1. Procurement Planning
WFP Logistics, We Deliver

2. Lesson Objectives
By the end of this lesson, you will be able to: 1
Describe the models of inventory cost and turnover 2
Describe the principles of safety and free stock 3
Describe strategic procurement and investment in suppliers

3. Strategic Planning Process
Identify your requirements
Develop your Procurement Plan with reference to lessons learned
Coordinate your requirements with different GOVT departments to unify overall supply sources
Identify your opportunities & threats
Adopt your Procurement Plan
The Vision

4. Procurement Planning Needs Identified Order Management Distribution
Internal Users
Internal Users
Central Warehouses
Emergency Response / Beneficiaries
Emergency Response / Beneficiaries
Procurement Sourcing
Field Warehouse / Hubs
Stock Replenishment
Stock Replenishment

5. Strategic Planning Process
Whether to procure
How to procure
What to procure
How much to procure
When to procure
Taking into account:
Distribution schedule & capacity
Characteristics of the product
Inventory management

6. Managing Numerous Supply Chains Inventories Across the Supply Chain
National
Networks
Regional
Networks
Local Networks
Delivery
Points
Customer 1
Frequent
Customer 2
Infrequent
Chopra & Meindl 2010: Ch. 10

7. What is happening in an Emergency
Uncertainty of exact demand
Push – Pull strategy
A lot of stocks are pushed into the operational area.
Right or Wrong?
In groups, define the pros and cons.
5 minutes to prioritize and discuss
DO NOT PRINT IN WORKBOOK

8. What is happening in an Emergency
Right or Wrong?
Yes, but……..
DO NOT PRINT IN WORKBOOK
Tents request from Program: 10,000 Tents NOW
Available
Week 1
Week 2
Week 3
Planned Demand
10,000
Distribution
1,000
Received
5,000 air
4,000
8,000
7,000

9. Example: Haiti Emergency Shelter
Tents request from Program: 10,000 Tents NOW
Available
Week 1
Week 2
Week 3
Planned Demand
10,000
Distribution
1,000
Received
5,000 air
4,000
8,000
7,000
DO NOT PRINT IN WORKBOOK
Good planning
Available
Week 1
Week 2
Week 3
Planned Demand
1,000
Distribution
Received
4,000 air
3,000 sea
3,000
2,000
4,000

10. Inventory Management 1. Free stock 2. Safety Stock 3. Emergency stock
How inventory management is linked to your Procurement Planning Process
1. Free stock
2. Safety Stock
3. Emergency stock

11. Definition ‘Free Stock’
Physical Stock on hand
Stock on order from suppliers
Free Stock
Stock in Transit
Stock allocated to consignments
Stock reserved for special purposes

12. Inventory Management System
Commercial sectors are using different methodologies such as:
Minimum stock level
Maximum stock level
EOC (Economic Ordering Cost)
EOQ (Economic Ordering Quantity)
Not used in emergency situations except for medical items where minimum stock level system is used.

13. Scenario Exercise: Procurement Planning
DO NOT PRINT IN WORKBOOK

14. Scenario Exercise: Procurement Planning
In Mewong, you are in charge of planning the procurement of the tents for the Southern province.
Constraints
The Government of Mewong ask you to keep always 2000 tents in stock in Negeri for possible new influx of IDPs
Your distribution capacity (trucking and helicopters) is 10,000 tents per week
Your actual stock in Negeri is 12,000 tents. No stock anywhere else. This stock has been donated by the government of Japan. So, no cost involved for you
Cost calculation is up to Negeri warehouse. It does not include the last leg
Assumption
You may assume that when a consignment arrives to Negeri, it can be dispatched the same week.
DO NOT PRINT IN WORKBOOK

15. Scenario Exercise: Procurement Planning
Task:
Build your procurement plan in a cost efficient manner and tell us where you stand at week 8, using the tables you have in your hand out, and detailing your ordering and your dispatch plans.
Prepare a group presentation to explain your results and your reasoning
45 minutes to prepare/calculate
30 minutes per groups for presentation
See your hand out for more details
DO NOT PRINT IN WORKBOOK

16. Scenario Exercise: Procurement Planning
Solution
DO NOT PRINT IN WORKBOOK

17. Scenario Exercise: Procurement Planning
Date
Order Qty
Supplier
Mode
Cost
Dispatch Qty
Arrival
Week 1
8,000
Ahmad Bros. (stock)
Air
5,200,000
Week 2
2,000
Canvas Tech (stock)
Road
800,000
10,000
Canvas & Tents (stock)
Rail & Road
5,000,000
Week 3
30,000
Ahmad Bros.
Sea
3,000,000
Week 5
Week 6
Week 7
Canvas & Tents
Week 4
5,000
2,500,000
Total
65,000
27,500,000
DO NOT PRINT IN WORKBOOK

18. Distribution Plan Scenario Exercise: Procurement Planning
Time
Qty Recd
Supplier
Opening Stock in Negeri
Tents Dispatched
Closing Stock in Negeri
Stock on Order / Transit
Week 1
Stock
12,000
10,000
2,000
50,000
Week 2
Canvas Tech (2000) Ahmad Bros. (8000)
Week 3
Canvas & Tents
45,000
Week 4
35,000
Week 5
15,000
Ahmad Bros.
7,000
20,000
Week 6
Week 7
Ahmad Bros -
Week 8
5,000
Total
65,000
75,000
DO NOT PRINT IN WORKBOOK

19. DO NOT PRINT IN WORKBOOK
Recap Lesson
Recap Lesson
Questions: 1
What are the key considerations for an efficient procurement plan?
DO NOT PRINT IN WORKBOOK 2
What is the link between procurement planning and inventory management?

20. Questions
WFP Logistics, We Deliver