A typical strategic procurement process involves seven major steps. Organizations will adapt this process based on the type of competitive advantage strategy they are implementing, the international procurement activity they are undertaking and their own comfort level with the applicable risk.
To be effective and minimize risk, organizations must be able to conduct their sourcing process in an organized and systematic fashion that is repeatable for all procurement decisions.
This article series will outline each step in detail, for this article we are covering Step 5: Implement the Sourcing Strategy
You can read about steps 1, 2, 3 & 4 of the procurement process.
- Involvement in activities core to the buyer, e.g. supply limited raw material for core product, access to highly confidential proprietary knowledge
- One of a limited number of available suppliers with specific equipment/technology and skilled labour pool
- Part of the broader business strategy
For a direct purchase, organizations may begin with an Expression of Interest (EOI), prepare an RFP or RFQ, and solicit bids from identified potential suppliers as part of a competitive bidding process.
The RFP should include detailed material, product or service specifications, delivery and service requirements, evaluation criteria, pricing structure, and financial terms.
The strategic procurement team will want to include a disclaimer to declare that no financial responsibilities lie with its organization for soliciting information and for any costs associated with participating in the bidding process. The RFP is sent out to suppliers with a response deadline.
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The use of e-procurement technology is a means to streamline the bidding process. Companies that use an e-procurement platform allow potential suppliers to offer products electronically and post their bids online. The organization’s procurement team can download and assess quotes, and post responses confidentially. This eliminates paperwork, speeds up the bidding process and reduces the time zone impact.
Most e-procurement systems are integrated with enterprise resource planning (ERP) systems. Selected vendors then use Electronic data interchange (EDI) to send and receive standard business documents, such as inventory levels, invoices, and price lists, and payments are also made electronically.
Stay tuned for Steps 6 & 7 of the strategic procurement process in this continuing series.