Learning Outcome 2

Question 1

What are the steps of the procurement process?

Answer 1

• Pre-procurement = stages 1-8 stages 1-6 = sourcing process
• Post procurement = stages 10 - 13
  Contract award – stage 9 sits in the middle of both

1. Defining the need
2. Market commodity
3. Develop strategy/plan
4. Pre procurement market test and market engagement
5. Develop documentation
6. Supplier selection
7. Issue RFQ/ITT
8. Bid/Tender/Quote evaluation
9. Contract award and implementation
10. Warehouse logistics and receipt
11. Contract performance review
12. SRM and SCM and development
13. Asset management and lessons learnt

Question 2

Explain 5 stages of the procurement process?

Answer 2

1.Identifying the need
Identify and understand the need of the customer.
Should include:
* Quantity
* Quaiity
* Detailed description – includes specification – conformance/performance
* Delivery time and place

2. Market commodity
   Make or buy
   *Business critical – if internal competence and capacity build in house, more control– less risk
   * None critical – buying in or outsourcing services - less control more risk.

If buying in consider:
*The economic situation. If economy of another country is weaker often proves better value.
* Currency fluctuations. Exchange rates should be considered. Deciding when to commit to buy can add value.
* Supply and demand. If supply and demand is surplus better value for money if demand exceeds supply then less value for money

3, Develop strategy/plan
Should outline the following:
* Which type of suppliers to approach – local, national, global, SMEs
* Evaluation of the competition – porters five forces
* RFQ or invitation to tender.
* Marketplace assessment – number of suppliers, power, negotiation stance

4. Pre-procurement, market test and market engagement
   Engaging the market and suppliers gains advance understanding of marketplace and trends
   * Seek info or feedback on the proposed need from internal and external stakeholder
   * Product life cycles and seasonal trends -readily available better price.

Product life cycle

Introduction
Growth
Maturity
Decline

5. Develop documentation
   * RFQ or ITT
   Should include
   Description and specification
   Quantity
   Delivery details
   SLAs
   T&Cs

Consider incoterms, the currency and whether the price includes tax when there are differences between quotes.

Question 3

What are porters 5 forces?

Answer 3

Bargaining power of the supplier
Bargaining power of the buyer
Threat of new entrants
Threat of substitute products
Rivalry amongst competitors

Question 4

What are pre-contract issues if not carried out correctly?

Answer 4

Pre contract steps 1-8

Wrong product or service - specification not prepared correctly
Prices not competitive causing financial problems
Too few or too many products, high inventory costs, stock outs, damage to reputation
Supplier unable to meet requirements, unethical
Legal action if not open and fair competition.

Question 5

What are the post contract issues if not carried out correctly?

Answer 5

Non arrival of goods, no warehouse space, products not being available to customers.
Failure to monitor KPIs - late deliveries or deliveries coming in short
Loss of competitive status by not monitoring the contract and acting on feedback
Fines or additional costs if failure to take into account TCO

Question 6

What tools and techniques support the sourcing process?

Answer 6

KPIs
Carters 10 cs
Kraljic
RFP
Vendor rating
Supplier appraisal

Question 7

What are Carters 10 Cs?

Answer 7

Competency
Capacity
Commitment
Control
Cash
Cost
Consistency
Culture
Clean
Communication

Question 8

The purpose and added value that is created by each
of the stages of the sourcing process?

Answer 8

Stage 1 saves time – Quality standards are met and reduces need for requotes due to lack in information or misinterpretation
Stage 2 achieves lowest cost – Make or buy
Stage 3 saves time – ensures conformance by using suppliers that fit with the organisations strategy
Stage 4 Reduces the chance of goods or services not being received well or the agreed contract price being uncompetitive
Stage 5 ensures potential suppliers are full briefed on T&cs and eliminates suppliers who cant conform
Stage 6 Supplier selection – removes unethical and unsuitable suppliers along with those in financial difficulty.

Question 9

What is E-requistioning?

Answer 9

Is the first part of the electronic process. Triggered when an internal customer informs of a need. Requisition can be sent by email or automated systems.

Question 10

E tendering/E sourcing

Answer 10

ITT published in buyers web portal
Suppliers respond by sending bids through secure email
Buyers can observe and manage the process through a front end web function
Prohibited access to any tender responses to specified time
Automatic scoring and evaluation
All bidders notified of the award outcome