25 nov - procurement and supplier relationship management
TRANSCRIPT
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.!
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!
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!
Sourcing#
! Where!do!you!source!suppliers!for!your!wedding?!
! Source!of!InformaAon:!Internet,!Trade!Fairs,!Network!
! Supplier!Appraisal!–!Financial,!Capacity!
! Site!Visits!
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!
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]
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
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!
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
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!
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!
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!
THE#RELATIONSHIP#LIFECYCLE#
Strength!of!the!relaAonship:!trust,!
acAvity!links,!interdependency,!mutual!benefits!
Time!
THE#RELATIONSHIP#LIFECYCLE#
! 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)!
THE#RELATIONSHIP#LIFECYCLE#
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!
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!