Procurement and Supply Cycle
The Procurement cycle is the cyclical process of key steps when procuring goods or services, from identification of a need and conducting market analysis through to the process of selecting the supplier, managing their performance and reviewing lessons learnt.
This interactive tool has been developed to guide members through the procurement process with links to relevant knowledge, guidance and insights to keep you up to date with new thinking and current guidelines. Mapped against relevant books, events, tools and templates to provide you with the knowledge you need to support you every step of the way through the procurement cycle.
Hover and click on the procurement cycle to review the topic summary with links
to the practical knowledge and resources to support your day to day activities whether
studying or operating in an organisation.
Tap the procurement cycle to review the topic summary with links to the practical
knowledge and resources to support your day to day activities whether studying or
operating in an organisation.
Develop strategy / plan
Once you have developed the specification, and outlined the business requirements and assessed the marketplace, the next stage is to develop the strategy and plan and should consider. The potential impact of the external environment should also be taken into account.
It may be the organisation’s policy to use small local suppliers or it maybe to move to a global source. If there is competition, and you are well positioned to leverage the market, you may decide to conduct a competitive tender. If however you are reliant on one sole source of supply your strategy may be to develop competition in the marketplace or bring this in house. If for example your volume represents 50% of your supplier’s total turnover your procurement power will be greater, however also presents risks. All of these considerations should be incorporated within your analysis.
Develop documentation, PPQ / detailed spec / combine with 1
Time should be spent in developing the tender documents including a detailed breakdown of the volumes, service level agreement and terms and conditions along with a detailed specification to ensure consistency on pricing, product quality, operational functionality and that products are fit for purpose in order to reduce the financial impact of the wrong specification further down the line. When developing specifications it is important to distinguish between product requirements and product preferences and build in tolerances for suppliers to adhere to, not restricting the supply and build cost into a product. You may decide to include technical, engineering or operations in this process.
The specification will form part of the tender documentation issued to suppliers to quote on a like for like basis.
Supplier selection to participate in ITT / RFQ / negotiation
Conducting a Request for Information (RFI) at this stage in the procurement cycle will help to gain insights into suppliers, size, capabilities, financials, strengths and weaknesses before assessing whether they should be included in the tender process.
Ranking the performance qualifiers against the business needs with key stakeholders is a useful exercise at this stage before reviewing the RFI against the selection criteria in order to select whom to invite to participate in the tender process.
Bid/Tender Evaluation and validation
Once the tenders are submitted, bids must be evaluated and validated in order to select the preferred supplier. Whether tendering contracts for the supply of goods or services, tender evaluation should be carried out in a structured, disciplined and transparent manner. Most evaluations explore price comparisons alongside technical capability, capacity, quality of service and financial health.
At this stage a post tender negotiation often takes place, along with checking of references and credit checks or carrying out supplier visit, technical audit, product sampling or a trial.
Whole life costs should also be considered including the decommissioning, removal or disposal costs.
In addition to traditional economic criteria such as price and quality items such as social, economic and environmental factors should be considered to ensure a sustainable solution when procuring products and services.
Sustainable procurement helps organisations to eliminate waste, become more energy efficient and inevitably save money. Corporate Social Responsibility is a way of ensuring that the business monitors its compliance with the law and industry standards and how business processes can be managed to provide a positive impact on society.