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Almahi Suliman Adam - Towards Proactive

Procurement System

Outsource for Purchasing & Supply

Systems Training Center

Towards Proactive

Procurement SystemAlmahi Suliman Adam

Certified Trainer by ILLAF Train UK

Ex Shell Africa Co, P&G MIC Dammam

www.outsource-sd.com
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Procurement System

Procurement is

Procurement is an organization system

meant with specifying and acquiring goods,

services and work of the required quality, of

the right quantity, on the right delivery (Date& Place), at a reasonable price; and from the

right third party considering the whole life

cost of purchased goods/services and

focusing

on getting better value for money

invested in procurement.


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Procurement System

Why procurement is

important?

Departments spend more than 50% of theirBudget a year on procuring goods andservices to deliver their core services. Failureto purchase them cost effectively can put theachievement of key objectives at risk.Procurement directly influences profit margin

and sales volume.


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Procurement System 4

The Major Procurement Problems

Undesired Quality Of Goods/Services And inadequate

QuantityHigh Cost Of Purchased Goods/Services

Increasing cost of maintenance

Disastrous Delay In Delivery Of Goods/Services

High Cost Of Inventory

Increasing Cost Of Procurement Staff And ToolsSafety Issues

Bad Conditions Of Payment

Unsecured Sources And Uncertainty Of Continuous Supply

Absenteeism Of Suppliers Management

Failure to Meet Customers NeedsFailure To Get Rid Of Obsolete Assets

And else


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What is the

RADICAL

Solution forprocurement

Problems?


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Effective

Procurement

Department?


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Procurement System

As Procurement Department

Can not stand aloneand yet, has no magicalsolution for procurementproblems!


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Procurement System

Proactive ProcurementSystemis

the radical Solution;

Procurement

Dept

You Get What you Pay for

Right

OutputsIn the

Right

Time

Right

InputsIn the

Right

Time


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Procurement System

Whats right Inputs?Right Items Specifications and Predefined StandardsEfficient lead Time

Right Payment System

Supportive Organizational Structure

Adequate Authorization

Right Material Planning SystemRight inventory Control system

Right support from Senior managers

Right Technology

Right, Enough and Qualified Personnel with ongoing trainingfacilitiesRight Training for Clients (Initiators)

Right Model of Decision making (Rational Model)


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Whats Right Outputs?

Enough, Qualified, sustaining and well managed sources(Suppliers)

Required quality and adequate Quantity of goods

Just In time (JIT) Delivery of Goods, Services and Work

Better Value for Money invested in ProcurementZero Stock (Approach)

Customer Satisfaction

Optimal Payment terms

And else ..

E i t


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Procurement System

Environment

of

Procurement

SystemQC & QA

SafetyDept

MarketingDept

PR

HR

Logistic

FinancialDept

IT Dept

Warehouse

Suppliers

Operational

Dept

HighAuthority

ProcurementDept

Political &

Legal Issues


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Procurement System

Before We Cross or Blame Procurement

Department?

Do We have

StrategicBusiness

Plan?


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Procurement System

Overhaul The Operational Planning &

Control SystemStrategic

Business Plan

ProductionPlan

MasterProduction Schedule

MaterialRequirement Plan

ProductionActivityControl

Planning

MasterPlanning

ImplementationProcurement


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Before We Cross or Blame Procurement

Department

Has each unit involved in the

procurement system given .

The Right Required Inputs?

In the right Required time?


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Procurement System

Dear Procurement Manager

NEVER Keep Silent

if you dont get the rightinputs in the right time

Otherwise

Caution!!


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You Will Be Responsiblefor any Procurement

Failure that may causebad consequences in the

whole Company system


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Procurement System

GetStarted:


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Procurement System

Build Up a Dynamic Procurement

Team

Qualified Personnel With Accounting Backgroundand Give Them:

Initial And Ongoing Training

Needed Technology

Needed AuthorizationNeeded Tools

Clear Mission, Objectives, Principles, Policies AndCode Of Practice.

And:Evaluate Their Performance progressively.


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Procurement System

Build Up a sustainable Vendor Database

System & Never Be a Fireman

Scan the market with the predefined items andspecifications to discover the most attractiveopportunities of sourcing

Build up cross functional team for sourcesEvaluation

Select the valuable qualified suppliers andgive them sufficient consideration.

Build up Suppliers Relationship ManagementSystem (SRM).


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Procurement System

Get the Clients Ready

BudgetOwners:Inform them with

procurement policies andcode of processing

Have a copy of theirplanned needsSpecifications even before

the ordering time to makethe required preparation.

Beaware of their S.O.P

OrderOrig inator

Any originator should be

pre-qualified to Procurementsystem

Any originator should get fulltraining in procurementsystemoriginator Side

Any originator shouldcomply with theprocurement system needs

P t f P i d


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Procurement for Primary and

Supportive activities

Procurement

SupportiveActivities

Primary

Activities

Storeroom

Items

NonStoreroom

Items


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Priorities vs Capacity

Key Questions:

What are thePriorities?

What is the AvailableCapacity?

How can variance

between priorities &Capacity Be resolvedBalance

Priority(Demand) Capacity(Resources)

/Q


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Procurement System

Working with Value/Quantity

Parameter

Low Value Big

Quantity

Low Value Small

Quantity

High Value BigQuantity

High Value smallQuantity

Value

Quantity

Sourcing Strategies di t


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Procurement System

Sourcing Strategies according toValue/Quantity Parameter

Streamline & make

JIT Delivery

Simplify & Decrease

Purchasing Efforts

Partnership &Alliances

Long-term

Relationship

ContinuousSearching for

Alternatives

Value

Quantity

B tt V l f M (VFM)


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Procurement System

Procurement should be based on

BetterValue for Money (VFM)=

Optimum [whole life cost + quality]

BetterValue for money (VFM)

initial lowest price cost

Better Value for Money(VFM)

How to Achieve Better Value For Money


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Procurement System

How to Achieve Better Value For MoneyGetting an increased level or quality at the same cost.

Avoiding unnecessary purchases.

Ensuring that user needs are met but not exceeded.

Specifying the purchasing requirements in output terms so that supplierscan recommend cost-effective and innovative solutions to meet the needs.

Sharpen your approach to NEGOTIATION to get a good deal fromsuppliers.

Cut of the mediators and reach the direct suppliers.

Optimizing the cost of delivering a service or goods over the full life of the

contract rather than minimizing the initial price.aggregating transactions to obtain volume discounts.

Collaborating with other Companies to obtain the best prices and securebetter discounts from bulk buying.

Developing a more effective working relationship with key suppliers toallow both departments and suppliers to get maximum value from theassignment by identifying opportunities to reduce costs and adopt

innovative approaches.Reducing the cost of buying goods or services by streamliningprocurement and finance processes.

Reducing the level of stocks held.


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Key Principles To Follow:

Adopt a strategic approach to procurement;Make appropriate use of Technology

Manage procurement risks;

Develop contract strategies and manage supplier

relationships;Develop partnerships and longer term collaborationwith suppliers when appropriate;

Ensure there is reliable procurement financial

management information;Measure and evaluate procurement performance.

C titi P t P li


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Procurement System

Competitive Procurement Policy

Goods and services should be acquiredby competition, unless there are

convincing reasons to the contrary. The

form of competition should beappropriate to the value and complexity

of the procurement; suppliers should be

givenequalopportunitiesto participate.

1

Assessing the9

Typical Stages in


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Procurement System

Assessing the

needs

for the goods/

services

2

Specification ofrequirements

3

Agreeing list for

potential suppliers

4

Invitation to

tender

5Evaluation of

Bids

6

Award

7

Agreeing form

of contract

8

FormalAppointment

9

Evaluation of

Contract

Performance

Key information

on suppliers

performance &Prices

Procurement units advise

end users on procurement

methods & contracts &

appoint suppliers

End users identify

demand for goods and

services and manage

and evaluate suppliers

performance

Suppliers provide

goods& services

Typical Stages in

Competitive

Procurement


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Procurement System

The Conclusion!Regard Procurement as aSYSTEM

rather than a department.

Consider thewhole life cost(WLC)

in procurement process rather than

the initial price.

Get Bettervalue for money(VFM)invested in procurement.

P


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Procurement

System

WLC

VFMInfodat Training & Business Development Center

P t


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Procurement

S.W.VOutsource for Purchasing & Supply Systems Training Center

How can we Serve Procurement


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Procurement System

How can we Serve Procurement

System

Establish & Develop New procurementDivisions & Entities.

Run Researches & Studies in particularprocurement Issues.

Train Initiators & Buyers

Manage group discussion & Seminars forProcurement Authors.

Audit, Evaluate Procurement EntitiesPerformance and Advise.

F M


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Procurement System

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