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104/07/2023Almahi Suliman Adam - Towards Proactive
Procurement System
Outsource for Purchasing & Supply Systems Training Center
Towards Proactive Procurement SystemAlmahi Suliman Adam
Certified Trainer by ILLAF Train UKEx Shell Africa Co, P&G MIC Dammam
www.outsource-sd.com
204/07/2023Almahi Suliman Adam - Towards Proactive
Procurement System
Procurement isProcurement 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 theRight Time
Right Inputs In theRight Time
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Procurement System
What’s right Inputs?Right Items’ Specifications and Predefined StandardsEfficient lead TimeRight Payment SystemSupportive Organizational StructureAdequate AuthorizationRight Material Planning SystemRight inventory Control systemRight support from Senior managersRight TechnologyRight, Enough and Qualified Personnel with ongoing training facilitiesRight 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 goodsJust In time (JIT) Delivery of Goods, Services and WorkBetter Value for Money invested in ProcurementZero Stock (Approach)Customer SatisfactionOptimal Payment termsAnd else …..
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Procurement System
Environmentof
ProcurementSystem
Shareholders
Company
Credibility
Political & Legal Issues
Indu
stry
Company Mission
Tech
nolo
gyFo
rces
Competitive
Forces
Social Cultural &
Environmental
Globa
l
Chall
enge
s
Econ
omic
Fo
rces
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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
ImplementationProcurement
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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
GetStarted:
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Procurement System
Build Up a Dynamic Procurement Team Qualified Personnel With Accounting Background
and Give Them: Initial And Ongoing TrainingNeeded TechnologyNeeded AuthorizationNeeded ToolsClear 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 sourcingBuild up cross functional team for sources’ EvaluationSelect 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 processingHave 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 systemAny originator should get full training in procurement system – originator SideAny originator should comply with the procurement system needs
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Procurement System
Procurement for Primary and Supportive activities
Procurement
SupportiveActivities
Primary Activities
StoreroomItems
Non Storeroom
Items
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Procurement System
Priorities vs CapacityKey Questions:
What are the Priorities?What is the Available Capacity?How can variance between priorities & Capacity Be resolved
Balance
Priority (Demand)
Capacity(Resources)
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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-termRelationship
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 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 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 TechnologyManage 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
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 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.
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Procurement System
Procurement SystemWLCVFMInfodat Training & Business Development Center
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Procurement System
Procurement
S.W.VOutsource for Purchasing & Supply Systems Training Center
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Procurement System
How can we Serve Procurement System
Establish & Develop New procurement Divisions & Entities.Run Researches & Studies in particular procurement Issues.Train Initiators & BuyersManage group discussion & Seminars for Procurement Authors.Audit, Evaluate Procurement Entities Performance and Advise.
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Procurement System
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Outsource for Purchasing & Supply Systems Training Center