Procurementsystem 101215124343 Phpapp02

Outsource for Purchasing & Supply Systems Training Center
Towards Proactive Procurement System

Almahi Suliman Adam Certified Trainer by ILLAF Train UK
Ex Shell Africa Co, P&G MIC Dammam www.outsource-sd.com
2/22/2014 Almahi Suliman Adam - Towards Proactive Procurement System 1
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.
Why procurement is important?

Departments spend more than 50% of their Budget a year on procuring goods and services to deliver their core services. Failure to purchase them cost effectively can put the achievement of key objectives at risk. Procurement directly influences profit margin and sales volume.
Almahi Suliman Adam - Towards Proactive Procurement System
2/22/2014
The Major Procurement Problems

Undesired Quality Of Goods/Services And inadequate Quantity High 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 Tools Safety Issues Bad Conditions Of Payment Unsecured Sources And Uncertainty Of Continuous Supply Absenteeism Of Suppliers Management Failure to Meet Customers Needs Failure To Get Rid Of Obsolete Assets And else
What is the RADICAL Solution for procurement Problems?

Effective Procurement Department?

As Procurement Department
Can not stand alone and yet, has no magical solution for procurement problems!
Proactive Procurement System is the radical Solution;

You Get What you Pay for Right Outputs In the Right Time
2/22/2014
Procurement Dept
Right Inputs In the Right Time

8
Whats right Inputs?

Right Items Specifications and Predefined Standards Efficient lead Time Right Payment System Supportive Organizational Structure Adequate Authorization Right Material Planning System Right inventory Control system Right support from Senior managers Right Technology Right, Enough and Qualified Personnel with ongoing training facilities Right Training for Clients (Initiators) Right Model of Decision making (Rational Model)
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 Procurement Zero Stock (Approach) Customer Satisfaction Optimal Payment terms And else ..
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Environment of Procurement System
QC & QA
High Authority
Operational Dept Suppliers
Safety Dept
Marketing Dept
Procurement Dept
Warehouse
PR Financial Dept
IT Dept
HR Logistic
Political & Legal Issues

Before We Cross or Blame Procurement Department?
Do We have Strategic Business Plan?

Overhaul The Operational Planning & Control System

Strategic Business Plan Production Plan Master Production Schedule Master Planning
Planning
Material Requirement Plan Production Activity Control

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Procurement
Implementation
13
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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Caution!!
Dear Procurement Manager
NEVER Keep Silent if you dont get the right inputs in the right time
Otherwise
You Will Be Responsible for any Procurement Failure that may cause bad consequences in the whole Company system
Get Started:
Build Up a Dynamic Procurement Team

Qualified Personnel With Accounting Background and Give Them: Initial And Ongoing Training Needed Technology Needed Authorization Needed Tools Clear Mission, Objectives, Principles, Policies And Code Of Practice. And: Evaluate Their Performance progressively.
Build Up a sustainable Vendor Database System & Never Be a Fireman Scan the market with the predefined items and specifications to discover the most attractive opportunities of sourcing Build up cross functional team for sources Evaluation Select the valuable qualified suppliers and give them sufficient consideration. Build up Suppliers Relationship Management System (SRM).
Get the Clients Ready
Budget Owners:
Inform them with procurement policies and code of processing Have a copy of their planned needs Specifications even before the ordering time to make the required preparation. Be aware of their S.O.P
2/22/2014
Order Originator
Any originator should be pre-qualified to Procurement system Any originator should get full training in procurement system originator Side Any originator should comply with the procurement system needs
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Procurement for Primary and Supportive activities

Procurement
Supportive Activities
Storeroom Items
Non Storeroom Items
Primary Activities
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Priorities vs Capacity
Key Questions:
What are the Priorities? What is the Available Capacity? How can variance between priorities & Capacity Be resolved
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Priority (Demand)
Capacity (Resources)
Balance
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Working with Value/Quantity Parameter

Value
High Value small Quantity
High Value Big Quantity
Low Value Small Quantity
Low Value Big Quantity
Quantity
Sourcing Strategies according to

Value/Quantity Parameter
Value
Continuous Searching for Alternatives
Partnership & Alliances Long-term Relationship
Simplify & Decrease Streamline & make Purchasing Efforts JIT Delivery
Quantity
Better Value for Money (VFM)

Procurement should be based on
Better Value for Money (VFM) = Optimum [whole life cost + quality] Better Value for money (VFM) initial lowest price cost
How to Achieve Better Value For Money

Getting 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 suppliers can recommend cost-effective and innovative solutions to meet the needs. Sharpen your approach to NEGOTIATION to get a good deal from suppliers. 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 secure better discounts from bulk buying. Developing a more effective working relationship with key suppliers to allow both departments and suppliers to get maximum value from the assignment by identifying opportunities to reduce costs and adopt innovative approaches. Reducing the cost of buying goods or services by streamlining procurement and finance processes. Reducing the level of stocks held.
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 collaboration with suppliers when appropriate; Ensure there is reliable procurement financial management information; Measure and evaluate procurement performance.
Competitive Procurement Policy

Goods and services should be acquired by competition, unless there are convincing reasons to the contrary. The form of competition should be appropriate to the value and complexity of the procurement; suppliers should be given equal opportunities to participate.
Typical Stages in Competitive Procurement

8 Formal Appointment
9 Evaluation of Contract Performance
1 Assessing the needs for the goods/ services
Key information on suppliers performance & Prices
2 Specification of requirements
7 Agreeing form of contract
End users identify demand for goods and services and manage and evaluate suppliers performance
Procurement units advise end users on procurement methods & contracts & appoint suppliers
3 Agreeing list for potential suppliers
Suppliers provide goods & services 6 Award 5 Evaluation of Bids 4 Invitation to tender
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The Conclusion!
Regard Procurement as a SYSTEM rather than a department. Consider the whole life cost (WLC) in procurement process rather than the initial price. Get Better value for money (VFM) invested in procurement.
Procurement System WLC VFM

Infodat Training & Business Development Center
Procurement
S.W.V
Almahi Suliman Adam - Towards Proactive Procurement System 2/22/2014 32
How can we Serve Procurement System

Establish & Develop New procurement Divisions & Entities. Run Researches & Studies in particular procurement Issues. Train Initiators & Buyers Manage group discussion & Seminars for Procurement Authors. Audit, Evaluate Procurement Entities Performance and Advise.
For More
www.outsource-sd.com

2/22/2014
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Outsource for Purchasing & Supply Systems Training Center

Towards Proactive Procurement System

Why procurement is important?

The Major Procurement Problems

What is the RADICAL Solution for procurement Problems?

Effective Procurement Department?

Proactive Procurement System is the radical Solution;

Right Inputs In the Right Time

Almahi Suliman Adam - Towards Proactive Procurement System

Whats right Inputs?

Whats Right Outputs?

Almahi Suliman Adam - Towards Proactive Procurement System

Environment of Procurement System

Operational Dept Suppliers

Political & Legal Issues

Before We Cross or Blame Procurement Department?

Do We have Strategic Business Plan?

Overhaul The Operational Planning & Control System

Material Requirement Plan Production Activity Control

Almahi Suliman Adam - Towards Proactive Procurement System

Before We Cross or Blame Procurement Department

Almahi Suliman Adam - Towards Proactive Procurement System

Build Up a Dynamic Procurement Team

Get the Clients Ready

Almahi Suliman Adam - Towards Proactive Procurement System

Procurement for Primary and Supportive activities

Non Storeroom Items

Almahi Suliman Adam - Towards Proactive Procurement System

Almahi Suliman Adam - Towards Proactive Procurement System

Working with Value/Quantity Parameter

High Value small Quantity

High Value Big Quantity

Low Value Small Quantity

Low Value Big Quantity

Sourcing Strategies according to

Continuous Searching for Alternatives

Partnership & Alliances Long-term Relationship

Better Value for Money (VFM)

How to Achieve Better Value For Money

Key Principles To Follow:

Competitive Procurement Policy

Typical Stages in Competitive Procurement

9 Evaluation of Contract Performance

1 Assessing the needs for the goods/ services

Key information on suppliers performance & Prices

7 Agreeing form of contract

3 Agreeing list for potential suppliers

Almahi Suliman Adam - Towards Proactive Procurement System

Procurement System WLC VFM

How can we Serve Procurement System

Outsource for Purchasing & Supply Systems Training Center

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