Fundamentals of Sourcing & Procurement

Dear procurement comrades,

I hope that the festive times are keeping you in the best of health and spirits.

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Many thanks to all those who have already bought the books and embarked on the journey to learn and apply the interesting procurement concepts?in their day-to-day work…, I am pretty sure that the books would be serving the purpose to make all of you?‘The Procurement Champions’!!

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Apologies for a long post but it would be necessary for you to go through once if you care about your career growth.

For those who are still thinking, here is an attempt to highlight what you are missing. The book offers all the necessary ingredients that would be extremely helpful in discharging your KRAs at your work-place.

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Please allow me to describe the Part – 1 in this edition –

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1.?????Fundamentals of Sourcing & Procurement, Part-1 (ISBN No.?978-93-6013-132-6)

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Chapter 0 : Understanding Procurement as a Value Creation Function

Procurement has always been a core function of any organization and still the executives working here from top to bottom are considered useless time-wasters.

The Procurement job is a thankless job. They just know how to create hindrance in our important/urgent purchases. They are among the most corrupt people of an organization…If any of the above feelings are bothering you while discharging your procurement duties, this chapter serves to restore the pride, to a large extent. Understand what you as a core member of the team bring to the table and how important this function is in ensuring the smooth and efficient functioning of the organisational machinery.

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Chapter 1 :?Spend Diagnostic and Solution Identification

Scenario : The Procurement team is under tremendous pressure as most of the performance indices are showing up in red. The CPO is in a dilemma as to what and where the issue is and as a result, bears the wrath of top management in the review meetings.

What to do? Run a detailed diagnostic exercise through a fact-finding mission across Procurement and related functions. Going over all the processes, finding the lacunae and suggesting fixes is the most common way and it is systematically taught in this chapter. What questions to ask and whom to ask; Where are the major issues or potential risks; Where you stand today and what could be aimed to achieve in future through a series of changes is what this chapter is all about.

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Chapter 2 : Project Assessment and Data Collection

New requirements, expiring contract, hostile supplier, inflationary market, trying out value-engineered or cost saving alternatives, design changes, field complaints etc. could be some examples where a procurement personnel may be required to go for a full-fledged sourcing project. This chapter guides you to assess the risks, data gaps, success factors and boundary conditions even before you start putting your efforts on a sourcing exercise. The assessment enables you to map the expectations and pre-articulate the extent of success. It also helps you to clearly identify the key success parameters that may be much beyond cost reduction.?

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Chapter 3 : Opportunity Assessment and Category Wave Plan

Opportunity Assessment could be a periodic exercise where all the sourcing categories are assessed for compression opportunities and accordingly, they come up for sourcing as per a pre-planned cycle. The question is how to sequence and prioritize to reap the maximum benefits. Well, the answer lies in this chapter. It guides you to make a category sourcing wave plan keeping all the four important parameters to position and prioritize a category. Impress your business stakeholders by conducting and presenting this assessment

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Chapter 4 : 9-Step Sourcing Process

Taking short-cuts, bypassing the sourcing process or missing a few important steps always become a big headache during compliance audits. They also bring disrepute and embarrassment. This chapter beautifully captures all the necessary steps of a standard sourcing process that can be universally applied to any sourcing category. The process almost guarantees that you would achieve optimized results in your sourcing exercise if it is followed in spirit and kind. All the 9-steps are explained in detail with important milestones and check-points. This one is a must for every procurement manager to learn and understand.

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Chapter 5 : Supplier Research, Supplier Management

After collecting all the financial data, specifications and other requirements, there is a need to immediately find potential suppliers who can be approached for quotations while sourcing any product or service. Typically, organizations find themselves short of an exhaustive and validated vendor database that can be referred to for seeking commercial proposals for any new requirement. And therefore, invariably the sourcing executive needs to go out into the market to search for potential suppliers. This chapter teaches you how to refine your search through keywords and targeted search engines. The suppliers thus found need to be approached for collecting information around their credentials and capabilities to pre-qualify them for subsequent steps of sourcing. The chapter also introduces you to an integrated supplier management tool (ISMT) that helps you to capture and preserve such supplier database for future use.

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Chapter 6 : RFx Scoring and Ranking

The next logical step after collecting the preliminary data from primary supplier search is to analyse the data and score the responses to put the potential suppliers on a capability ladder. It is customary to screen the suppliers using this ladder where the suppliers scoring higher than a set of predetermined minimum qualifying criteria pass through the screen for next rounds and those who are below the threshold are filtered out. This chapter teaches you how to determine the qualifying parameters, put scores against each of them and finally, arrive at a consolidated score to assess the consolidated capabilities and applicability of a potential supplier to your sourcing category…once again a skill that every sourcing/procurement executive should master.

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Chapter 7 : Essentials of Writing and RFP/RFQ

It is well established that there are far-reaching benefits of adequately specifying your requirements in the Request for Proposal/Quotation document, while attempting to source any category. A well-defined RFP/RFQ clearly articulating the specifications and supply terms results in getting most competitive responses from suppliers. For every requirement that is not defined properly, the supplier tends to build contingency in his proposals/quotations thereby inflating the offer. This chapter brings up all the essentials that should be defined to attract most competitive offers. More clarity means more trust and more trust means a mutually beneficial supplier relationship!

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Chapter 8 : Cost Structures and Cost Driver Analysis

Every category has several cost factors that build up its cost and then it also has the factors that either constitute the formidable part of that cost or significantly impact the overall cost. Understanding the cost structure and cost drivers enable a procurement executive to focus on those areas of the cost that are expected to return the most desirable results in a cost deflation exercise. It also helps to pre-determine the controllable and compressible element of cost to articulate the sourcing strategy and pre-empt the size of the prize after the sourcing exercise is concluded. Finally, the awareness of cost structure and cost drivers also prepare you better for negotiations and competitive analysis. Again, a must for every procurement personnel to learn and apply.

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Chapter 9 : Negotiation Strategy

As we move further in the book, the topics become more and more intense and interesting. Applying a most effective sourcing strategy in the given conditions is the most crucial element of success.

Equally important is to prepare and plan for the negotiations beforehand with adequate seriousness. Your conduct, choice of words, appearance and even the tonality can make or break the favourable outcome. This chapter helps you to prepare for negotiations well in advance to meticulously plan your behaviour, knowledge and conduct during negotiations. Learn about the dos and don’ts of entering into, manoeuvring around and emerging satisfied out of a negotiation discussion. ??

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Chapter 10 : Supplier Site Assessment

An essential part of supplier qualification and audit before or after completing the RFx process, the Supplier Site Assessment always remains a necessary skill to master by any procurement person. This chapter brings in all the flavours of a site assessment that go beyond quality systems and help you in arriving at a consolidated score. The chapter shall come to you along with the macro-enabled spreadsheet and audit guide for reference and practical application..

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Chapter 11 : Business Award and Contracting

The sourcing exercise may go futile if it is not followed up with an award of business and/or contract to bank the potential savings or to realize the benefits. This chapter explains the elements of a standard contract and it also exposes you to learn the various types of contracts and their terminologies.

The importance of supplier communication to all the participating suppliers after completing a negotiation exercise is of paramount importance that can go a long way to attract respect and reputation for your organisation. Learn what, when and how to communicate in this chapter.

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Chapter 12 : Supplier Performance Management

A very logical next step after a supplier has got successfully onboarded is to monitor his ongoing performance. The data points gathered on performance serve as valuable insights on future business prospects and working relations with the suppliers. Suppliers who show a consistently satisfied performance must be rewarded through additional business and/or extra care. The chapter highlights all the important parameters that should be assessed while monitoring the performance and they are much beyond Quality, Cost and Delivery. It also provides valuable insights on how to segment the suppliers into preferred, strategic, high-risk and/or watch-list categories.

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Chapter 13 : Inventory Management

Inventory control, management and innovations are some of the key success parameters for any Procurement professional. It allows to keep the cash flow healthy and impacts the working capital favourably. Gain a deep understanding of inventory control concepts and measures that are prevalent in the industry to keep this KRA in focus and score big on this particular aspect. Optimal inventory levels are achieved by systematic exposure of bottlenecks and solving them in a serial manner. Learn more in this chapter and demonstrate your leadership potential by applying the given concepts. ??

The first 14 smartly crafted and logically arranged chapters thus complete the scope of the Part-1.

Hope it will help you to remove your hesitation and take a decision in your favour..!

Happy Learning!!!

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