Flash Cards
What are business needs?
- an organisation needs certain inputs in order to perform its activities and pursue its objectives
- the planners of business activities, and the users of inputs, typically notify the procurement function of these requirements, in various ways
- the task of procurement is to fulfil the input requirements, by achieving what are often called the five rights of procurement
What includes business needs analysis?
- to operate profitably (key in private)
- to achieve competitive advantage
- to achieve cost leadership
- to achieve differentiation
- to satisfy public needs (public sector)
- to attract quality stakeholders
What stages of development there is in Procurement?
- passive
- independent
- supportive
- integrative
- increase profit
- add value
- maintain liquidity
- achieve competitive advantage
Describe generic procurement cycle.
Identify the needs Define the needs Develop contract terms Source the market Appraise the suppliers Invite tenders/RFQ’s Analyse the bids Negotiate best value Award the contract Manage the supplier/contract
Explain EBI (early buyer involvement)
Complete later
Identify and explain type of purchases.
- straight re-buy: items already sourced from a supplier (Stock/Specs/Source)
- modified re-buy: some of the requirement has changed (Challenge/Competition/Contract terms)
- new buy: requirement has not been specified or sourced previously (Research-demand/Vendor/Market) EBI/ESI
What are the elements of a comprehensive formal business case?
Executive summary Reference Context Value proposition Scope Deliverables Impacts Work planning Resource requirements Risk management and contingency plans Commitments
List the criteria used for business case
Business benefits Added value Competitive advantage Costs Risks
What are the advantages and disadvantages of leasing?
Advantages:
- no initial investment to tie up capital
- protects against technological obsolescence
- cost are known and agreed in advance
- fewer complex tax and depreciation calculations
- hedge against inflation, as payments are made in ‘real’ money terms
Disadvantages:
- long-term commitment to pay instalments
- user does have total control of asset
- total cost maybe higher than purchase
- large organisations may get better terms by securing their own finance to purchase (benefiting from capital allowances)
- contract terms may favour the lessor (e.g. limitations to use, liability for risks and costs)
What are the advantages and disadvantages of outright buying?
Advantages:
- total cost is low, compared to rental
- the user has total control over the use of the asset
- the asset may have a residual re-sale value at the end of use
- capital allowances might be set against tax, and government grant may be granted
Disadvantages:
- high initial expenditure ties up capital
- users bears all cost and risk of maintenance, operation and disposal
- risk of technological obsolescence
- wasteful if equipment is needed only for a short period of time (e.g. particular project)
How to build a business case?
- who needs to be involved in the the team to produce the business case e.g. finance?
- is there a prescribed process or template to follow?
- are there any key dates for which the business case must be ready
- who are the key decision makers and what is important to them
- what deliverables needs to be produced and by when?
- are there any generally understood criteria that must be met, such as that all projects need to pay-back within two year?
Who are the stakeholders involved in business case?
- anyone with access to market forecasts or research reports
- anyone with access to competitor info (or research this yourself)
- the strategy team (business strategy)
- product marketing, to learn how your product will be positioned against other products and propositions
- business development, sales and channel managers
- marketing, to learn about any other planned launches or promotions that might compete for resources
Business case alignment
Corporate Strategy 🔽 Organisational Tactics 🔽 Operations
Is it:
Sustainable?
Feasible?
Acceptable?
Remember:
Profit?
People?
Planet?
What are links between corporate and purchasing objectives?
B: Maintain or increase market share
P: Provide supplies to match the customer needs, assure quality, reduce delivery times, reduce cost
B: Improve profits, cash flow and return on capital.
P: Reduce stocks, improve reliability, more frequent deliveries
B: Shorten time to market
P: Early supplier involvement
B: Eliminate non-core activities
P: Develop effective make-or-buy policy, integrate purchasing and capacity planning
What are links between corporate and purchasing objectives?
B: Introduce continuous improvement
P: Reduce the supplier base, partnership approaches, reduce product complexity, increase accuracy and reliability
B: Become world class supplier P: Work with suppliers to establish world class standards, improve flexibility of response to market conditions, liaison with technological sources
