Cycles Flashcards
PROCUREMENT CYCLE - Supplier selection
• Understand the need
Develop a high level specification
- Market/commodity options including make v buy
- Develop strategy/plan
- Pre-procurement market tests and market engagement
- Development of required documentation
- Supplier selection to participate in an invitation to tender
- Issue invitation to tender/request for quotation
- Bid/tender/quotation evaluation and validation
- Contract award and implementation
- Warehouse logistics and receipt
- Contract performance review and continuous improvement
- Supplier relationship/contract management
- Asset management/end of life
There may be an amount of negotiation at this stage to alter the winning bid, but it should not make a large difference or this would be unfair to other bidders.
There should be a contract agreed and the unsuccessful bidders should be informed and feedback provided (compulsory in the public sector, good practice in other sectors). It can also reassure the bidders that a fair process was held.
The buyer should work with the supplier to implement the contract, especially where there needs to be a handover from a current supplier or where assets eg machinery needs to be swapped. The buyer should provide key information eg how to book in deliveries or the format required for invoices etc.
Selection award criteria x 6 :
S E F C T L
Suck Education, find cash to live
CONCLUS
Benefits
PC - UNDERSTAND THE NEED
Develop a high level SPECIFICATION
• Understand the need
Develop a high level specification
- Market/commodity options including make v buy
- Develop strategy/plan
- Pre-procurement market tests and market engagement
- Development of required documentation
- Supplier selection to participate in an invitation to tender
- Issue invitation to tender/request for quotation
- Bid/tender/quotation evaluation and validation
- Contract award and implementation
- Warehouse logistics and receipt
- Contract performance review and continuous improvement
- Supplier relationship/contract management
- Asset management/end of life
- a formal requisition
2. - an informal req.
3. a reacting t falling inventory / stock
4. a market change such as high demand period - preparing for promotion
5. could be due to a new output requirement,
6. to replace an older asset,
need v whim
Objectives could include to improve efficiency, reduce defects/improve quality, reduce costs per item, increase output rates etc.
conformance v performance
These give precise details of how the product is to be made or a service delivered and will provide information on functions and operation
e.g. performance requirements, dimensions, reliability etc
performance specification
where the outcome/ required performance , but not the methods to achieve it.
The suppliers use their expertise to determine the best way of producing the item or service, lead to a more innovative outcome
lower costs using their existing capabilities. risk - IP
Value Add
Questioning the business need - not spending on a spec or appraising
etain or eliminate or outsource
Make or buy
budget
PC - CONTRACT AWARD and implementation
• Understand the need
Develop a high level specification
- Market/commodity options including make v buy
- Develop strategy/plan
- Pre-procurement market tests and market engagement
- Development of required documentation
- Supplier selection to participate in an invitation to tender
- Issue invitation to tender/request for quotation
- Bid/tender/quotation evaluation and validation
- Contract award and implementation
- Warehouse logistics and receipt
- Contract performance review and continuous improvement
- Supplier relationship/contract management
- Asset management/end of life
There may be an amount of negotiation at this stage to alter the winning bid, but it should not make a large difference or this would be unfair to other bidders.
There should be a contract agreed and the unsuccessful bidders should be informed and feedback provided (compulsory in the public sector, good practice in other sectors). It can also reassure the bidders that a fair process was held.
The buyer should work with the supplier to implement the contract, especially where there needs to be a handover from a current supplier or where assets eg machinery needs to be swapped. The buyer should provide key information eg how to book in deliveries or the format required for invoices etc.
Selection award criteria x 6 :
S E F C T L
Suck Education, find cash to live
CONCLUS
Benefits
MARKET/commodity options including make v buy
• Understand the need
Develop a high level specification
- Market/commodity options including make v buy
- Develop strategy/plan
- Pre-procurement market tests and market engagement
- Development of required documentation
- Supplier selection to participate in an invitation to tender
- Issue invitation to tender/request for quotation
- Bid/tender/quotation evaluation and validation
- Contract award and implementation
- Warehouse logistics and receipt
- Contract performance review and continuous improvement
- Supplier relationship/contract management
- Asset management/end of life
Pre-procurement market tests and market engagement – stakeholder feedback, market research, supplier engagement, competitor actions
The buyer needs to consider the current and potential future movements within the internal and external business environment in order to work out the long term strategy for the purchase.
STEEPLE can be used to assess the external market – Social, Technological, Economical, Environmental, Political, Legal, Ethical.
The buyer can also assess internal factors such as current skill sets, availability of staff or equipment etc. The results of this research can be plotted on a SWOT analysis – Strengths/Weaknesses (both internal) and Opportunities/Threats (both external).
Porters 5 Forces - bargaining power of suppliers, bargaining power of buyers, competitive rivalry, threat of new entrants, threat of substitutes
The level of competition within a market can also be assessed by looking at the market structure – monopoly, imperfect competition and perfect competition
The level of supply and demand
generally as supply volumes decrease, prices increase
supply volume increase, price go down
if demand decreases, prices usually decrease
PROCUREMENT CYCLE - Supplier MNG
• Understand the need
Develop a high level specification
- Market/commodity options including make v buy
- Develop strategy/plan
- Pre-procurement market tests and market engagement
- Development of required documentation
- Supplier selection to participate in an invitation to tender
- Issue invitation to tender/request for quotation
- Bid/tender/quotation evaluation and validation
- Contract award and implementation
- Warehouse logistics and receipt
- Contract performance review and continuous improvement
- Supplier relationship/contract management
- Asset management/end of life
upplier management
This is the longer term management of the supplier to ensure that the requirements of the contract are being met and to ensure performance is maintained.
This is the process of
rationalising,
co-ordinating,
measuring and monitoring performance (feedback mechanisms) , building relationships
and developing the potential of suppliers.
use of audits or site visits to check the physical site
Benchmarking may be used to compare a function, process or performance to that of a best in class example. This can be done internally eg comparing procurement effectiveness across different sites in the same company.
Incentive schemes
These offer rewards for continued excellent performance, could include:
• Preferred supplier status
• Increased or longer term business
Staged payments or faster payments for early performance
motivation of suppliers could have benefits : increase productivity, quality, Innovations they will be more committed.
Penalising the supplier
Threatening to reduce business is common and usually linked to decreasing supplier performance and may also be part of a name and shame campaign. At best they will bring about very short term improvements as the cause of the performance failing is not addressed.
Improving performance
Whilst having a monitoring process may in itself encourage suppliers to perform better, as they know they are being assessed, it does not fix problems. There also needs to be a process to resolve issues and improve performance, agree a plan of action a d processes
Conclusion
The criteria for gaining the reward should be clear, fair and achievable otherwise the supplier may become demotivated.
Tendering x 8
Tendering is designed to ensure fair, non-discriminatory and competitive supplier selection,
based on
equality of access to tender information,
selection of suppliers based on price and non-price criteria,
and accountability for decisions
During the pre-qualification process the buyer is assessing the supplier to see if they are suitable to provide the requirements.
The assessment criteria can include questions to check if there is compatibility between the parties ethically and what practices or actions the supplier takes. This can be split into three key areas – people, profit and planet (sometimes called the triple bottom line).
- Open – the requirement is advertised and anyone can bid.
- Restricted – The initial process shortlists potential suppliers by going through the selection process, commonly using a questionnaire eg PQQ. Only the suppliers who pass this stage are invited to bid on the tender. This is then evaluated and the winning supplier is chosen.
- prep of detailed specs/draft contracts
accurate spec of requirement must include non-price criteria like quality/sustainability so buyers task will be
simply to check tender meet requirements
choose bids on best value/price.
Means bids can be accurately compared once tender is in process as there is no room for renegotiation/adjustment of specs
- Advertisement of tender -
timetables, tender procedures to follow
- sending pre-qualification questionnaires in response to
expressions of interest (selective tender)
submission of bids (open tender)
inc timescales to be returned. Follow-up information or clarification may be sought
- Issue of invitation to tender (ITT) and tender documentation to those responding to the advertisement or invitation to tender within the prescribed time frame. Tender documents should be issued to each potential supplier in identical terms and by the same date.
Tender documents: 1. an invitation to tender 2 instructions to tenderers; 3 a pricing document 4 the specification; 5 criteria for contract award; 6 contract terms; 7 Deadline for submission; 8 a pre-addressed tender return label.
- Tenders will be received (in the form of sealed bids) for opening by the tender evaluation team, following the closing date for submission . The details of all tenders received will be logged, with details of each listed on an analysis spread sheet for ease of comparison. Each tender will then be analyzed, according to the specified criteria for contract award, with a view to selecting the ‘best offer’.
- Post-tender clarification Verification of supplier information and negotiation, where required.
- The contract will be awarded, and the award notified to tenderers.
8 A best practice tender will also include ‘de-briefing’: the giving of feedback, to unsuccessful tenderers, to enable them : to improve the competitiveness of future bids, to develop the market- help the procurement function to improve future tender processes.
SOUCRCING PROCESS
I D R S R A S
contract terms
supplier selection
award contract
supplier management
