Dr. Jana Jagodick Polytechnic of Namibia, 2012 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 Supplier Contact Background Review Negotiation Fulfillment Consumption, Maintenance and Disposal Renewal Very common in public sector and in some private companies

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 6 months 2 months 1 month flexible Slightly flexible inflexible 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