EU public sector procurements
- Open tender process
- Restricted tender process
- Competitive procedure with negotiation
- Competitive dialogue
- Innovative partnership procedure
Describe an open tender process
Used when there are fewer suppliers in the market so shortlisting is not required and/or the requirement is well developed. This stage has no PQQ stage
Describe a restricted tender process
From issuing a PQQ and selecting suppliers from a shortlist, a buyer will then issue these suppliers a RFP
Describe a competitive procedure with negotiation
It can include a PQQ stage. Shortlisted bidders are invited to submit a tender followed by negotiations
Describe competitive dialogue
Used when the buyer has a complex requirement and several phases of negotiation are required. A PQQ is undertaken and then the stages of negotiation will be entered into with the shortlisted bidders
Describe innovative partnership procedure
It allows for the research, development and purchase of a product or service within a single procurement. The final purchase corresponds to pre-agreed levels of performance and maximum costs. Following the responses to the initial advert the buyer uses a negotiated approach to invite the suppliers to submit ideas to develop the required innovative products or services for which no suitable product is currently available. No negotiation is permitted following submission of the final tender
What is the only procedure where negotiation can take place after submission of the final tender
Competitive dialogue
What evaluation criteria is used in the public sector to help procurement achieve the goal of obtaining value for money
MEAT
Most
Economically
Advantageous
Tender
Who should be involved when developing evaluation and award criteria
Key stakeholders
