Outsource for purchasing & supply system training center

13/21/2014
Almahi Suliman Adam - Towards Proactive
Procurement System
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

23/21/2014
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 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.

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Procurement System 4
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 …

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Procurement System
What is the
RADICAL
Solution for
procurement
Problems?

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Procurement System
Effective
Procurement
Department?

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Procurement System
As Procurement Department …
Can not stand alone
and yet, has no magical
solution for procurement
problems!

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Procurement System
Proactive Procurement System is
the radical Solution;
Procurement
Dept
You Get What you Pay for
Right
Outputs
In the
Right
Time
Right
Inputs
In the
Right
Time

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Procurement System
What’s 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)

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Procurement System
What’s 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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Procurement System
Environment
of
Procurement
System
QC & QA
Safety
Dept
Marketing
Dept
PR
HR
Logistic
Financial
Dept
IT Dept
Warehouse
Suppliers
Operational
Dept
High
Authority
Procurement
Dept
Political &
Legal Issues

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

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Procurement System
Overhaul The Operational Planning &
Control System
Strategic
Business Plan
Production
Plan
Master
Production Schedule
Material
Requirement Plan
Production
Activity
Control
Planning
Master
Planning
Implementation
Procurement

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Procurement System
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 don’t get the right
inputs in the right time
Otherwise …
Caution!!

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Procurement System
You Will Be Responsible
for any Procurement
Failure that may cause
bad consequences in the
whole Company system

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Procurement System
Get
Started:

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Procurement System
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.

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Procurement System
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).

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Procurement System
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
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 System
Procurement for Primary and
Supportive activities
Procurement
Supportive
Activities
Primary
Activities
Storeroom
Items
Non
Storeroom
Items

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Procurement System
Priorities vs Capacity
Key Questions:
What are the
Priorities?
What is the Available
Capacity?
How can variance
between priorities &
Capacity Be resolved
Balance
Priority
(Demand)
Capacity
(Resources)

233/21/2014
Procurement System
Working with Value/Quantity
Parameter
Low Value Big
Quantity
Low Value Small
Quantity
High Value Big
Quantity
High Value small
Quantity
Value
Quantity

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Procurement System
Sourcing Strategies according to
Value/Quantity Parameter
Streamline & make
JIT Delivery
Simplify & Decrease
Purchasing Efforts
Partnership &
Alliances
Long-term
Relationship
Continuous
Searching for
Alternatives
Value
Quantity

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

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Procurement System
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.

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Procurement System
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.

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Procurement System
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.

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Procurement System
1
Assessing the
needs
for the goods/
services
2
Specification of
requirements
3
Agreeing list for
potential suppliers
4
Invitation to
tender
5
Evaluation of
Bids
6
Award
7
Agreeing form
of contract
8
Formal
Appointment
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

303/21/2014
Procurement System
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.

313/21/2014
Procurement System
Procurement
System
WLC
VFM
Infodat Training & Business Development Center

323/21/2014
Procurement System
Procurement
S.W.V
Outsource for Purchasing & Supply Systems Training Center

333/21/2014
Procurement System
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.

343/21/2014
Procurement System
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