L4M8- Procurement Cycle Detail Flashcards
Give the key areas of stage 1 of the procurement cycle?
Define business need and develop specification
Communication to ensure no error in understanding of the requisition (verbal, email, written, automated)
Have stakeholders signed it off?
Is the need tangible, intangible, direct or indirect
Should include dates, quantity, when, where, why, who (think 5 rights)
MRP systems may automate this process based on BOM, MOQs, stock, demand planned, cycle and lead time
Comparison vs available or forecast budgets
Give the key areas of stage 2 of the procurement cycle?
Market Analysis and Make or Buy Decision
Budget discussions, commodity prices, porters 5 forces for market analysis
Outsource matrix, ansoff, SWOT, STEEPLED, offshoring, ESI, product life cycle can be considered
Oligopoly, monopoly, monopolistic competition, perfect/imperfect competition
Supply and demand (if demand increases and supply remains static, a shortfall will occur, and buyers can expect to see inflated prices)
Push and pull dynamics
Give the key areas of stage 3 of the procurement cycle?
Develop the strategy and plan
very closely linked to stage 2. Product has been evaluated and a decision to make or buy has been made. Next is to decide how it will happen. Can be helped by a SWOT analysis to assess the organisation.
Strategy should be made up of:
1) Analysis of marketplace competition- STEEEPLED, availability, leverage, negotiation, type of market (use insight from stage 2)
2) Which type of supplier to approach- local, national, global
3) Whether ITT or RFQ is more appropriate
Give the key areas of stage 4 of the procurement cycle?
Pre Procurement Market Testing
Use stakeholder feedback on timing. Engage the supply base. Market research. Review legislation/regulation. Currency fluctuations. Competitors actions.
Think about macroeconomics
Key deliverables of this stage:
1) How to develop the best spec
2) Is it the right time to enter the marketplace
3) What the cost implications and contracting terms might be
Consider product life cycle here as if it is in the decline phase there will be much less appetite for a large value order
Give the key areas of stage 5 of the procurement cycle?
Develop Documentation and detailed specification
Either RFQ or ITT
RFQs are generally for quicker, less complex requirements. Public sector uses tenders a lot more
Will contain T&Cs, quantity, description/spec, delivery details, KPIs (through an SLA)
All suppliers should get identical documentation so it is a fair process
Give the key areas of stage 6 of the procurement cycle?
Supplier selection to participate in the tender
Can be found through: Existing relationships, internet searches, trade shows, recommendations, marketing, prior knowledge
May undertake visits, audits, PQQs or RFIs to gather info and assess suitability
PQQ will cover company details, trading history, financial information, quality standards, insurance, H&S policy, references, ethical policies/procedures
Audits can also cover CSR and ethical codes of conduct
Review carters 10C’s, credit checks, benchmarking, reputation, ethics, sustainability
Benchmarking can be internal (department, product, team, location) or external (competitive, functional, generic)
When considering the relationship think about the CIPS relationship spectrum and the Steele and Court matrix (attractiveness vs value)
Evaluate the suppliers on financial performance, structure, culture, ethics/CSR/Sustainability, reputation, quality, accreditations, location, technology
Give the key areas of stage 7 of the procurement cycle?
Issue Tender Documents
Remember tenders should be used for large or complex projects, where the law requires it, where the company policy demands it, the value is high, you need to aggregate many bids, there is a lot of competition
The documents made in stage 5 are sent to the suppliers selected in stage 6
Public sector sometimes sent to the market in a one stage tender called an open market
Can be done electronically through e-tendering portal
In an ITT all suppliers should be issued at the same time with the same timelines
RFQ can be less formal so may not have deadlines
Tender process is:
- Style of tender
- Prepare ITT
- Send ITT
- Receive bids
- Evaluate bids
- Award
- Contract management
5 types of tender (open, restricted, negotiated procedure, competitive dialogue, innovation)
Competitive has a dialogue phase where a single solution is decided upon and then issued as a tender. Negotiated is where each supplier submits their own solution
Give the key areas of stage 8 of the procurement cycle?
Bid and tender evaluation and validation
Lines up with stage 5 of the tender process (Evaluate bids)
The best solution may not be the one that has the lowest price
Ensure there is a cross functional team reviewing the decision (think about the ORL tender process and stakeholders involved)
Need to consider WLC, quality/spec, organisational benefits (e.g. reputation), price, ethics, sustainability, risk, payment terms, transport method (Incoterms) WLC, service levels, location, warranty, order quantities (EOQ)
Give the key areas of stage 9 of the procurement cycle?
Contract award and implementation
Award the winner first, then unsuccessful ones
2 parties then negotiate contractual terms and reach a mutual agreement
Public sector should always select the offer that has the best possible value for money (MEAT)
Once accepted there is creation of contract terms- this requires: Intention, capacity, offer, consideration, acceptance and be legally binging
Can form standard contract terms or model form contracts
Need to consider implied (e.g. consumer rights act 2021) and express terms (price, spec, payment terms, retention of title, breaches, damages, exclusion, indemnity, termination, conflict resolution, conditions/warranties)
Contract mobilisation- the phase where supplier sets up and initiates the project. Change needs to be managed effectively (Kotters 8 stages, use gantt charts, TUPE, contract implementation)
Give the key areas of stage 10 of the procurement cycle?
Warehouse, logistics, receipt
This is all about delivery, receipting and storage. Think about CEVA for Ocado, its not always the final location that the goods are initially delivered to. Also compare the difference of receiving 1 case vs 1 lorry of stock
Tangible goods may need prep of the site. Intangible may need to make prep e.g. permits, office space to work or informing stakeholders
Should be a process set up for receiving e.g. what checks need to be done, unpacking, counting, receiving into the system, considerations (e.g. temp)
Give the key areas of stage 11 of the procurement cycle?
Contract performance and improvements
Are suppliers meeting performance and contractual obligations (and continuous improvements)
Continuous improvement- map, plan, action, review, identify
KPIS should be SMART
Can be qualitative or quantitative
SLAs as part of the contract (e.g. potato contract at ORL)- should be reasonable, important, simple and understood (not all KPIs need to be measured or in the SLA)
MBO (management by objectives) is the process of defining the objectives, relating them to both internal and external stakeholders
Review sessions and managing any variations
Give the key areas of stage 12 of the procurement cycle?
Supplier Relationship Management
Also consider SCM (supply chain management) and the flow of goods across a network
Relationship will be dependent on: type of product, length of contract, stage of contract, competitiveness of the marketplace
THink about the Kraljic matrix, pareto principle, relationship spectrum, zero sum (win lose)
Collaborative relationshops can be benefitted through:
shared info
innovation
reduced defects
improved quality
Continuity of supply
Stable supply chain
Cost reduction
Think about the example of the M&S and Ocado JV
Continuous improvement can also cover waste reduction (TIMWOODS), supplier development, contingency planning
Give the key areas of stage 13 of the procurement cycle?
Asset Management
Is the need still current and required? has the need changed? If no longer required then need to manage
Consider end of life and that it is done in a safe, compliant, responsible way.
Services can be managed, as it could be reviewing if the service is still needed or if the contract is fit for purpose.
Can also include lessons learnt (think about grey market sourcing)
