In this assignment your group will integrate procurement tasks into a project. Consider the given case study on Sustainable textiles for the fire services and answer the following questions:
1. Explain each part of the diagram below called “Flowchart for Optimal Utilization of Market Intelligence to Address Sourcing Challenges”.
Flowchart for Optimal Utilization of Market Intelligence to Address Sourcing Challenges
2. Analyse those factors that are important when Institute for Safety, Netherlands (IFSN) needs to qualify and select suppliers for a project requirement.
3. Examine the key factors, including risk factors that affect buyer/supplier decisions concerning contract pricing and the selection of the proper contract type.
4. Given a procurement situation for a major contract, analyse the application of e-Procurement and other types of supplier bidding models available for IFSN.
5. Given a situation to solicit a bid proposal, evaluate technical, management, commercial and ethical requirements, and then prepare an RFP for IFSN.
6. Given the receipt of a proposal or competitive proposals for a major contract, determine the key factors used when negotiating an agreement or evaluating competitive proposals and establish a negotiating strategy for IFSN.
7. Analyse and select effective contract management techniques to control contract cost, schedule and performance factors; as well as manage contract changes, contract claims and contract close out for IFSN.
8. Given a claim on a major contract, analyse the role of commercial terms and conditions, the uniform commercial code (UCC) and applicable government regulations on the outcome for IFSN.
Explanation of Flowchart for Optimal Utilization of Market Intelligence to Address Sourcing Challenges
Scoping – The project scope could be considered as an inseparable part of the planning processes, which involves determination and documentation of a certain set of goals, features, deliverables, tasks, deadlines and total costs. After a clear definition of the project requirements, an analysis would be made for the problem for which the project would be considered (Kermanshachi et al., 2017). During defining of project scope, the geographical location of both parties, which are the buyer and supplier would be considered. Different consideration of trade aspects would need to be considered before the final transportation of goods. The present scenario would be majorly be considered as this would help in analyzing the problems and then make future decisions over the next phases of approach over the project management strategies (Greig et al., 2014). Depending of the project aspect, a team charter defining the aims and responsibilities of each team member would be considered.
Internal Analysis – An internal analysis would also be conducted based on gathering information about the situation of supply chain management structure and current functionality. Changing requirements of the business would enable the services of the supply chain to be modified frequently. There should also be a major form of consideration of the total amount of money been spent during procuring processes (Kamijo & Huang, 2016). The data of spend analysis would generally be collected from the database of the organization. Proper estimation approaches of suppliers of goods and services would also ensure that stock levels are managed, duration time of delivery is maintained while also determining the sourcing patterns.
External Analysis – The current position of the supply chain should be continuously analyzed based on the gathering of data based on the marketplace. Sellers and buyers collaborate together on a common platform to sell and purchase products. The purpose of SCM is to bring in the aspect of competitiveness and enable the proper flow of information across all functional units
(Shafiee, Hvam & Bonev, 2014). Any kind of risk or uncertainties identified within the market would be solved based on using two form of solutions, which are internal validation and market validation. The process of internal validation would refer to ensuring that each products would meet their internal specifications before the final market release. The market validation refers to the process in buyer and seller would provide reviews over a particular solution. The trends based on SCM would help suppliers and buyers to capture the market trends and establish new strategies for the market. Certain key players within SCM are procurement department, senior managerial levels, technical support, legal advisors and many others (Hessami et al., 2017). The impact of the discussed key players would be considered as highly essential as they would be able to manage the several kind of transactions, identify the services and products that need to be showcased for customers and also manage the services in a proper time based manner.
Analysis of Key Factors for Supplier Qualification and Selection for IFSN
Strategy Development – The four processes on strategy development are discussed as:
- a) Use of Best Practices– Any organization should develop a focus over the particular areas in which spends are made by customer groups (Klingebiel & Rammer, 2014). After the categorization of areas, the organization would develop best practices to focus over those particular customer groups by improving the quality of their products.
- b) Applicable Sourcing Levers– The Company should be able to identify the particular sourcing categories from a wide range of options. Hence, these could be treated as methods for saving costs (Mok, Shen & Yang, 2015).
- c) Managing requirements for TCO– The Total Cost of Ownership could be defined as an estimation pricing process of a system or product. These are made using the determination of long-term cost and initial price. A most strategic decision for measuring the lowest TCO is based on optimizing value and requirement management, which should be evaluated efficiently.
- d) Zero-based Costing– This method is mostly used for analyzing costing strategies. This method helps in providing continuous improvement and thus validate products based on the manufacturing quality (Marmier, Deniaud & Gourc, 2014). Hence, this method also helps in increasing the focus on projects made by organization.
Sourcing Execution – In the initial stage, a proper supplier would be sought who would have sufficient capacity of products for supplying. The right price would also be need to be chosen and hence a proper time of procurement needs to be set.
Future expectations need to be set and concepts should be formed for avoiding misconceptions (Remington & Pollack, 2016). The requirement of supplier based on delivering of service should be sought after the requirements of buyer have been generated.
Prices of products should be compared with other suppliers and thus the best price should be quoted. The comparison over various products could be made for understanding industry standards.
Implementation – The requirement based on contracting should be understood properly. Hence, the best practices based on supplier management should be sought properly (Ackermann & Alexander, 2016). A proper relationship should also be maintained in order to ensure that high quality of products are being procured from the suppliers.
The suppliers form an integral part within the procurement process and thus is highly required to be selected properly. Hence, the choosing of a proper supplier would be considered to be highly important rather than scanning over the prices of product list. Hence, a wide range of factors would also be considered based on quality, money, service and reliability (Tosun & Akyüz, 2015). A strategic kind of approach based on choosing of suppliers would be helpful for the company to understand about the ways in which potential customers would make their decisions based on purchasing.
In the present situation, the Institute for Safety, IFS (Netherlands) have been in the current process of procuring sustainable clothing for fire station in some fire service regions. The IFS had carried a pilot study in 2015, aimed at looking into the possibilities within the market about the offerings (Rezaei et al., 2016). The IFS had made a decision to employ a non-public procedure in which some selected companies who would have a certain experience of organic fibres and recycling of goods based on influencing production would be made. This approach had also been used for minimisation of costs for the parties involved in supplying goods.
The discussion would focus over the most important characteristics of suppliers in order to get qualified for supplying goods to companies. There are certain set of criteria, which would need to be fulfilled for establishing a strong ground for becoming a potential supplier (Asadabadi, 2014). A certain criteria set that would need to be followed for qualification are:
- A proper legal document that would provide permission for suppliers to provide goods and materials to companies.
- Previous experiences of the supplier and the availability of resources should be considered.
- The Quality Capability and Employee Health should be carefully sought based on verifiable procedure and policy.
- The flexibility of service providers and capability of providing service at every moment should be analysed and based on that they should be contracted.
- Adequacy of capabilities based on financial strength should also be measured.
Factors Affecting Contract Pricing and Selection of Contract Type
The above discussed criteria could be considered as important in order to contract a supplier for the providing of goods facility. Criteria could vary from one organisation to another and thus the selection of a potential supplier would be considered accordingly (Jain et al., 2014). The lowest price that would be quoted over the selected goods would be selected primarily. The potential suppliers would maintain a proper communication with the owner during the entire procurement process.
It should also be ensured that suppliers should provide the goods within a proper time frame. A time limit would be set based on delivering the product and hence a certain level of honesty should be maintained (Lo et al., 2018). Financial security would also be considered as a major factor as suppliers need to have a strong cash flow based on delivering the product whenever requested. A proper check over credit levels would help the buyers in gaining assurance about the supply of products whenever requested by buyers (Dargi et al., 2014). A strong form of relationship between suppliers and buyers would be considered as highly crucial in maintaining the supply of goods and services to help in the continuity of tasks accordingly. The company should also make the suppliers realize about the importance of their business. This would help the suppliers to provide the best materials that would be needed for the industry.
The procurement management within a project would follow a logical order based on meeting up to the demands of buyers. The company who would be procuring goods should prepare a plan regarding the supplier who would provide the service and also decide on the next steps (Prince et al., 2016). The requirements based on the contract should be distributed among sellers and thus they would bid for their chances of gaining the tender. The company would be the final decision body who would select the proper contractor.
During the planning of a contract, the company would plan out the details for individual contract based on the needs of projects. The management team within the company would set metrics based on which the procured goods would be checked for quality aspects and many others (Habib, Bastl & Pilbeam, 2015). The price for a contract should be selected based on a mutual understanding from both parties. A mutual pricing should be set and thus the terms and conditions should be set accordingly.
Analysis of Application of e-Procurement and Supplier Bidding Models for IFSN
In the purpose of contract management, the pricing based on a selected contract would be referred to the selected services and goods. There could be two different forms of contract types that might be selected by the company based on their requirements and needs. These are discussed as follows:
- Fixed-Price Contracts– This is defined as a legal agreements set between the organisation and suppliers. This kind of contract would define the details of the to-be procured items, the exact timing of receiving of the service and the total price required for the delivery process. There are some risks, which are associated with the employing of fixed-price contracts (Hudnurkar, Rathod & Jakhar, 2016). The costs that are in association with the changes in project are considered to major risks. In case of any changes within the project in which a change order would be requested from contractors, the price acquired for making the requested changes would be typically high. Although the change in prices would be included within the existing contract, any kind of changes made within the fixed-price contract would result in a projection of the total costs. This is majorly due to the reason that most of the risks based on cost would be transferred to contractors (Steinle, Schiele & Ernst, 2014). The contractors might also add a factor of contingency towards the contract in order to recover the project from the additional associated risks.
- Cost-Reimbursable Contracts– In these contracts, the company requiring the service would be agreeing over certain terms and conditions based on paying the contractor for providing goods and performing the necessary service. In these kind of contracts, the contractor would be less responsible for the associated risks with the increase in the cost factors (Bahng & Kincade, 2014). These kind of contract are used when the cost factors cannot be estimated properly. This further reduces the total money placed by bidder for accounting towards the risk.
Risk Factors - However, there are some forms of risk factors that would be in relation to pricing set for a contract. Consumers mostly believe the fact that highly priced products might incur a great quality. However, a product having a low price might be thought to have a low quality. With this kind of risk, it can be discussed that rising prices of products could help in inviting new suppliers within the market to bid for lower prices (Holzhacker, Krishnan & Mahlendorf, 2015). The lowering of prices for products would also help in decreasing the expenses thereby reducing the profit margins of products.
Factors for Selection of Contracts – During the process of selection of contracts, bids should be presented. In the presented case, there would be a contract based on procuring clothing for fire station based on covering 19 fire service regions. A particular list of contracts are selected that would be needed to be followed by subcontractors (Liu et al., 2014). The analysis of price factors that would vary from contractors could be selected as a basis for the placement of the contract. Hence, the standards based on pricing should be considered carefully. However, cost analysis should also be performed that would also include the factors based on identifying the uncertainties and risk identification. In order to determine the proper supplier, different pricing arrangements would be helpful for the involvement of concurrent operations.
Risk Factors – There might be several kind of risks, which might affect the project. These risks could be based on procurement strategies, the related cost factors and the engagement of suppliers. There might be also some kind of risks based on selection of the materials and during modification of contracts, which might have been previously signed (Jefferies et al., 2014). Thus, these risks might be need to be mitigated at the earliest in order to ensure the success rate of a project and thus ensure better outcomes.
Electronic procurement or e-procurement is defined as the electronic transfer of data for the purpose of supporting tactical, operational and strategic procurement. In the recent times, most of the e-procurement tasks are conducted through the internet platform. In the previous times, it can be discussed that most of the tasks of supplies of materials were been performed though offline modes such as pen and paper (Prabavathi & Gnanadass, 2015). However, with the transition to the electronic modes, there has been significant changes that have been made over the methods used for procurement of goods. With the introduction of e-commerce modes, the methods of procurement have been done through websites and e-mails. The e-procurement strategies also support e-catalogue service in which the buyers would be able to select goods from the presented catalogue of the website.
Evaluation of Technical, Management, Commercial, and Ethical Requirements and Preparation of RFP for IFSN
This method could be placed at the forefront of any company providing the necessary service. This would be highly required in order to bring in the best form of service provided by the company to customers. The procurement departments are mostly present in organizations that serve the major purpose of companies to purchase office supplies, raw materials, office equipment and many others (Adika & Wang, 2014). Thus, this system, which can also be defined as a transparent approach would be helpful in maintaining effectiveness and efficiency over the entire process. Thus, the procurement managers working over any project should have a complete understanding of the different kind of e-procurement applications. They would be solely responsible for the identification of processes in order to design the processes in an effective form. The procurement managers should also have a strong understanding over the benefits gained from e-procurement strategies and thus they should ensure the successful implementation of the strategies.
Some of the various useful e-procurement strategies that have proved to be majorly beneficial for companies are discussed further. E-Requester is considered as one major e-procurement platform that helps in requesting goods and then gaining outcomes based on those requests. This platform offers greater value for spent money, ease of usage and ensures greater form of customer satisfaction (Rashedi, Tajeddini & Kebriaei, 2016). This software integrates different functionalities such as online requisitioning of goods, budgetary control, designing integrated mobile and web interfaces, invoice approval and many others. This software would also perform critical functions based on reduction of duplication errors, automating the procurement process, encouraging of preferred vendors and reducing the costs incurred by the company.
Another e-procurement system is Procurify, which is known as a cloud-based system that would be installed within creative companies. The software supports many kind of impeccable features and also provides seamless services based on integration with the multiple sub-systems. This software could be beneficial for organisations in order to plan for the required service that needs to be procured. The platform also manages the different kind of procurement while managing the financial aspects such as planning of budget, calculating the total amount of money spent and also predict the future budgetary analysis.
Procura+ has been considered as a vast network of Europe based public authorities and regions, which have the capability of connecting, exchanging and further acting over innovation and sustainable procurement. They combine the knowledge from various service experts who would be able to provide valuable advice to customers who would need service. In this case, Procura+ would be providing procurement based services to IFSN. They would ensure the use of sustainable practices based on making use of raw materials and manufacturing the required goods meant to be used by companies (Dzeng & Wang, 2017). There are different kind of supplier bidding models that includes RFP, RFT and auctions. Different cases of contract would imply different bidding models for suppliers. These bidding models would be selected based on emerging needs of the company while it would be evaluated by a proper tender panel. However, the auction based bidding model would be generally considered as useful and transparent as this would help in bringing in the factor of competition among the suppliers.
Determination of Key Factors for Negotiating Agreements and Establishment of Negotiating Strategy
In the case of the concerned procurement processes based on IFSN, it can be discussed that different strategies based on e-procurement could be processed. Such large contracts need to be discussed properly before procuring the necessary goods. Thus, from the analysis of research, it can be discussed that companies should develop new kind of e-procurement strategies in order to manage the supplies (Setia & Speier?Pero, 2015). The use of RFP would be highly required for analysing the situations of the present market and gain a knowledge about the expectations of suppliers and the prices.
The defining of contracts would be considered as important for the proper maintaining of services during the entire stages of the project. These contracts should be evaluated and assessed properly based on understanding of specifications. The requirements could be considered as vital necessities based on which the company would be able to provide valuable services.
Technical Requirements – The traditional approach based on managing of requirements would be considered as crucial. Evaluation of previous performances would be considered as highly important to gain an idea about the success of the previous procurements.
Management Requirements – The qualification of managers would need to firstly estimated. This would be highly essential to manage the working progress over any project. The use of Information Systems within the supply organisation should be integrated for the help of buyer and also ensure efficient communication (Xia et al., 2014). Financial strength should also be calculated based on understanding the processes based on measuring competitive nature. Indication of future operations that would be successful could be measured based on the achievement of success for the company.
Commercial Requirements – Companies would require such kind of supplies that would be procurable from low bidders. This would bring in a competitive advantage for the company. Certain changes based on suppliers would also help in the development of new kind of relationships and also establish communication standards. Previous experiences of suppliers should also be analysed before signing of contracts (Zhao, Hwang & Gao, 2016). These information should be presented within the RFP. There should also be some kind of opportunities for commercial suppliers to improve the quality of their products based on the previous experiences.
Ethical Requirements – Every organisation who would provide supply of goods should maintain ethical factors before supplying goods to buyers. Ethical consideration should also be sought based on selecting the appropriate supplier. The goals and values of suppliers should be clearly outlined within the RFP. Hence, it should also be ensured that the supplier of products for a company should be compliant with laws approved by the Government (Amarowicz, 2015). These kind of considerations should be considered as highly essential in order to ensure that there would not be any disruption in the supply of goods during the entire process of the project designing.
Selection of Effective Contract Management Techniques for IFSN
1. Information of Company
The IFS is an institute based on providing services for public crisis management and disaster relief. The organisation is responsible for contributing towards ensuring a safe society and strengthening of regions based on sharing knowledge, promoting leadership qualities, acquiring of communal equipment and management of projects. The company also has a strong kind of policy based on developing action plans based on sustainable method of procurement, which further aims towards undertaking of procedures. Legal advice and various informative advices based on consultation within the market and managing of several contracts would also be a part of the organisational services.
2. Purpose of RFP
The project established by the company is based on implementing purchases. Many representatives within the fire service sector would be a part of the project group and maintained by the steering committee. In this project, a contract would be made for preparing a sustainable fire station clothing to be fitted for 19 regions out of the 25 fire service regions within Dutch. Fair operations would be made and thus supplies should be granted based on ensuring prices, which are competitive in nature in terms of cost. Suppliers and vendors would be selected based on the criteria of who would satisfy the requirements. Commercial experience, necessary strength and financial strength should be considered before the procurement processes.
3. Information for Communication and Contact
Any kind of communication made with the managers would not be entertained after 6 PM.
The proposals for contracts that might be made after 14th November would not be considered.
The supplier who would be nominated after the completion of bidding session would be notified by email. The supplier should acknowledge the email henceforth. No response to the email would be considered as ineligible for further service providing.
Name of the Company: Instituut Fysieke Veiligheid
4. Terms of Contract
The approved contract would be valid for one year from the date of acceptance and start of work.
5. Fees Structure
The payments made to the stakeholders would be made during the initial days of the month. Pricing of different inputs could be recapped based on monthly basis.
- Deliver the best kind of solutions as required by the organisation
- The requirements would be considered based on following of every forms of Australian laws.
- Maintaining sustainability practices and ethical considerations.
7. Service Scope
The scope based on the contract would be determined as follows:
- The vendor who would provide the service should preserve the statistics based on supplying of their goods and the costs incurred.
- The service provider would be playing a consulting role over the project based on suggesting of better kind of recommendations for products. Efficiency of service and maintaining environment friendly service would be considered as important.
8. Instructions for Submission for responses
Certain instructions that would be presented for responses are included as:
- All necessary documents would be attached to email.
- The selected suppliers would be invited to meetings after a notification from the company officials.
- The responses should be submitted to the email as feedback.
9. Evaluation Criteria and Processes
Practices of sustainability
Financial strength of vendors
Analysis of the Role of Commercial Terms and Conditions, UCC, and Applicable Government Regulations for IFSN
10. Documents required
Business information documents, procurement strategies, policies and contracts.
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