Steve Hooker MBA

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Steve Hooker

Supply Chain and Procurement Expert,

Various articles and support on Supply Chain and Procurement

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Procurement - useful resources

Procurement and Purchasing Pathmap

by Steve Hooker


To develop a world class procurement function requires many step and actions to be done. The below outlines a logical progression to follow for Phase 1 – Developing a Purchasing Strategic Plan.
There are three phases:
1. Develop the Procurement Strategic plan
2. Execute the Procurement Plan
3. Manage the Supply and Supplier / Vendor

Develop the Procurement Strategic Plan

Has 5 steps
The Project Brief.
One needs to understand the scope of the project. This involves discussion with the various stakeholders. This is crucial time to invest in understanding the “real” requirements. Often missing the involvement of a key stakeholder can derail a project at a latter stage. A key question for stakeholders, is who else should be involved. The stakeholders will help define the Activity plan, the roles and responsibilities of those and the terms of reference of the team.

The Team and Datal Plan
The next step is to invite, cajole and sell why they are part of the team. A key meeting with the team members will lead to clear (and written) deliverables and KPIs (Key Performance Indicators or measures) that are agreed. It will also define the time line with key milestones. If this is different from the stakeholders original aspirations, you may need to inform or re-discuss. There is often a tendency for project members to want to agree to easy / unchallenging objectives. The use of SMART (Specific, measureable, achievable (but demanding), realistic, time based are useful.

Data Identify and collect the data that is required to direct the project. What are the business requirements? Evaluation of the required product or service. What is the supplier market and trends. How to do this purchasing research is a key question, collection of data is ambiguous, using resources – cost, people and time, need to be balanced versus the benefits. Setting up templates, spreadsheets to collect and share this information for future project s is useful.

Analysis of Data
Turning the data into information. Tools such as cost model breakdown and value stream analysis are useful here. To help prepare choices, the turning of the information into scenarios is often useful. This stage should involve the full team.

Strategy Ready Choose the route you plan to follow. A key step to advance is to get sign on of the key stakeholders. So preparation of a compelling business case is key. The reason for doing the project is to deliver benefits to the business, whether financial, risk management or meeting other business objectives such as improving environmental / social responsibility . This combined with an executive plan that is shared with the key directors / VPs will smooth the execution.

Execute The Procurement Plan
There are 5 steps to this as well.
Project Management
People are key, every member of the team needs to have agreed roles and responsibilities. Do not forget the deputies, ideally from within the team or external. A full plan including the events needs to be developed and kept up to date, Linked into the resources required and expressed in the roles and responsibilities a resource plan for the project is required. Identification of risks and development of contingency plans to be developed. The detailed project plan needs to be regularly updated and shared, this can either be done by one person, or shared amongst the team. The use of software such as Microsoft project are useful, but often spreadsheets can suffice.

Plan Execution The project plan needs to develop with the detail, who – what – when –resources – contingency – risks. Often done by individuals and pulled together. A key element not to miss are the dependencies of tasks with each other. Do not forget response times e.g. write off the month of August for responses from some Mediterranean countries (can you blame them!), or a couple of weeks in February in China for the new year there. Build on the RFI (request for information) that was in your date analysis and move toward RFQ (request for quotation) and updating the situation with any current or recent suppliers. If audits are required, this is often a good time to do them.

Sourcing and Negotiation
The bit that non professional buyers think what it is all about. Are the objectives clearly defined, have you developed a rough / strawman negotiation plan? The negotiations should lead to the selection of the supplier. This phase will also lead to clear definition of the contractual / supply KPIs and commercial terms. This is particularly important for eProcurement / auctions where this will be firmly defined. Volatility in prices has never been so high as in 2007 and 2008 with huge movements in commodities and wild exchange rate swings. In the negotiation are you planning to pass these risks

Agreements and Contracts
The contract is defined, groups of standard contracts and terms should be developed for the business. The collection and agreement of best practise for contracts is time well spent, speeding up this stage. These can then be modified as required. Within this phase the Service level agreements SLAs, confidentiality agreements, memorandum of Understanding MOUs.

Contract Execution
The contract needs to be implemented. Has notice to existing supplier been given. Start managing vendor management. Do you have all the key contact information (on both sides), do you have a training programme in place for new suppliers.

Procurement Links

Articles

A number of useful articles from other authors

Article 1 eProcurement services

Article 2 How to prevent the outsourcing procurement process from breaking down