High Level Of Critical Ability

Procurement and Supplier Performance http://dilbert.com/search_results?terms=P rocurement Dr Eoin Plant - Lecture Format What is Procurement? Sourcing considerations Legal considerations Summary Procurement is about specifying requirements, identifying sources, evaluating options and acquiring resources that are fit for purpose, cost effective and sustainable (Mangan, et al., 2012:168) procurement and supply chain practice to find the best opportunities, source ethically and sustainably, and understand true value throughout the supply chain, can give a significant competitive (CIPS, 2016). Concerned with strategic decisions can we get goods and services internally or externally? Procurement significant role in the organisations competitive advantage (Porter, 1985 ) goods and services are in place so that a focal firm can produce its (Harrison et al., 2014:354) Brexit sourcing and delivery implications NHS procurement Procurement activities Figure 1: Procurement strategic sourcing, ordering cycle and managing supplier relations (Harrison et al., 2014:355) VIPER - segmentation A generic procurement cycle Source: Chartered Institute for Procurement and Supply, 2017 Procurement is a process Stage Description Key Issues Specify The requirements the contract must deliver Unclear specification Missing definitions technical, commercial, end user Identify Suitable potential suppliers who meet requirements/spec Determine competition for risk and value Capability and capacity Select Suitable supplier(s) to deliver the contract Evaluation criteria price and quality. Capacity & capability to deliver. Manage Manage that key deliverables are met KPIs required Learning from process Adapted from: Harrison et al., (2014); Mangan et al., (2012) Where to source? Considerations: Spend, Characteristics, Marketplace Local, regional, national, global basis? Strategy: Sole, Single, Multiple - Amount of spend - Risk - Project or recurring - Technology lifecycle of market - Contract duration - Potential for performance improvement & cost reduction Source: Mangan, et al., (2012:170) Sole sourcing Single sourcing: particular supplier purposefully chosen Single Sourcing Multiple suppliers for product or service Multiple Sourcing Short - term ability to supply Longer - term ability to supply Range of products or services provided Potential for innovation Quality of products or services Ease of doing business Responsiveness Willingness to share risk Dependability of supply Long - term commitment to supply Delivery and volume flexibility Ability to transfer knowledge as well as products and services Total cost of being supplied Technical capability Ability to supply in the required quantity Operations capability Financial capability Managerial capability Rating potential suppliers Weighted supplier selection criteria Factor Weight Supplier A score Supplier B score Cost performance 10 8 (8 x 10 = 80) 5 (5 x 10 = 50) Quality record 10 7 (7 x 10 = 70) 9 (9 x 10 = 90) Delivery speed promised 7 5 (5 x 7 = 35) 5 (5 x 7 = 35) Delivery speed achieved 7 4 (4 x 7 = 28) 8 (8 x 7 = 56) Dependability record 8 6 (6 x 8 = 48) 8 (8 x 8 = 64) Range provided 5 8 (8 x 5 = 40) 5 (5 x 5 = 25) Innovation capability 4 6 (6 x 4 = 24) 9 (9 x 4 = 36) Total weighted score 325 356 Self - appraisal questionnaires Financial appraisal Checking supplier accreditations, quality awards and policy statements References, recommendations, reports and testimonials Work sampling Supplier audit (also called a site visit or capability survey) Gathering and verifying supplier information Supplier management benefits The company incurs lower costs by developing a small core group of trusted suppliers Quality and other problems can be ironed out progressively Goodwill developed with positive relationships may earn preferential treatment or flexibility from suppliers in the event of emergencies Suppliers may be more motivated to give their best performance and to add value through innovation, flexibility, commitment to continuous improvement and so on Motivated suppliers may be willing to co - invest There is less risk of supplier failure or poor performance Supplier performance evaluation Help identify the highest - quality and best - performing suppliers Suggest how relationships with suppliers can (or need to be) enhanced to improve their performance Help ensure that suppliers live up to what was promised in their contracts Provide suppliers with an incentive to maintain and/or continuously improve performance levels Significantly improve supplier performance KPIs for supplier performance SUCCESS FACTORS SAMPLE KPIS Price Basic purchase price (and/or price compared with other suppliers) Whole lifecycle cost of ownership (and/or comparison with other suppliers) Value and percentage cost reductions (and/or number of cost reduction initiatives proposed or implemented) Quality/compliance Reject , error or wastage rates (or service failures) Number of customer complaints Adherence to quality standards ( eg ISO 9000) and/or environmental and CSR standards and policies Delivery Frequency of late, incorrect or incomplete delivery Percentage of on time in full OTIF deliveries Service/relationship Competence , congeniality and co - operation of account managers Promptness in dealing with enquiries and problems Adherence to agreements on after - sales service Financial stability Ability to meet financial commitments and claims Ability to maintain quality and delivery Innovation capability Number of innovations proposed or implemented (and/or investment in research & development) Willingness to collaborate in cross - organisational innovation teams Technology leverage/ compatibility Proportion of transactions carried out electronically Number of technology breakdowns Overall performance Benchmarking against other suppliers Commitment to continuous improvement ( eg number of suggestions proposed or implemented) Kraljic Model Kraljic , 1983 Initial Critique of Kraljic Model Deciding on variables. How to accurately measure? What is high and what is low, guidance on deciding. Strategy based o just two dimensions? The Law and Procurement Subject to legal regulation which has increased over the past decade. Differences between public and private sector procurement EU Directives (Directive 2014/24/EU) for managing public procurement: openness & transparency. Supporting Europe 2020. Minimum public procurement rules across the EU but also national laws too: new Procurement Reform (Scotland) Act 2014, supported by Procurement (Scotland) Regulations 2016. Impacted by spend EU thresholds change every two years new as of 1 st Jan 2018. Impact of Brexit uncertainty, implications for EU but currently we use PPL (international EU and national laws). EU Public Procurement Strategy Single Market generates business opportunities, drives economic growth and creates jobs. By rethinking the entire approach to purchasing, professionalising public buyers, cutting red - tape, and capitalising on the benefits of the digital revolution, public administrations can be made more efficient, more effective, and more citizen and business - friendly. Improved governance, the simplification of procedures and the greater use of electronic tools in public procurement are also important tools for fighting fraud and (EU, 2016). EU Public Procurement Clearer definition to prevent, identify and correct conflicts of interest Exclusion of those presenting false statements and attempting to influence public procurement Ability to modify contract after award without starting new process Rejection of abnormally low bids company violating international/EU laws Government very important customer = spending of public funds Bid criteria Quality Speed Cost Flexibility Dependability Code of conduct Bankruptcy Tax avoidance falsehoods (Harrison et al., 2014; Weele, 2010) Innovation Socially inclusive Greener E - Procurement Digital procurement slow progress Simplifies and shortens process Increased transparency Improves access - SMEs London, 2012: ODA, productivity gains +5 million Green Procurement = relationships Collaboration Trust Transparency Ethics Being Green Environmental benefits - reduce waste, energy consumption, recycling, materials substitution, eco - design. Eco - supplier selection positively impacts firms bottom line. ( Youn et al., 2013) Procurement summary A key area of SCM Strategic impact Changing national and EU legal regulation impact Increasing technological use Lots of opportunities in this area References (see also reading list) CIPS. (2016) at www.cips.org European Commission (EU). (2016). Public Procurement at http://ec.europa.eu/growth/single - market/public - procurement/index_en.htm (accessed 11.01.17). European Commission (EU). (2014). Directive 2014/24/EU. Official Journal of the European Union . Available from: https://eur - lex.europa.eu/legal - content/EN/TXT/PDF/? uri=CELEX:32014L0024&from=EN (accessed 14.01.19). Harrison, A., van Hoek, R., and Skipworth, H. (2014). Logistics Management and Strategy . 5th edition . Harlow: Pearson. Hayes (2018). Salary Guide and Procurement Insights Report (2018). Stamford: CIPS Group. Kraljic , P. (1983). Purchasing must become supply management. Harvard Business Review (September - October 1983). Mangan , J., Lalwani, C. , Butcher, T . Javadpour, R. (2012). Global Logistics and Supply Chain Management, 2 nd Edition. Chichester : Wiley. Porter, M.E. (1985). Competitive advantage: creating and sustaining superior performance . New York: Free Press. Weele , A.J. (2010). Purchasing and Supply chain Management . Fifth edition. Singapore: Cengage/Seng Lee Press. Youn , S., Yang, M.G., Hong, P., Park, K. (2013). Strategic supply chain partnerships, environmental supply chain management practices, and performance outcomes: an empirical study of Korean firms. Journal of Cleaner Production . 56, 1 21 - 130.