Welcome to

DUBAI INSTITUTE OF BUSINESS MANAGEMENT

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Purchasing & Strategic Procurement

Bassam Hameidi
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Course Index
1- Introduction 2- Management of Organizations 3- Purchasing Management
A- Definition B- Importance/ Fundamentals C- Objectives D- Role and Duties

4- The Purchasing Chain

A- Focus B- Interfaces C- Cycle D- Centralized VS Decentralized E- Work Process
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Course Index Cont.

5- Purchasing Strategy &Forecasting and Research
A- Types of Strategies B- Make or Buy Decision C- Strategic Partnering D- Forecasting E- Research Techniques

6- Purchasing and Supply Chain Management

A- Purchasing in the Supply Chain B- Objectives and Strategies C- Functions and activities D- Benefits of SCM to Purchasing

Course Index Cont.

7- Supplier Analysis and Selection
A- Price Analysis B- Identifying Cost Drivers C- Cost Effective Programs D- Vendor Selection Steps E- Negotiations Strategies/Skills

8- Supplier Relationship Management

A- What is SRM? B- How to Build SRM? C- SRM Tool Set D- Supplier as a Partner
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Course Index Cont.

9- Purchasing Key Skills 10- Purchasing Problems and Control Methods 11-The Evolving Purchasing Role 12- E- Procurement &Strategic Sourcing

Introduction

In modern management, organizations have to operate within a structured system in order to be successful, effective and profitable. This integrated system which is showing in the coming slide includes four important elements that must operate as a cohesive system for any activity in the organization to insure continuity and existence. 7

2 Management of Organizations
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An Organization As A Structured System

Inputs

Labor Money Materials Equipment

Processing

Transformation of inputs

Outputs

Products Services

Feedback
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 The concept of management is as old as old ages during Sumerian, Ancient Egyptians and Slave Owners when the need to get the job done was important for all. At the end of 18th century TAYLOR introduced the Classic / Traditional Theory when people were managed in a very bossy and dictatorship way. This theory was called The Boss is Everything Then management developed through several stages to reach to current Modern System Theory applied by most organizations nowadays. 10

What is Management?
Management is both Science and Art where it requires Knowledge at the same time it requires Skills and Abilities to Get the Job Done Through People. Management is the process of utilizing all input factors through proper and effective process to produce required outputs to achieve the organization goals .(see slide no. 4) 11

Management Functions:
1- Planning: means setting SMART goals

and exercising mental efforts to predict and control future.

Why Plan?
To determine the overall Direction. To Consolidate Efforts. To be Protective: Avoid or reduce related RISK. To be Affirmative: Insure and achieve SUCCESS.
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Stages of Planning:
STATE GOALS/OBJECTIVES

COLLECT EFFORTS LIST ALTERNATIVES CHOOSE BEST ALTERNATIVE PUT PLANS INTO ACTIONS

EVALUATE
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WHY DO WE FAIL TO PLAN?

- Ignorance of the importance of Planning.

- Poor Planning Skills.

- Getting absorbed with surroundings. - Fear of unknown. - Surrendering to LOGIC.

Remember that: No one plans to fail, but we all fail to plan.

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2- Organizing: Insuring that Plans are moving

towards right direction through proper, efficient and effective coordination of inputs to optimize outputs for the achievement of goals. HOW?
Build Organization Structure. Assign major tasks and assignments. Create subtasks. Allocate resources and link to plans. Evaluate to insure proper Feedback. Design proper policies and procedures.
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3- Directing: Alignment of inputs and

resources towards goals.

HOW?
Build Organization Culture. Exercise true leadership. Identify lines of authority. Develop Employee Relations. Determine span of supervision. Enforce Work Ethics.
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4- Controlling: It is an ongoing process to

insure that all Plans and Tactics developed are implemented effectively. HOW?
Tie objectives to specific measures of Performance (KPI). Check quality of Outputs. Analyze results. Link results to the Big Picture WHAT WENT WRONG?
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History of Purchasing
Since ancient times, human beings needed to exchange goods as important means of their survival. Therefore, Barter deals were created to serve the purpose where people w exchanged goods and commodities they had with the ones they did not have. With the invention of Money such practice developed to allow people fulfill their needs through the exchange of money which laid the basic principles of Modern Purchasing which will be explored in this presentation. 18

3
Purchasing Management:
A- Definition B- Importance/ Fundamentals C- Objectives D- Role and Duties
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A- Definition
Purchasing refers to a function in business whereby the enterprise obtains the Inputs for what it produces, as well as other goods and services it requires. In larger businesses, the function is frequently carried out in a Purchase Department, headed by a Purchasing Manager Purchasing is the informal name of the department in Procurement responsible for issuing Purchase Orders for goods, including material and equipment. In most US Corporations, Purchasing Agents are typically referred to as Purchasing Specialists or simply as Buyers.
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Other Definitions Cont.

Purchasing for personal consumption as ultimate users is called Shopping Purchasing for Industrial and Commercial purposes is called Purchasing

Purchasing for Government and other authorities is called Procurement

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B- Importance/ Fundamentals
Major cost center Affects quality of final product Aids strategy of low cost, response, and differentiation

Fundamentals
Understand the Requirement Perform Analysis Prepare for Negotiations Execute Always Document

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C- Objectives
Help identify the products and services that can be best obtained externally; and Develop, evaluate, and determine the best supplier, price, and delivery for those products and services Develop and implement purchasing plans for products and services that support operations strategies
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D- Role and Duties

Identifying sources of supply

Negotiating contracts
Maintaining a database of suppliers Obtaining goods and services Managing supplies

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4
The Purchasing Chain:
A- Focus B- Interfaces C- Cycle D- Centralized VS Decentralized E- Work Process
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A- Focus
Materials Management -High transportation cost -High inventory costs Purchasing Management -Commodity items -Standard products Supply Management -High costs -Scarcity: national or international

Source Management -Unique items -Custom-made items -High technology items

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B- Interfaces
Legal

Operations

Accounting

Purchasing

Data processing

Design Receiving Suppliers

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C- Cycle
1.Requisition received
Operations Legal

Accounting

2.Supplier selected
3.Order is placed
Purchasing Data Processing

4.Monitor orders
5.Receive orders
Receiving Suppliers 28 Design

D- Centralized VS Decentralized
Centralized Purchasing
Purchasing is handled by one special department. (Recommended to exercise proper control)

Decentralized Purchasing
Individual departments or separate locations handle their own purchasing requirements

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Advantages of Centralized Purchasing

More influence with suppliers --> greater supply continuity Buy in large quantities --> better prices Larger purchasing department --> buyer specialization Combine small orders --> less order cost duplication Combine shipments --> lower transportation costs Better overall control
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E- Work Process
Customer
Purchase Order Receivables Report Accounts Payable Mail Receiving Dock

Supplier
Order Processing

Packing List Invoice

Mail

Reconcile

Check

Mail

Accounts Receivable
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BASIC WORK PROCESS:

Purchasing Agent receives a requisition. The Purchaser then evaluates the requisition to determine which suppliers would best supply the material and includes those suppliers on the List of Bidders, or those who will be solicited to submit quotation.

The formal request for a quotation is known as an Request for Quotation (RFQ) or Request for Proposal (RFP), depending on the complexity of the material or service.
The RFQ/RFP can be as simple as text written in an email, to a complex document requesting engineered drawings, manufacturing locations, multiple points of contact at each branch location, and financial statements.
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BASIC WORK PROCESS: Cont.

The Purchaser will also determine the validity period of the Solicitation of Bids known as the "Bid due Date", the date when the window to submit proposals ends. After the bids are received the Buyer will evaluate the proposals and tabulate the bids, usually on a spreadsheet. A bid tabulation is essentially a spreadsheet with categories used to informally compare each supplier's proposals to determine which proposal best meets the Buyer's needs. After the bids are tabulated, the Buyer will make a decision in regards to which supplier will be recommended and will award the order and the Seller will proceed in supplying the material in accordance with 33 the agreed upon terms.

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Purchasing Strategy & Forecasting and Research
A- Types of Strategies B- Make or Buy Decision C- Strategic Partnering D- Forecasting E- Research Techniques

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A- Types of Purchasing Strategies

1- Just In Time Purchasing (JIT): This strategy is used when the need arises for certain goods and services. 2- Advance Purchasing: In large and economical quantities to meet future needs of the organization 3- Speculative Purchasing: excess quantities to sell at later stage when prices are higher 4- Reciprocal Purchasing: agreement between buyer and sellers to exchange goods and services
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B- Make or Buy Decision

Reasons for Making
1. Maintain core competencies and protect personnel from layoff 2. Lower production cost 3. Unsuitable suppliers 4. Assure adequate supply 5. Utilize surplus labor and make a marginal contribution

Reasons for Buying

1. Frees management to deal with its primary business 2. Lower acquisition cost 3. Preserve supplier commitment 4. Obtain technical or management ability 5. Inadequate capacity
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Make or Buy Decision.. cont

Reasons for Making
6. Obtain desired quantity 7. Remove supplier control 8. Obtain a unique item that would entail a expensive commitment from supplier 9. Protect proprietary design or quality 10.Increase or maintain size of company

Reasons for Buying

6. Reduce inventory costs 7. Ensure flexibility and alternate source of supply 8. Inadequate managerial or technical resources 9. Reciprocity 10.Item is protected by patent or trade secret

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Vertical Integration
Choosing between making or buying an item is largely dependent on the vertical integration strategy of A company.

By vertical integration, we mean developing the ability to produce goods or services that are previously purchased.
It can take the form of forward or backward integration

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Forward vs. Backward Integration

BACKWARD INTEGRATION FORWARD INTEGRATION

RAW MATERIAL

CURRENT PRODUCTION

BUYERS

STEEL

AUTOMOBILE

DEALERS

SILICON

CURCUIT BOARDS

COMPUTERS

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C- Strategic Partnering
Who is going to supply your need? How many suppliers will you work with? Many business firms in the world borrowed the Japanese concept of extremely close supplier interactions and cooperation. This strategic partnering involves
Selecting the best suppliers, Working closely with them, and Entering into long-term relationship based on mutual need and trust.

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D- Forecasting
How much and what time are you going to buy?

When demand is uncertain, Someone should forecast the quantity to be purchased.

A forecast is an Inference of what is likely to happen in future. Forecast can be wrong. Businesses may use Forecasts in several subjects.

Some of the major forecasting areas are (1) Economic Forecasting, (2) Technological Forecasting, and (3) Demand Forecasting.

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Economic Forecast
Economic forecast is a prediction of what general business conditions will be in the future. Some examples of economic forecasting are: inflation rates, gross national product, personal income, tax revenues, level of employment, and so on.

Economic forecast is usually made by government agencies, banks, and econometric forecasting services.
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Technological Forecast
Technological forecast predicts the probability and significance of possible future developments in technology.

What technology will the firms competitors incorporate into their products and processes? Are there any technological advances with which the firm can create a competitive advantage?
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Technological Forecast
For example, development of electric cars seems like a challenging shift for car manufacturers. But what time and how will they be in the market is a concern of technological forecasting.

Toyota Prius: A hybrid (electric + oil) car

The forward-thinking 2005 gas/electric Prius with Hybrid Synergy Drive offers fuel economy and cutting-edge available features like Bluetooth technology -- all with the performance of a conventional car. Plus, you never need to plug-in for recharging.

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Demand Forecast
Demand Forecast predicts the quantity and timing of demand for a product or material.

Factors affecting the forecast are:

Status of the general economy, Time of the year, Competitors actions, Advertising and sales promotions, New product entries to the market, etc.

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Forecasting Methods
A forecast can be developed through either a subjective approach or an objective approach. Subjective approaches are qualitative in nature and they are usually based on the opinions of people (that is why they are subjective). Objective approaches involve quantitative methods and mathematical formulations. (They can also be referred as statistical forecasting)
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E- Research Techniques
Supplier investigation: competencies, capacities, credit rating, service quality Our dependency on particular suppliers Competitor information Advising suppliers on how to meet our quality requirements Economic forecasting & the supplier Purchase targets & their attainment Financial targets & our profit plan Value analysis - of buying processes & items we buy Our quality/service requirements & control methods
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6
Purchasing and Supply Chain Management
A- Purchasing in the Supply Chain B- Objectives and Strategies C- Functions and activities D- Benefits of SCM to Purchasing
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A- Purchasing Link in the Chain

Market Assessment

Supplier Selection Requirement Definition Proposal Evaluation Contract preparation System Development

Bid Evaluation

Business Need

Procurement Strategy

Contract Management

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B- Objectives and Strategies

Plans to help achieve company mission Affect long-term competitive position Strategic options
Many suppliers Few suppliers Keiretsu network Vertical integration Virtual company

Plan

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Objectives and StrategiesCont

Negotiate with many suppliers; play one supplier against another Develop long-term partnering arrangements with a few suppliers who will work with you to satisfy the end customer Vertically integrate; buy the actual supplier Keiretsu - have your suppliers become part of a company coalition Create a virtual company that uses suppliers on an as-needed basis.
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Many Suppliers Strategy

Many sources per item Adversarial relationship Short-term Little openness Negotiated, sporadic POs High prices Infrequent, large lots Delivery to receiving dock
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Few Suppliers Strategy

1 or few sources per item Partnership (JIT) Long-term, stable On-site audits & visits Exclusive contracts Low prices (large orders) Frequent, small lots Delivery to point of use
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C- Functions and Activities

Forecasting Purchasing Inventory management Information management Quality assurance Scheduling Production and delivery Customer service
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D- Benefits of SCM to Purchasing

Lower inventories Higher productivity Greater quickness Shorter lead times Higher profits Greater customer loyalty Integrates separate organizations into a cohesive operating system
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Successful Supply Chain will Build:

Trust among trading partners
Effective communications Supply chain visibility Event-management capability
The ability to detect and respond to unplanned events

Performance Parameters
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Suppliers Analysis and Selection
A- Price Analysis B- Identifying Cost Drivers C- Cost Effective Programs D- Vendor Selection Steps E- Negotiations Strategies/Skills
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A- Evaluate Overall Price Reasonableness With Price Analysis

Price analysis - process of examining and evaluating
a proposed price to determine if it is fair and reasonable

Cost analysis - not a substitute for price analysis

Perform a price analysis whenever there is a valid base for analysis Cost analysis - insight into what it will cost the firm Cost analysis does not necessarily provide a picture of what the market is willing to pay
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Basis for Price Analysis

Select the basis for comparison in determining if a price is fair and reasonable, such as:
Proposed prices received in response to the solicitation Commercial prices Previously proposed prices and contract prices for the same or similar end items Parametric estimates or estimates developed using rough yardsticks Independent public body estimates Prices obtained through market research
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Price Reasonableness Decision

Price analysis is a subjective evaluation Resolving differences between cost and price analysis: If price analysis does not support the cost analysis, reexamine the cost analysis result Consider alternative methods of contract completion If the results of cost analysis and price analysis cannot be reconciled, refer the contract action to the next level

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B- Identifying Cost Drivers

Cost drivers - aspects of proposal or contract requirements that if changed would have a major impact on contract price What are some possible cost drivers?
Contract terms and conditions Delivery requirements Technical requirements

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Identify Sources of Cost

Risk

Most cost estimates include a "point estimate" In most cases, the point estimate is one of a range of possible costs There are usually variances between projected and actual costs
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Cost Risk
Increases when market prices are unstable or cost information is lacking There are a variety of methods for reducing and controlling contract cost, among the most important are the appropriate use of:
An appropriate contract type Clear technical requirements Public body furnished property Other contract terms and conditions
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C- Cost Efficiency Programs

Qualify current suppliers and contractors Search for new alliances Qualify current products and services Qualify current prices keep updating Qualify delivery, receiving and issuance methods Implement annual and semi annual purchase plans Compare purchases to budget Group purchases and services (centralized Purchases) Minimize cash purchases
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This Will Lead To

Reduce high percentage of losses Control prices Get best quality service Control cash flow Avoid cash payments Extend payment terms Build high market profile Build strong relationship with alliances
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D- Vendor Selection Steps

Vendor evaluation
Identifying & selecting potential vendors

Vendor development
Integrating buyer & supplier
Example: Electronic data exchange

Negotiations
Results in contract Specifies period of agreement, price, delivery terms etc.
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Supplier Selection Criteria

Company
Financial stability Management Location

Service
Delivery on time Condition on arrival Technical support Training

Product
Quality Price

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Vendor Selection Rating Form (Example)

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The Evaluation Team

Criteria: Empowered Establish reporting relationship Full time Team room Flexible Shared goals Shared loyalties

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E- Negotiation Strategies
Negotiation Types:
Cost-based price model - supplier opens its books to purchaser; price based upon fixed cost plus escalation clause for materials and labor Market-based price model - published price or index Competitive bidding - potential suppliers bid for contract
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Negotiation skills:
Researching sources, assessing sources, customer relationships management, win-win & mutual respect. Methods to keep costs down such as tendering Negotiate: preparation, the negotiation, completing the buy. Attention to detail Humor, patience, self-control, Avoid dramatics Analytical approach to problems Questioning & listening Verification - contract formulation & testing
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Pre-negotiation Documentation
Draft elements of a Price Negotiation Memorandum (PNM) before negotiations:
Purpose of the negotiation Description of the acquisition Exception's) used and its basis

The extent to which the purchasing agent:

Relied on the data submitted Recognized any submitted data as inaccurate, incomplete, or non-current Determined that an exception applies and will not require certification
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Additional Documentation
Document important aspects of the procurement situation that affected pre-negotiation objectives, such as:
The items or services and quantities being purchased The place of contract performance The delivery schedule or period of performance Differences between the proposed delivery schedule and the objective schedule

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8
Suppliers Relationship Management
A- What is SRM? B- How to Build SRM? C- SRM Tool Set D- Supplier as a Partner
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A- What is Supplier Relationship Management?

Supplier Relationship Management (SRM) involves defining and managing all aspects of supplier relationships, from information sharing and collaboration to sourcing, negotiating and streamlining purchasing activities.

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B- How to Build SRM?

Select the right firms

Involve appropriate personnel Assess the relationship from your perspective Supplier assesses relationship independently Assessments form basis for initial conversations Focus on areas of agreement and disagreement Identify gaps Evaluate the leakage caused by these gaps Develop action plans to remedy the gaps Supplement existing metrics to evaluate progress Schedule periodic assessments 76

C- SRM Tool Set

SRM is not a separate process. It is a set of competencies, tools and techniques that support the overall Procurement process
How we used to think about SRM
PROCESSES

How we think today

Strategic Sourcing Demand Management Buy, Pay, Track

Buy, Pay, Track

Strategic Sourcing

Demand Mgt

SRM

Supplier Relationship Mgt

Processes were viewed as linear and separate. A separate dedicated SRM team was envisioned.

All processes are interrelated. Our Commodity Managers bear primary responsibility. No separate COE to hand off to.

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D- Supplier as a Partner
Aspect
Number of suppliers

Adversary
Many

Partner
One or a few

Length of relationship
Low price Reliability Openness

May be brief
Major consideration May not be high Low

Long-term
Moderately important High High

Quality
Volume of business Flexibility Location

May be unreliable; buyer inspects

May be low Relatively low Widely dispersed

At the source; vendor certified

High Relatively high Nearness is important

Supplier Partnerships cont

Ideas from suppliers could lead to improved competitiveness:
1.Reduce cost of making the purchase 2.Reduce transportation costs 3.Reduce production costs 4.Improve product quality 5.Improve product design 6.Reduce time to market 7.Improve customer satisfaction 8.Reduce inventory costs 9.Introduce new products or services
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Purchasing Key Skills

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Purchasing - Key Skills

1. Business awareness and strategic procurement 2. Developing & managing procurement systems 3. Purchasing techniques and methods 4. Supplier evaluation and selection

5. Risk and value management

6. Contract management Legal aspects of procurement (contracts)
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Purchasing - Key Skills ..cont.

7. Purchasing negotiations 8. Quality management 9. Service level agreements

10. Ethical behaviors in procurement

11. Relationship management (client-server)

12. Performance evaluation of suppliers & self

13. Change management
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10
Purchasing Problems and Control Methods
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Purchasing Problems
How goods are received can be a headache Receiving problems are credit/payment problems Errors & confusions cause delays & more processing Transactions on goods received:
correct Order Ref, quantity, specification & pricing Items shipped match PO & invoiced quantity? split shipments - item consolidation? How? reaction to shortage

What % of invoices are paid via auto-pay? When do we have to pay? If it is valuable someone will steal it !!!!
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Segregation of Duties & Fraud

No one individual can influence purchasing outcomes to own advantage or has responsibility for more than one of Specification/requisition process & authorization Supplier selection : tender lists & receipt, shortlisting, negotiation parties Contract award: deciding the supplier; authorizer of contract/order Goods received: checking exact order received & to be paid for Payment authorization: signing off invoices & setting system tolerances 85

Control Methods
Procurement procedures, processes & policies (incl. ethical code re-transparency & declaration of interest). Risk analysis. Random audits of different contracts & procurement projects. Financial limits e.g. open-to buy, how much each buyer can commit Disciplinary how to comply with policies Rotations: buyers not too close to favorite 86 suppliers

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The Evolving Purchasing Role

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Developing the Competency

The Evolving Procurement Role
TRADITIONAL PROCUREMENT Knowledgeable about procurement
Disconnected from business strategy Less technology knowledge Transactional Negotiation/T&C skills

THE NEW PROFESSIONAL

Multi-dimensional knowledge manager Center of Expertise on business/markets Understands evolution of technology Acts as consultant Holistic relationship management

One-dimensional supplier relationships

Short term benefits Priorities driven by technical community

Strong analytic/financial/cash management understanding

Complex deals Influence/lead change 88

This Evolving Role will Enable the Organization to:

Identify new expectations and corresponding skills

Communicate expectations repeatedly

Retrain procurement employees Train employees outside of procurement organization Provide job aids Set the example

Consider outside help to enable fast start

Staff appropriately Make the tough decisions
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12

E-Procurement & Strategic Sourcing

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What is e-procurement?
The combined use of information and communication technology through electronic means to enhance internal and external purchasing and supply management processes.

Resolving the issue of the long tail low value paper Purchases

Why e-procurement ?
Quick, easy, internet-based access to vendors to negotiated agreements. Maximizes the total value of the suppliers relationship. Targets high-transaction users, traditionally. Allows further development of the relationship between suppliers and consumers.
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How Does e Procurement Work?

Internet buying at the users desktop. Catalog-style concept to access preloaded vendor deals. Configurable to organization needs for oversight. Automates the buying experience.

SERVICES Supplier connectivity Extensive product taxonomy Centralized e-Catalogs Price/content management Transaction integrity Transaction tracking

TRANSACTION DATA

Purchase Order Advanced Ship Notification Invoicing Receipt notification Contract data Payment data

Benefits of E-procurement Technologies Cost Reduction

Significant cost reduction on externally procured goods and services through increased use of volume buying, better negotiated pricing and reduced off-contract (or maverick) buying

Reduction

in Procurement Cycle Time

Shorten requisition to order cycle for term-contract purchases Shorten bid-to-award cycle time for competitive bidding process

Benefits of E-procurement Technologies.

Reduced

administrative workload and

costs:
Reduction in Vendor Management administrative efforts Reduction in competitive bidding administrative efforts Reduction in term-contract creation and distribution administrative efforts

Benefits of E-procurement Technologies.

Increased Control with simultaneous enduser freedom
Tighten control over off-contract or maverick purchasing by empowering end users with desktop goods/services catalogs and using technology to simplify the procurement process Establish a controlled yet non-restrictive procurement process Ability of users to easily comparison shop online
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Benefits of E-procurement Technologies.

Enhanced

negotiation of reduced goods/ services costs

- Improved data gathering and reporting on all procurement processes

More

efficient business model

- Re-assign procurement professional from administrative to strategic

Better

leveraging of vendor Base

- Ensures contract compliance and increases negotiation leverage

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Components of E-Procurement
E-Procurement Functional Requirements:
1. VENDOR MANAGEMENT
Integrated, Internet-based, self-service Vendor Management System.

2. BID / QUOTE & AUCTION

Integrated, Internet-based Bid/Quote Auction System.

3. E-CATALOGS
Graphical Internet-based Electronic Catalog System on every desktop with current, negotiated pricing and approved vendors.

Typical As-Is or Existing Process

Organization External Vendors

Vendors in-line
Existing Procurement Application
Manual / Paper

Manual / Paper

Manual / Paper

Buyers

Future Process
Organization
FIREWALL

External Vendors

Vendors on-line

Web-enabled Procurement Application

Internet

Administrative Time

Manual / Paper

Current Procurement Scenario

Traditional Procurement Process Procurement Office
Users Create Requisitions Buyers manually enter responses from paper Paper Bid Response Paper Bid Response

Vendors Vendors in-line

Procurement Application

Paper Bid Package

Paper Bid Package

Buyers manually assemble paper bid package

Future E-Procurement Example

Internet-enabled Solicitation Process University Procurement
Campus Personnel
WFD Users

Vendors
FIREWALL

Procurement Personnel

Vendor Organizations

Intranet

Intranet
WFD Field Operators

HTML

Bids
Internet

Responses
Solicitation Automation EProcurement Module

FIREWALL

Goals of Strategic Sourcing

Reduce to total cost of goods and services Rationalize the supply base Optimize the companys supply chain Increase requisition- through- payment process

Saving from strategic sourcing:

It can be 5% to 20% or more depends on: Type of products and services Market palace factors Current purchase practices Implementation of automated system Execution of sound sourcing strategy

Steps in Strategic Sourcing:

1- Analysis of spending patterns 2- Assessment of requirements 3- Identification of potential Suppliers 4- Development of Sourcing Strategy 5- Execution of Sourcing Strategy 6- Monitoring and reporting

Strategic Sourcing is an on going process Not a one time job

Role of Strategic Sourcing in Eprocurement:

Why do savings tend to erode without an e- procurement solutions?

Employees tend to forget or ignore Employees come and go Suppliers back off promises of lower prices Without actual spending data, customers cannot leverage full buying power

When should strategic sourcing be performed?

Strategic Sourcing e Procurement Implementation

Time

Strategic Sourcing

e Procurement Implementation

Time

Why? To shorten the time to savings!

At the End..

Is not this what we are all looking for?

Thank you