When considering your procurement and supply strategy, it’s imperative to formulate a plan of action that considers both internal and external factors of your business. Things like external market conditions need to be taken into consideration, as well as internal factors such as your business’ dynamic requirements.
What are the 13 stages of procurement?
Here are the 13 essential stages of the procurement life cycle.
1. Define the needs of your business
The first step of the procurement and supply lifecycle is to understand your businesses needs and opportunities. These need to be clearly laid out before going forward to ensure you’re following a plan.
It’s critical to involve numerous different stakeholders within this plan to help you build a bigger, more broad image of what needs to be done, using various different kinds of knowledge, expertise and viewpoints to build a comprehensive plan of action that includes lots of different aspects and considerations.
2. Market analysis
Next, you need to conduct market research in your industry and analyse the options available to you in order to make the best decision. Weigh up your options based on your current position and what is happening in the marketplace.
Analysing both your own position and the conditions of the marketplace better equip you with the information required to make better decisions for both the present and the future. Use this information to help you decide whether to manufacture the product or to outsource it.
3. Develop the plan
Once you have carried out thorough market analysis and familiarised yourself with the changing market conditions it is time to put together a solid plan that considers the potential effect of the external environment. Making competitive procurement offers is good if you’re in a position to compete with others in your market with a quality offering that distinguishes your capabilities above the rest. It may be better to develop competition in the marketplace or bring this in-house if you only have one supplier.
4. Pre-procurement – Market Test & Engagement
This is the stage where you have to consider the individual needs of both the stakeholders and the business as a whole and how changes to the procurement strategy can flexibly meet those needs. This kind of market test will help you gauge whether it is the right time to go into the marketplace or whether it’s best to hold back.
5. Develop detailed documentation
Creating relevant and detailed documentation is critically important, including a detailed breakdown of the volumes, service level agreements and terms and conditions. A detailed breakdown should ensure consistency on pricing, operational functionality and product quality, reducing the negative financial effect of the wrong specification.
6. Supplier selection to participate in Tender
Gain an understanding of the capabilities, size, financials, strengths and weaknesses of the supplier to see if they are the appropriate candidates. Conducting a request for information (RFI) should give you good insights into all of these factors and help you decide whether the supplier is fit for purpose.
7. Issue Tender Documents (ITT + RFQ)
When you have selected the appropriate companies to take part, you need to send out the formal documentation such as an Invitation to Tender (ITT) and a Request for Quotation (RFQ) to the suppliers that have been selected to participate. Include as much detailed documentation as possible regarding the business requirements, along with clear timescales to respond.
8. Bid and Tender Evaluation and Validation
Once the tenders have been submitted and returned, the next step is bid evaluation and validation against pre-defined award criteria. Identify which offering is the best value for money (VFM) and select the best supplier based on these criteria. Make sure the tender evaluation is disciplined, structured and transparent, including price comparisons and technical aspects.
9. Contract Award & Implementation
Once you have the selected your chosen supplier you will award them the contract, allowing both parties to fully understand their duties, responsibilities and key success criteria as part of the agreement. This forms the proper foundations to manage the contract and relationship effectively.
10. Warehouse, Logistics and Receipt
Warehousing and logistics have to be considered to make sure that the procurement and supply process is efficient and uncomplicated. Things like product coding and classification, storage space, layout & racking and the delivery frequency. Be sure that your supplier is able to handle the demand.
11. Measure Contract Performance and Improvement opportunities
You should monitor the contract performance and review it at agreed periods against the key performance indicators that were agreed upon in the contract. Include discussions on the relationship and its efficacy, resolving any issues or conflicts with agreed-upon processes and timescales. Also, consider continuous improvement and set the next date for review.
12. Supplier Relationship Management (SRM)
Supplier relationship management (SRM) is a crucial part of supply chain management (SCM), reviewing your suppliers and considering the right level of cooperation and effort required to develop the relationship and achieve specific objectives. Creating the right relationships and environment fosters innovation and development as well as making the process faster and more efficient.
13. Asset Management
As the process continues, regular assessments should be made to consider the changing business requirements that are affected by numerous factors such as market changes, economic climate, supplier relationships etc. This helps determine whether the current agreement is still fit for purpose or whether a new, updated one needs considering, bringing us back to stage one of the cycle.
Improve Your Organisation’s CIPS Procurement Life Cycle
If you would like to improve your employees’ understanding of these steps then consider enrolling them in a Supply and Procurement apprenticeship here at SRSCC.
We cover all of these steps and more in our industry-leading Supply and Procurement courses, so get in touch with SRSCC today to discuss our courses.