Competitive Procurement and Cost Savings

Introduction

Procurement is the acquisition of goods and/or services at the best possible total cost of ownership (TCO), in the right quantity and quality, at the right time, in the right place and from the right source for the direct benefit or use of corporations, or individuals, generally via a contract. Simply in other words, the range of activities associated with the buying of goods and services to support business operations is called procurement.

Traditionally it was thought that competitive advantage was the result of marketing and advertisement expenses and purchasing was not given due importance. Even in the recent past, purchasing was regarded as being services to production and other functions of the company and thus it was given limited attention to issues concerned with the procurement. But in today’s competitive business world, these traditional approaches can no longer guarantee competitive advantage in all cases. Companies, therefore, have to find other means of succeeding. This is nothing but succeeding through effective utilization of procurement processes. Now managers have realized that purchasing should be considered as a key strategic business process rather than a narrow specialized supporting function to overall business strategy.

Typically, a company normally spends about 60-70% of revenues through procurement, and if this spending is managed efficiently and effectively, company can enhance its competitive advantage significantly. Any savings in procurement directly contribute to the company’s bottom line i.e. profit of the company. To achieve same amount of profit through marketing and sale, the company’s sale may have to be increased proportionately. In most cases this may become difficult task for many companies. Savings thorough procurement can be achieved by ensuring continuity of supply at the best possible TCO, reducing overall lead-times, maintaining quality and durability of supply of inputs, promoting innovation in supply, improving supplier’s reliability and services, maintaining optimum inventory and applying many other ways related to supply and procurement.

To reap the benefits of all opportunities of effective procurement management as narrated above, companies have to have to effective procurement organization in place. This procurement organization has to be run by trained personnel. Without trained personnel in the organization in general and for the procurement organization in particular, organization may fail to ensure uninterrupted flow of supply at lowest cost, improve quality and to achieve satisfaction of end customers.

Methodology

Interactive Lecture
PowerPoint Presentation
Group Discussion

Contents of Training:

Day 01:
Introduction to Program & Learning Objective
Procurement and its Evolution of Strategy
Overview of Purchasing Process
Make or Buy Decision
Types of Purchases and Supply Positioning Model
Information about Supplier and Supply Market
Select areas of Supply and its Strategy

Identify and select Suppliers
Price and Acquisition Cost
Tendering Process
Negotiating and Bidding Process
Negotiating through Cost Analysis
BATNA and other elements of Negotiating
Price Revision Formula

Total Cost of Ownership
Purchasing Contract
Supplier Relationship Management (SRM)
Vendor Evaluation
Demand Management
Group Purchasing

Strategic Souring
Supply Chain Management
Learning Check
Question & Answer Session
Summarize and Wrap up of the day

Day 02:
Introduction to Program & Learning Objective
Inventory – Key Concepts
Inventory Replenishment
Lead-time Management and Cost Performance
Incoterms 2010
Letter of Credit
RFI, RFP and RFQ

Cost Savings through Cost Reduction
Cost Savings through Change of Specification
Cost Savings through Variety Reduction
Cost Savings through Better Negotiation
Purchasing and Improvement of Liquidity
Purchasing Savings and Cash Discount

Cost Savings through Cost Avoidance
Cost Reduction by Cutting Back on Safety Stock
Cost Savings through Change of Modes of Transport
Reduction of Inspection
Windfall Cost Savings

Value Engineering and Cost Savings
Purchasing: Profit Leverage
Case Studies
Glossary
Question-Answer Session
Summarize and Wrap up of the session

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Contact

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Professionals working in the field of supply, procurement, logistics, finance and strategic planning.


"It was a wonderful experience, some old concepts got revised and got some new ideas" - A. K. M. Shafiqur Rahman, Sr. Executive, MGH Group.
"The workshop was quite good, knowledgeable and satisfactory" - Sajid Shafique, Sr. Executive, MGH Group.