Standouts in terms of the performance or failure of the procurement process with the supplier should be observed.
These lessons should be implemented in the next procurement lifecycle. Being open to feedback from the supplier and other stakeholders in the process can help in identifying the scope for improvements if any. Customer satisfaction depends on not only meeting customer expectations with regard to the product. It also depends on being able to meet the demand on time without compromising on quality.
Demand planning is the process by which an organization is able to accurately predict and plan for future fluctuations in demand. In order to do this, there has to be an awareness of all the factors that can affect demand. When demand planning goes wrong there is either a shortfall of goods to meet the demand or an overstocked inventory that lies unsold.
Both of these scenarios impact the organization financially. Demand planning helps the organization match the rise and fall in demand to increase profitability and customer satisfaction. Demand planning is truly useful to an organization when it is proactive and not reactive to demand changes.
When an organization accurately forecasts the rise and fall in demand and adjusts the procurement and supply chain accordingly, there is the optimum use of finances and other resources. To properly forecast demand historic demand-related data is as important as being aware of the current market environment and factors that could influence it. These factors could include current events, natural events or other political issues. Proper data gathering and analysis is the key to accurate demand planning.
This process is being automated as technology advances. Demand planning enables an organization to better estimate the spikes in demand. It ensures that their supply chain is capable of sustaining a higher rate of production.
The planning of all steps in the supply chain is done in advance to ensure smooth operations during high demand. When all the stakeholders from the procurement suppliers, production line to the end buyer are in readiness, the entire process is more likely to be smooth. If there is a likelihood of delays due to demand spikes, advance notice will ensure fewer customer complaints.
Negotiating in advance with all people involved will ensure better terms and more transparency. If there are any maintenance or service activities to be scheduled they can be better planned according to the demand forecast. Planning ahead for highs and lows in demand will ensure that there is always the optimum number of staff members.
Too many staff when there is a fall in demand is a waste of money. Too few staff during a demand spike can derail the production line. Demand planning helps to plan ahead for temporary additional labor to manage increased production.
When all the aspects of production match the demand, it enhances capacity management, resource management, and production efficiency. Predicting the demand pattern enables an organization to better manage the cash flow. It prevents the scenario of having cash locked in unsold inventory or raw material. Predicting a slump in demand also enables financial planners to arrange for additional credit to bridge the shortfall. Demand forecasting has an important role to play in the planning of logistics.
Ill-planned logistics can affect the supply chain in two ways; incoming and outgoing. Logistic insufficiencies can block procured materials as well as the movement of finished goods. If the logistics for the incoming materials are insufficient, it can bring production to a halt. When the outgoing transport of finished inventory does not perform well, it results in unfulfilled orders and unhappy customers.
Ideally, demand forecasting should allow for the planning of added logistics support during predicted spikes in demand. General surges in demand across the market put logistics suppliers under pressure. To circumvent difficulties in such a situation, one would have to plan for added warehousing to stock incoming supplies in foreseeing the demand.
One would also have to factor logistic lags into order fulfillment schedules. The skill of negotiation is critical to the process of procurement. The motivation of every procurement professional is to negotiate the best deal for their team. Negotiation is an art as well as a science that requires that both parties to arrive at an agreement that is favorable to their own interests and also satisfies both sides. A successful procurement negotiation secures the supply of the requirement at the best possible price in the exact quantity, quality and time frame that is desired.
Familiarity with all the relevant details enables the negotiator to better understand where there is room for negotiation. Research and understanding of the technical and business aspects of the procurement item help one negotiate a favorable deal.
It is better to negotiate a clearly stated lowest price rather than agree to a range of prices. When the pricing is clearly stated and agreed upon it prevents future disputes. An agreement to a range of prices might result in the higher price being charged which is disadvantageous to the negotiator.
There should be absolute clarity and precision in stating and agreeing upon the technical and other aspects of an agreement so that there is no room for misunderstanding. Negotiations are rarely a one-meeting agreement. Sometimes it takes several rounds of negotiation until both stakeholders are satisfied with all the terms. If you know that there is room for negotiation, being persistent can give good results.
When the negotiations are not going in the direction desired, showing the other party that you have alternatives is a good strategy. This should however not be an empty threat and is more effective when backed by evidence. An technique that is regularly used in negotiation is that the negotiator states that the terms would have to be agreed upon by a higher authority. This then creates a roadblock to lowering the rates or getting more favorable terms.
Clearly stating that negotiations will only be done with the decision making authority prevents the use of this tactic. Compromise on both sides of negotiation results in a mutually satisfactory agreement.
Being inflexible leaves no room for compromise. One must keep in mind the non-negotiable factors and be willing to compromise on other factors if required. When there are benefits to both the parties involved, the likelihood of a long and successful relationship is higher. Successful procurement negotiation techniques follow the same logic as negotiation strategies.
Procurement KPIs or key performance indicators help gauge the efficiency, effectiveness and standard of performance of a procurement strategy and process. The performance of a procurement process should be evaluated on a qualitative and quantitative basis.
Quantitative KPIs are by definition those that can be represented by a number. Qualitative KPIs are those that deal with factors that are not numerical such as ease of business or customer satisfaction.
There are numerous KPIs that a company can decide to monitor. The most important KPIs that give a clear picture of procurement performance are:. The efficiency of a procurement cycle is highly dependent on how well inventory is managed. Good warehouse and inventory management avoids bottlenecks in the entire process.
Key inventory KPIs are:. A procurement process can only perform when the manpower involved is highly productive. When evaluating a procurement process, it is important to include the following employee-related KPIs. An important aspect of procurement is the efficiency of the delivery process.
KPIs that help evaluate delivery are:. Procurement definition: Procurement is the activity or process by which a business or organization sources or procures the goods or services that it requires. It is the act of buying services and goods on a large scale. The very first step is to determine what the exact product or service requirement is.
The procurement research process identifies likely suppliers and sends them a Request for Quotation RFQ. A vendor is selected either through negotiation or an auction or tendering process. After identifying a vendor, the procurement department negotiates the rates and terms with the chosen vendor, and they enter into a contract.
The required products or services are then ordered and received. The procurement department performs quality assurance checks on the received goods and services. The procurement team continually reviews and monitors the entire process for efficiency, quality and cost-effectiveness. Procurement is continually evolving with the changes in the market. With organizations and businesses growing beyond geographical borders, the management of procurement is continually undergoing many improvements.
The implementation of eProcurement tools and software has reduced the cost of each step in the procurement cycle while increasing efficiency. The UI or user interfaces of these systems are becoming more user-friendly by the day. The implementation of apps to manage the entire procurement lifecycle has enabled seamless realtime data flow across all the levels of management. The digitization of procurement has made it easier than ever to enforce best practices and transparency across the board.
Machine learning, Big Data, and AI have made data analysis, demand forecasting, and procurement management more of a science than a gamble.
Cloud-based technology has made the eProcurement system easily accessible. With countries implementing lockdowns the entire world was thrown into a crisis. Companies having a diverse network of suppliers from different geographies were better enabled to quickly leverage access to alternate suppliers. This crisis has illustrated the importance of planning and implementing proper supplier risk management policies.
Agile and responsive procurement systems are better equipped to mitigate the fallout from such disasters. The digital transformation of procurement has made it easier to make and implement emergency sourcing decisions.
Empower your procurement department with the right insights into the market and competitors. Our reports include in-depth and reliable data to enable procurement teams to make informed, efficient, and cost-effective decisions. So, irrespective of your business type and industry, get your hands on the best procurement intelligence reports from Beroe that have helped some of the most renowned Fortune names.
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Table of Content What is Procurement? When are these Procurement Types Used? Procurement Process Flow. Stages of Procurement. Components of Procurement. People Process Paperwork or Records. Procurement, Purchasing and Supply Chain. Procurement Models. Types Of Procurement. Direct Procurement Indirect Procurement. Procurement Life Cycle. Demand Planning. Advantages Of Demand Planning. Demand Forecasting in Logistics. Negotiation strategies. Negotiation Techniques. Procurement KPIs. Types of KPIs.
Procurement Best Practices. Procurement Business. What Next? The Future Of Procurement. What is Procurement? When Is Direct Procurement Used? Lab Chemicals. Active Components. Advertisement Production.
Aluminum Collapsible Tubes. Anti-Money Laundering Software. Cell Culture Media. Credit Bureau Services. Debt Collection Software. Debt Sales. Digital Payment Services. Disposable Gloves. Energy As A Service. Face Masks. Gum turpentine.
Investment Management. Jerry Cans. Laminate Collapsible Tubes. Lockbox Services. Lotion Pumps. Medical Coveralls. Mining Exploration Services. Palm Kernel Oil. Passive Components. Patient Monitors. Patient temperature monitoring devices. Payment Processing Services. Plastic Collapsible Tubes.
Plastic Jars. POS lending platforms. Pressure sensitive labels. Rare earth elements. Respiratory devices. Returnable glass bottles. Rubber stoppers. Third party administrator services. Thermoformed trays. Vitamin B. Vitamin C. Xanthan Gum. API Povidone Iodine. Chromatography Resins. Comparator Drug Sourcing. Laundry Services.
Mobile Device Management. Utilities—Natural Gas—Global. Natural Vitamins. Secondary Packaging Equipment. Social Media Marketing. Activated Carbon. Wooden Pallets. Wireline Services. Wastewater Treatment. Antibody Vaccines. Car Rentals. Cashew Nuts. Viral Vaccines. Cementing Chemicals. Cheque Processing Services. Citric Acid. Clinical Logistics. Clinical Trials. Clinical Wearables.
Clove Oil. Coconut Oil. Cold Chain Logistics. Stretch Films. Stimulation Chemical. Completion Chemicals. Contract Sales Organization. Core Labs. Corporate Cards. Deep Freezers. DNA Vaccines.
Drilling Chemicals. Sodium Hypochlorite. Explosive Accessories. External Audit Services. Finance Accounting and Outsourcing. Flow Chambers. Gene Therapy Trials.
Heavy Mining Equipments. High Fructose Corn Syrup. Soda Ash. Iron Ore. Lab Centrifuges. Lab Glassware. Lab Supplies. Lactic Acid. Refrigerated Road Freight Services. Professional Education. Production Chemicals. Plastic Bottles. Patient Affordability. Orange Oil. Liquid Chromatography. Mechanical, Electrical and Plumbing Services. Medical Agencies. Offshore Aviation Logistics. Medical Writing Services. Mentha Oil. Metal Drums. Business Intelligence. Public Relations.
Media Planning and Buying. Thus, these are often the main aspects organizations consider when heading towards implementation of strategic procurement. Those who intend to take the initiative today can take the first step by opting for technologies which help the company move towards the aforementioned aspects.
Prime among these tools is procurement software. Not only does it enable companies to head towards increased automation in sourcing and procurement processes, it also offers a number of modules that enhance purchasing accountability, supplier base management, and even help with building and refining supplier relationships. Strategic Procurement — The new way to procure!
Major Objectives To make the shift towards strategic procurement, understanding the major objectives is essential. The result was a genuine pooling of risk, the co-production of values, and the sharing of reward, all of which brought into being a resilient value constellation that has benefitted everybody involved.
European Patent Office. In the late 20 th century, the EPO was one of the biggest clients in Europe for many international vendors of IT equipment. During that period, it designed important value-creating systems by organizing them around IT platforms, and by orchestrating information-exchange standards. In parallel, the organization used those same IT platforms and their derivatives to reach a wider public, which ultimately allowed it to create a new Patent Information industry.
By the turn of the century, thanks to this broadly strategic approach to procurement, the EPO had ushered in a new era of online interactions with patent attorneys and representatives.
Today, its value-creating systems have become a key element not only in its own strategy and success but also those of the broader European Patent System. As companies focus less on efficiency and more on resilience, procurement becomes central to strategy.
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Ciaran McGinley is is a senior associate at the strategy consultancy NormannPartners. He served for 34 years at the European Patent Office, 20 of which were in a wide range of senior management roles.
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