2024 Global Procurement Management
Global Procurement Management
by Cuong Hoang, PhD.
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Objectives of this chapter
To discuss the scope of purchasing and procurement
To discuss the changing role of purchasing and supply
To examine the ‘total cost of ownership’ concept
To introduce a category of risks
To identify the procurement cycle concept
To highlight the procurement transformations
To introduce the concept of sustainable procurement
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What is Procurement?
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The Evolution of Procurement
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Purchasing vs. Procurement
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Purchasing vs. Procurement
Reactive vs. Proactive
Transactional vs. Relational
Tactical vs. Strategic
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What is Procurement?
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Total cost of ownership
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Total cost of ownership
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Total cost of ownership
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Total cost of ownership
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Risk management
Categories of Risks:
Operational
Quality
Compliance
Strategic
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Risk Reduction Strategies
Proactive Monitoring
Transparency
Supplier Relationship Management
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The scope of purchasing
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The scope of Procurement
Supplying the Organization's Needs
Ensuring Continuity of Supply.
Ethical, Diverse, and Sustainable Procurement
Cooperative Relationships with suppliers.
Development of Staff and Procedures
Procurement's Contribution: Value Addition, Strategic Alignment, Competitive
Advantage
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The changing role of procurement
Changing from reactive to proactive buying.
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The changing role of procurement
Procurement as a crucial strategic activity.
Leading-edge concepts in procurement:
■ total quality management (TQM);
■ just-in-time philosophies and lean production;
■ relationship management;
■ corporate social responsibility (CSR);
■ sustainability.
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The changing role of procurement
The changing nature of relationships:
from the transactional relationship
to the mutual relationship
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Procurement and SCM
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Procurement and SCM
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Procurement and SCM
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Procurement and SCM
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Kraljic procurement positioning
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Kraljic procurement positioning
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The Procurement Cycle
Figure
illustrates a
typical
procurement
cycle. While all
companies
have a
procurement
cycle, its value
addition may
vary. We'll
explore how to
ensure value
addition by
evaluating
each phase of
the cycle.
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The Procurement Cycle
Identify the Need
Requisition issuance or a materials
requirements planning (MRP) system
usage signifies the identification of a
procurement need.
Procurement enhances value by
challenging over-specification, proposing
alternatives, and addressing
sustainability considerations..
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The Procurement Cycle
Develop Contract Terms
Contracts set roles, rights, and obligations of parties. Clear
contract terms define obligations and ensure legal
compliance. They specify offer content and become
binding upon acceptance.
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The Procurement Cycle
Source the Market
Surveying the market involves identifying potential suppliers and
monitoring supply markets. Procurement must deliver value by
exploring new supply options and innovations, especially
disruptions.
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The Procurement Cycle
Evaluate Suppliers
Ensures potential suppliers can meet contract requirements
Prevents wasted costs and time by selecting capable suppliers,
reducing tender investigations
Invite Quotes/Tenders
Requests for Quotation (RFQ) or Competitive Bidding/Tendering
procedures are employed.
Competitive bidding ensures fairness, value for money, and engages a
wide choice of suppliers.
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The Procurement Cycle
Analyze Quotations and Select Supplier
Bids assessed via objective scoring systems considering cost
and non-price criteria.
Structured evaluation ensures selection based on total cost of
ownership or most economically advantageous tender.
Negotiate Best Value
Negotiation determines contract terms, emphasizing lean, agile
approaches, innovation, and continuous improvement.
Aims to achieve best value for both parties.
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The Procurement Cycle
Award the Contract
Contract documentation formalizes the agreement.
Purchase-to-pay (P2P) sequence initiates post-contract award, ensuring
seamless transaction flow.
Contract Management and Supplier Relationship Management (SRM)
Effective management and SRM mitigate non-conformance risk and
ensure supply continuity.
Key performance indicators (KPIs) and service level agreements (SLAs)
monitor performance.
Procurement Transformations
Procurement's value-driven focus is critical to its success.
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Procurement transformations
Procurement's essence: Delivering value over chasing the lowest price.
How procurement adds value.
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Procurement transformations
Seven Areas of Procurement Transformation:
■ improving core value chains;
■ transformational digital capabilities;
■ risk management;
■ innovation;
■ sustainability;
■ social value; and
■ diversity.
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Best practice in strategic supply management
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Sustainable Procurement
Aims:
Minimize Negative Impacts
Reduce Demand for Non-renewable Resources
Ensure Fair Contracts and Promote Diversity
Procurement Evolution: From Purchasing to Procurement
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Objectives of this chapter
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Objectives of this chapter
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