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Procurement and Supply Cycle

What is the Procurement Cycle?

The CIPS Procurement and Supply Cycle is the cyclical process of key steps for procuring goods or services. This interactive tool guides members through this highly effective procurement cycle process, with links to relevant knowledge to support you every step of the way through your procurement life cycle.

Download the cycle to use in presentations and share with peers on social media.

1

Define Business Needs and Develop Specification

The first stage of the procurement cycle process is to understand and define the business opportunity or business need.

Involving cross-functional stakeholders gives you a wide range of expertise to develop a comprehensive, high-level specification.
Engaging stakeholders at this early stage means they will support the change process where stakeholder buy-in is required.

See CIPS Innovation Cycle

Extra information to consider for this step:

Gateway review: Stop, Think, Check

2

Market Analysis and Make or Buy Decision

The next stage is to conduct the market opportunity analysis research to assess the market options available in the marketplace.

Scoping out your spend and current positioning and dynamics of the marketplace helps you identify potential suppliers and degree of competition.
Here, you can conduct analysis as to whether to make or buy the product or outsource the service.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

3

Develop the Strategy and Plan

Now you have defined the business needs and opportunity it’s time to develop a strategy and plan, which should consider the potential impact of the external environment.

Conducting a competitive tender is a good idea if there is competition and you are well positioned to leverage the market.
Developing competition in the marketplace or bringing this in house may be a better strategy if you are reliant on one sole source of supply.
For example, if your volume represents 50% of your supplier’s total turnover your procurement power will be greater. However, this also presents risks and you will need to incorporate these considerations in your analysis before you develop a plan.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

4

Pre Procurement - Market Test and Engagement

The pre-procurement process includes identifying both stakeholder and business needs, and how changes to implement the procurement strategy can meet those needs flexibly.

Conducting market testing or a strategy test will help to identify if it is the right time to go into the marketplace.
Consider other factors such as crop cycles, competitor activity, suppliers’ end of financial year or new legislation.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

5

Develop Documentation - PPQ and Detailed Spec

It’s key to spend time developing the tender documents, including a detailed breakdown of the volumes, service level agreement and terms and conditions.

Create a detailed specification to ensure consistency on pricing, product quality, and operational functionality. This means products are fit for purpose, reducing the financial impact of the wrong specification. The specification will form part of the tender documentation for suppliers.
Distinguish in your specification between product requirements and preferences, building in tolerances for suppliers to adhere to.
You could include key stakeholders in this process.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

6

Supplier Selection to Participate in Tender

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.

Assessing the criteria can help you determine if they should be included in the tender process and receive a Request for Quotation (RFQ).
Ranking the performance qualifiers against the business needs with key stakeholders is a useful exercise at this stage

Extra information to consider for this step:

Gateway review: Stop, Think, Check

7

Issue Tender Documents

Once you have selected the companies to participate, you need to send formal documents.

Send an Invitation to Tender (ITT) and Request for Quotation (RFQ) to selected suppliers to participate.
Include the detailed specification and documentation developed around the business requirements, along with clear timescales to respond.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

8

Bid and Tender Evaluation and Validation

Once tenders are submitted, it’s time for bid evaluation and validation against pre-defined award criteria. This helps to identify which is offering the best Value for Money (VFM) and select the preferred supplier.

Ensure your tender evaluation is structured, disciplined and transparent. Most bid evaluations explore price comparisons alongside technical capability, capacity, quality, and financial health.
Post-tender negotiation often takes place, along with reference and credit checks, or supplier visits, technical audit, product sampling or trial.
Consider whole life costs, including decommissioning, removal or disposal.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

9

Contract Award and Implementation

Once the supplier has been selected, you will award a contract to the preferred supplier. This allows both parties to fully understand their obligations and key success criteria as part of the agreement. This forms the foundation to manage the contract and relationship effectively.

Award criteria offers agreed terms and conditions to minimise contractual risks and exposure when doing business.
The communication and implementation process sets out clear timescales and parameters on both sides, including relevant stakeholder groups to effectively manage the implementation and contract management.

See CIPS Contract Management Cycle.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

10

Warehouse, Logistics and Receipt

The warehouse operations need to be considered to ensure a smooth, efficient process.

These can include:

Product coding and classification.
Space, layout and racking.
Frequency of deliveries.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

11

Contract Performance and Improvement

Contract performance should be monitored and reviewed at agreed periods against agreed Key Performance Indicators (KPIs).

Set out KPIs in the contract
The contract review should include discussions on how the relationship is working and resolve any conflicts with agreed actions and timescales.
Discuss plans for continuous improvement and set the next review date.

Extra information to consider for this step:

Gateway review: Stop, Think, Check

12

Supplier Relationship Management

Supplier relationship management (SRM) is an important part of supply chain management (SCM), reviewing your portfolio of suppliers and establishing the right level of input to develop the relationship and achieve specific objectives.

Time devoted to SRM depends on your strategy, type of purchase, length of contract, and the marketplace.
SRM helps to create the right relationship and environment in which to work on new innovative developments and streamline processes.
Having the right relationship with a supplier may be the difference between being first to market with a new concept or ensuring continuity of supply.

See CIPS Innovation Cycle

Extra information to consider for this step:

Gateway review: Stop, Think, Check

13

Asset Management

Over time, assessments should be carried out to determine if business requirements have changed, whether the agreement is still required and fit for purpose, what can be learnt from the process and how improvements can be incorporated next time.

This takes us back to the start of cycle, which begins again.
Remember to calculate and account for end-of-life costs, including decommissioning, removal or disposal of assets

Extra information to consider for this step:

Gateway review: Stop, Think, Check

Key considerations for each step

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