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Summary procurment
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Part of Sales and Procurement 2nd Bachelor IBM
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Introduction ProcurementTable of Contents
Why are companies buying? .......................................................................................................................................................... 2
What are companies buying? ......................................................................................................................................................... 2
Procurement process .......................................................................................................................................................................... 4
Role of procurement........................................................................................................................................................................... 4
(Changing) business context ............................................................................................................................................................... 6
Importance of procurement ............................................................................................................................................................... 7
Digital transformation ........................................................................................................................................................................ 8
Back-up................................................................................................................................................................................................ 9
Strategic sourcing: definition............................................................................................................................................................ 11
Outsourcing....................................................................................................................................................................................... 11
Day one analysis (supplier – customer)............................................................................................................................................ 16
Supplier relationship mgt = SRM ...................................................................................................................................................... 17
Specification (Phase 1)...................................................................................................................................................................... 21
(2) Identify stakeholders & compose DMU ............................................................................................................................. 21
(3) Prepare procurement process & planning ........................................................................................................................ 22
Selection (Phase 2)............................................................................................................................................................................ 23
Contracting (Phase 3)........................................................................................................................................................................ 25
Ordering (Phase 4) ............................................................................................................................................................................ 34
Deliveries / follow up (Phase 5) ........................................................................................................................................................ 35
Performance follow up (Phase 6) ..................................................................................................................................................... 38
E-Commerce & E-Procurement ........................................................................................................................................................ 39
Blockchain ......................................................................................................................................................................................... 44
1
,Why are companies buying?
What are companies buying?
→ Buildings, equipment, ingredients/raw materials, software/licenses, hardware, vehicle, utilities (water, gas,…), services,
machinery, interim
2 sides
If you hire people they are on a payroll and every
month you give them a paycheck.
If you want to buy stuff you order it and you get an interim
invoice
Ways to classify items
• Goods VS Services: important difference for procurement. With services it is very hard to determine the actual service
on paper, in the contract. How do you describe the service you are epecting from the company?
• Direct VS indirect purchases/spend *
• OEM vs IAM
• Capex vs opex
• Investments
*Difference between direct and indirect purchases/spend
➔ Direct spend is product related: acquisition of goods, raw materials, and/or services to be directly applied to an
organization’s own production
➔ Indirect spend is non product related (NPR): purchasing of materials, goods, or services necessary for internal use
GOODS vs SERVICES
GOODS SERVICES
Tangible • Non tangible
• Produced -> Sold –> Consumed • a task of some kind
• production location - factory • a performance of some act
• production process of value
• stock = output from production • Organisations are ‘sub-
2
, stored for future sale contracting’ non-core aspects of
• can be transported their work. Examples ?
• good design and production • Examples : Accountancy,
processes ensure the right Advertising, Marketing, Banking,
quality • Catering, Cleaning, IT,
Consultancy, ..
DIRECT vs INDIRECT PURCHASE/SPEND
DIRECT INDIRECT
Product Related • Non Product Related (NPR)
• acquisition of goods, raw materials, • purchasing of materials, goods,
and/or services to be directly applied or services necessary for internal
to an organization’s own production use.
• necessary for key business practices • required to keep the day to day
• raw materials and goods for business alive.
production • does not add to a business’s
• done in large quantities bottom line
• acquired from a pool of suppliers at • businesses wouldn’t be able to
the best possible cost, quality and operate in an effective manner
reliability. • Examples:
• Examples: • Travel
• Drinks in shops • Office supplies (computers,
• Fruit and vegetables for direct phones,...)
consumption • Utilities (gas, electric,
• PPE (Personal Protective water etc.)
Equipment) such as gloves, • Facility management
safety glasses, safety shoes (beverages, toiletries etc.).
• repairing equipment
OEM / IAM
OEM IAM
OEM : original equipment manufacturer IAM : Independent Aftermarket Parts
• a company that manufactures a product that is • "third-party"
sold to another company, which resells the product • an unofficial alternative for the standard
under its own brand name. (expensive) official licensed parts
• Advantages • wide range of prices and qualities
- Advantages:
- Quick response times
- Quality component
- Good customer service
- Warranty
OEM examples:
• Car industry: A company that manufactures the steering wheel or the tires on a new car, truck or SUV.
• Computer software: A company like Microsoft that sells the operating system used in computers or other digital
devices.
• Electronics: A company that builds the car radio that is included in a new vehicle.
• Manufacturing: A company that builds the engine that goes into a new bulldozer or airplane.
3
, • Example: If you are buying an iPhone, you have an iPhone charger which breaks. You want to buy a new one. You
have a choice to make: do you buy the apple (=OEM) one or an alternative (=IAM).
CAPEX vs OPEX
➔ Capital expenditures (CAPEX) are major purchases a company makes that are designed to
be used over the long term. Operating expenses (OPEX) are the day-to-day expenses a company incurs to keep its
business operational.
Why important?
- Different accounting
- Different budget
Procurement process
6 phases in the procurement process
Specifying → Selecting → Contracting → Ordering → Deliveries/follow-up → Performance follow up
Role of procurement
Activities of procurement?
- R&D – market research
- Supplier selection
- Contracting
- Ordering products
- Supplier evaluation
- Strategy decisions (offshore/outsourcing/make or buy)
- Fairs
- Operational emergencies
➔ Key contributor to Business Success
Procurement role: isolated?
➔ Interaction with suppliers OUTSIDE the company
➔ Interaction with many colleagues/departments INSIDE the company
- Which stakeholders?
4
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