25 Nov - Procurement and Supplier Relationship Management

!!BA#244:#Supply#Chain#Management#

Survey#

!  LinkedIn!Group!Survey!

Homework#

!  30!November,!Wed!–!NO!CLASS!

!  2!December,!Fri!–!NegoAaAon!Exercise!

!  7!December,!Wed!–!ArAcle:!GiI!Giving!in!China!

!  9!December,!Fri!–!NO!CLASS!

!  14!December,!Wed!–!TAKE!HOME!MIDTERMS!!!

!  16!December,!Fri!–!ArAcle:!Culture!in!NegoAaAon!

PROCUREMENT#

Define!business!need!

Step!1!

Market!Intelligence!

Step!2!

Sourcing!

Step!3!

NegoAaAon!of!contracts!

Step!4!

Purchase!Order!

Step!5!

Monitor!and!Chase!Delivery!

Step!6!

Receipt!of!Delivery!

Step!7!

Payment!of!the!

Supplier!

Step!8!

• Contract!Management!• Supplier!RelaAonship!Management!• Dispute!ResoluAon!

Step!9!

Procurement Cycle – Deliverables

SpecificaAons!and!

Procurement!Plan!

PotenAal!and!Pre\qualified!Suppliers!List!

RFx!or!ITT!

Analyzed!quotes!and!promising!Supplier!

NegoAated!best!value!

Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

Types#of#Spend#

!  Goods,!Services,!Works?!

!  Direct,!Indirect?!

!  Stock,!Non\Stock?!

!  Capital!Expenditure,!OperaAonal!Expenditure?!

Capital#Expenditure#

!  Total!Cost!of!Ownership!(TCO)!!  Purchase!Price!!  Delivery!!  InstallaAon!!  Maintenance!and!Repair!!  Operator!Training!!  Energy!!  Labor!!  Disposal!Cost!!  etc.!

Pareto#Analysis#

!  What!to!prioriAze!

!  Can!also!be!applied!to!Customers!

KRALJIC#MATRIX:#L’Oreal#

Leverage!items! Strategic!items!

Printed!MarkeAng!Materials! Most!Raw!Materials!for!Make\up!

Non\criAcal!/!RouAne!items! Bofleneck!Items!Office!Supplies! Specialized!Spare!Parts!for!Make\up!

ProducAon!Equipment!

Impo

rtan

ce+of+the+Item

+/+Spend+

Low

!!High!

Number+of+Suppliers+in+the+Market+High ! ! ! !Low!

KRALJIC#MATRIX:#HOW#TO#HANDLE?#

Leverage!items! Strategic!items!

Standardize!specs!to!easily!switch!suppliers,!Local,!mulAple,!bidding!

Key:!Price!

Long\term!mutually!beneficial!strategic!relaAonships!

Key:!Long\term!availability!

Non\criAcal!/!RouAne!items! Bofleneck!Items!Vendor\managed!inventory,!Blanket!order!(call\off),!Local,!Online!ordering!

Key:!Efficiency!

Global,!develop!alternaAve!or!back\up!suppliers,!buffer!stock,!new!technology!

Key:!Reliable!Short\term!Sourcing!

Impo

rtan

ce+of+the+Item

+/+Spend+

Low

!!High!

Number+of+Suppliers+in+the+Market+High ! ! ! !Low!

Exercise#

!  Make!a!Matrix!for!your!company!

!  5!minutes!


SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

Sourcing#

!  Where!do!you!source!suppliers!for!your!wedding?!

!  Source!of!InformaAon:!Internet,!Trade!Fairs,!Network!

!  Supplier!Appraisal!–!Financial,!Capacity!

!  Site!Visits!


SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

Requests for Information, Quotations, Proposals (RFI, RFQ, RFP)

1

23

RFI – requests generic information to test the market RFQ – requests an actual price RFP – requests both price and a comprehensive description of services

Request for Quotation (RFQ)

Should include:

•  Contact details of the purchaser

•  Date by which to reply

•  Quantity and Description of Goods or Services required

•  Required Date and place of delivery

•  (Buyer’s standard terms and conditions)

•  (Terms of payment)

Coverage Value

Overall!Annual!Cover!per!Member PHP!300,000!/!annum

In\paAent!services Covered

Out\paAent!services Covered

Dental!Care!and!Maternity Not!Covered

Number!of!Male!Employees 56

Number!of!Female!Employees 50

Last!Year’s!UAlizaAon 65%

Hospital!Network All!TerAary!hospitals!in!MakaA!City

Request for Quotation (RFQ) Please quote for below services. This is for employees of the British

Embassy in Riyadh. Hope to receive before 22 April 2016.

Michael Juadiong

09178581557; [email protected]

Bapa Gulfy Med4,597! 8,344 6,236

Request for Quotation (RFQ)

All quotes above are in PHP per person

Invitation to Tender (ITT)

A more formalized competitive bidding, in which suppliers

are issued an ITT for a contract, with the buyer intending to

choose the supplier submitting the best proposal or the

lowest price.

Invitation to Tender (ITT)

ATT 1: Instructions to Tenderer

ATT 2: Evaluation Criteria

ATT 3: Proposed Contract Documents

ATT 4: Conditions of Contract

ATT 5: Statement of Services and KPIs

ATT 6: Price Schedule

ATT 7: Declaration by Supplier

!!UK’s#eQProcurement#Sites#






SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

Selection and Award Criteria

It is important to state at the onset that:

•  The buyer will not be bound to accept

the lowest price quoted

•  Post-tender negotiation may be entered

into

Criteria Perfect;Score;/;Weight

Technical Approach 40

Production Facilities 10

Ability to Meet Schedule 10

Price� 40�

Use of Weighted points systems for assessment

Example: Technical – 60%

Commercial – 40%

Balancing Technical and Commercial Award Criteria

HIGHEST COMMERCIAL

SCORE

BEST VALUE

MOST ECONOMICALLY ADVANTAGEOUS

TENDER (MEAT)

HIGHEST TECHNICAL

SCORE

Is not about achieving the lowest initial price: it is defined as the optimum combination of whole life costs and quality

VALUE FOR MONEY


SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!


SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

!!Is#a#Purchase#Order#(PO)#a#contract?#


SpecificaAons!and!

Procurement!Plan!


RFx!or!ITT!



Awarded!and!Signed!

Contract,!PO!

KPI!and!Measured!

Performance!

Step!1!

Step!2!

Step!3!

Step!4! Step!3!

Step!3!

Step!5!

Step!6!

Step!7!

Step!8!

Step!9!

Contract#Management#

Supplier#Relationship#Management#

THE#RELATIONSHIP#LIFECYCLE#

Strength!of!the!relaAonship:!trust,!

acAvity!links,!interdependency,!mutual!benefits!

Time!


!  Birth!

!  Selec@ng!and!afracAng!suitable!partners!

!  Growth!

!  Increasing;coopera@on,;trust,;and;benefits!to!both!parAes;!managing!emerging!issues;!conAnually!checking!that!objecAves!are!met!

!  Decline!

!  Progressively!downgrading!the!relaAonship;!becoming!complacent!or!cease;to;be;profitable;

!  TerminaAon!

!  Needs!to!be!done!construcAvely;!keep!the!door;open;to;future;business,!learning!lessons,!avoiding;unnecessary;conflict!and!reputaAonal!damage!(e.g.!law!suits,!or!negaAve!PR)!


READ:!

“I!can!see!the!end!as!it!begins,!my!one!condiAon!is,!say!you’ll!remember!me”!

\!SwiI,!T.!

SUPPLIER#MOTIVATION#

!  Carrot!and!sAck!approach!

!  Isn’t!an!enforceable!contract!which!the!supplier!is!legally!bound!to!comply!to!enough?!!  Only!sets!a!minimum;level!or!‘floor’!for!compliance!

!  We!want!the!extra;benefits!of!commitment,!flexibility,!innovaAon,!etc!

SUPPLIER#MOTIVATION#

How?!

!  IncenAves!vs.!PenalAes!(KPI)!

!  Use!dedicated!account!managers!

!  Securing!commitment!of!senior!managers!for!support!and!escalaAon!

! Maintain!a!sufficient!volume!of!business!

!  Pay!invoices!on!Ame!

Key#Performance#Indicators#(KPI)#

( )

 

?

 

 

KPI#Examples#

 %

 

 %

 

 

PERFORMANCE#

PERFORMANCE!=!CAPABILITY!x!MOTIVATION!

PERFORMANCE#

!

SUPPLIER#DEVELOPMENT#

!  To!improve!suppliers’!performance!and!capabiliAes!

!  To!meet!buyer’s!short\term!or!long\term!supply!needs!

!  To!raise!supplier!competence!to!a!specified!level!

SUPPLIER#DEVELOPMENT#HOW?#

!!End#

Date post:	12-Jan-2017
Category:	Business
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25 Nov - Procurement and Supplier Relationship Management

Business