Project Management Chapter 11 Project Procurement Management Dr

Procurement • “ acquisition of goods and/or services at the best possible total cost

Project purchasing procedures 4 different methods/approaches can be used for purchasing of goods and/or

Procurement Process (Contracts) • • • Information Gathering Very common in public sector and

Procurement Process • Information Gathering: If the potential customer does not already have an

Procurement Process Supplier Contact When >1 suitable suppliers identified: • Requests for Quotation (RFQ)

Procurement Process Background Review • References for product/service quality consulted • Requirements for follow-up

Procurement Process Negotiation • Negotiations are undertaken, and price, availability, and customisation possibilities are

Procurement Process Fulfillment • Supplier preparation, shipment, delivery, and payment for the product and

Procurement Process Consumption, Maintenance and Disposal • During this phase the company evaluates the

Procurement Process Renewal: • When products and services have been consumed and/or disposed of,

Choosing sources of supply Total cost of ownership approach Traditional view of purchasing, based

Example of TCO Imagine you want to source some goods regularly for 8 months

Quotations • For items budgeted for, but not available on contract • Get written

E-Procurement • Electronic Procurement - purchase and sale of supplies and services through the

Planning-an Element of Project Procurement – Planning is an element of project procurement –

Advantages of Good Procurement Planning – Timely supply of goods and services – Assists

Strategic sourcing 3 new strategies have emerged: • volume consolidation • supplier operational integration

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Project Management Chapter 11 Project Procurement Management Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement • “ acquisition of goods and/or services at the best possible total cost of ownership in the right quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or individuals” Dr. Jana Jagodick Polytechnic of Namibia, 2012

Project purchasing procedures 4 different methods/approaches can be used for purchasing of goods and/or services in the public or private sector – – contracts quotations petty cash online procurement Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process (Contracts) • • • Information Gathering Very common in public sector and Supplier Contact in some private companies Background Review Negotiation Fulfillment Consumption, Maintenance and Disposal • Renewal Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process • Information Gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services, it is necessary to search for suppliers who can satisfy the requirements Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Supplier Contact When >1 suitable suppliers identified: • Requests for Quotation (RFQ) • Requests for Proposals (RFP) • Requests for Information (RFI) • Requests for Tender (RFT) may be advertised -…. . or direct contact may be made with the suppliers Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Background Review • References for product/service quality consulted • Requirements for follow-up services including installation, maintenance, and warranty are investigated. • Samples of products or services being considered may be examined, or trials undertaken Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Negotiation • Negotiations are undertaken, and price, availability, and customisation possibilities are established • Delivery schedules are negotiated, and a contract to acquire the products or services is completed Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Fulfillment • Supplier preparation, shipment, delivery, and payment for the product and services completed, based on contract terms • Installation and training may also be included Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Consumption, Maintenance and Disposal • During this phase the company evaluates the performance of the products and services and any accompanying service support, as they are consumed Dr. Jana Jagodick Polytechnic of Namibia, 2012

Procurement Process Renewal: • When products and services have been consumed and/or disposed of, the contract expires • Or product or service is to be re-ordered subject to company experience of the products/services • If the products and services are to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier Dr. Jana Jagodick Polytechnic of Namibia, 2012

Choosing sources of supply Total cost of ownership approach Traditional view of purchasing, based on price alone, has changed Modern approach is to focus on supply chain management with greater emphasis on the relationship between the buyers and the sellers, New perspective emphasises continuous supply (JIT), inventory minimisation, improved quality, supplier development and lowest total cost. Dr. Jana Jagodick Polytechnic of Namibia, 2012

Example of TCO Imagine you want to source some goods regularly for 8 months – and you can get them from various suppliers South Africa China Germany Zambia $250/part $70/part $270/part $150/part 1 month flexible 6 months Slightly flexible 2 months inflexible 1 month infelxible Which is best from a TCO viewpoint? Dr. Jana Jagodick Polytechnic of Namibia, 2012

Quotations • For items budgeted for, but not available on contract • Get written quotations and choose the best supplier Dr. Jana Jagodick Polytechnic of Namibia, 2012

E-Procurement • Electronic Procurement - purchase and sale of supplies and services through the Internet as well as other information and networking systems, such as electronic data interchange (EDI) and Enterprise Resource Planning (ERP) Dr. Jana Jagodick Polytechnic of Namibia, 2012

Planning-an Element of Project Procurement – Planning is an element of project procurement – Project managers and their teams must plan well in advance for the timely procurement of goods and services – Goods not available (because of delays in the tendering process) can have serious implications for project managers Dr. Jana Jagodick Polytechnic of Namibia, 2012

Advantages of Good Procurement Planning – Timely supply of goods and services – Assists in improving the quality of suppliers – Objectives of the project can be reached in time – Contributes to improving the organisations’ purchasing system as a whole Dr. Jana Jagodick Polytechnic of Namibia, 2012

Strategic sourcing 3 new strategies have emerged: • volume consolidation • supplier operational integration • value management Dr. Jana Jagodick Polytechnic of Namibia, 2012