One of the topics that we learned this week is Procurement Management. What this entails is essentially handling processes that require goods and services from an outside organization via raw materials, services, etc. Ideally, you want to get a good grasp of your project and a good understanding of the scope to come up with a list of goods and services that you will need. Once you get an idea of what you need, now you have to go out and look for a place that provides you with the resource.
My question is, what are some of the steps that you have taken to choose a vendor that meets your requirements? What are some of the cost-services analyses that you have conducted to ensure that you were receiving the best product for your budget? And have you ever run into an issue?
From previous events and projects, I’ve dealt with vendor interaction and raw material procurement. When I used to work at a café, I was in-charge of dealing with inventory and procuring the ingredients needed for the store: from the flour used for the baked goods to the espresso bags used. There would always be independent vendors who would come to the café and offer their products for us to serve and they would pitch their idea, their prices, and their desired share of the sales. Every couple of months, the owners and I would discuss whether or not we will update our sources for the products. Choosing which ingredients to buy depends on various factors such as taste, cost, and dependability. First, we have to ensure that the ingredient we get complements the other ingredients that come with what we serve. We also have to make sure that it will sell and that the customers like it. Second, we have to make sure that we are making money from the ingredient. If the cost of the raw material is high, then in turn the price of the product will also be high. From this, we have to see whether the resulting price is reasonable and if the customers will still buy it. We also have to make sure that we are making money from the products that we sell instead of the money going mostly to the procurement of the ingredients. Lastly, we always have to make sure that the vendor we chose to deal with is dependable with their deliveries and products. We always want to make sure that we keep the quality of our products to be at its highest possibility. We do this by making sure that we only have the best ingredients for our products. We also want to make sure that the ingredients get to the store in a timely manner so that there is time for it to be prepared.
I have had several instances where I've had to deal with vendors and our project team has had to work on choosing the appropriate vendor. The initial steps in dealing with the situation are setting up meetings with different vendors. One key aspect of larger companies is that they usually have approved vendors, therefore you must meet with them even if you are interested in other vendors for your specific project. The approved vendors list is usually easier to deal with since they have been through the checks required by the company, while on-boarding an unapproved vendor can increase the cost and timeline of your project. For a project we worked on we ended up going through an unapproved vendor and had to audit their facility to ensure regulatory compliance and that the practices were acceptable by our company standards. This audit and company checklist were some of the methods utilized to ensure that the we receive that best product, however it did have the drawback of significantly increasing the timeline of the project. The biggest issue with vendors is usually communication as the vendors do have multiple clients at times certain vendors can have communication lapses which cause project delays and uncertainty on receiving certain material. For example we had communication lapses with a vendor that creates our surgical mesh, which we needed for prelim studies on another project that was being worked on. The vendor was requested to send certain batches of this mesh for the experimental protocol and at first they delayed the shipment by about 3 weeks and when it did finally arrive it was the wrong batch. These types of issues with vendors essentially drive cost and time of projects to increase.
In my opinion, if it is a small organization looking for outsourcing, then it should go for smaller vendors to cut down on the cost and to maintain flexibility rather than going for larger players as they may not provide that much attention to a smaller client. Secondly, if the requirement of the company is niche that can be met only by an industry specialist, then they need to go for a smaller specialised provider who have the relevant experience in providing those deliverables and can do that in the given timeline.
According to an article I read called, "The vendor selection process, How to select a vendor formally?", there are a set of questions you must answer as a buyer:
1. What products do you require?
2. What quality levels are you seeking?
3.What stock levels do you require?
4. How often do you require delivery?
5.What price points are you seeking?
Once these questions are answered then find vendors which meet your demands. Always negotiate prices and not just take the listed value.Once a vendor is selected create a master agreement to layout the delivery times etc.
In order to see if a vendor will meet our requirements, we actually did significant research on the vendor itself and looked to see if they actually made products to ISO standards, ASTM standards, so on and so forth. We were lucky enough to get in contact from the vendor's previous customers, and some of our team members were even previous customers from other vendors, so that helped a lot in ensuring that the products we were getting were compliant with our design. Sometimes it is difficult to perform a cost analysis comparing different vendors since some products were the only ones selling the product we required. We have run in to some problems with certain vendors not supplying the product on time and a vendor is the only variable in our project that we know for a fact is out of our control. If a component was delayed, there was nothing we could do but delay our project, but this only happened once. We had the foresight to anticipate this kind of issue and purchased components well ahead of the procurement deadline.
Although I haven't had any direct experience with procurement myself, I've caught glimpses of the processes in some previous jobs. When I worked in a restaurant, I often had to go back into storage to refill our supply of cups, takeout bags, etc. When I went back there, I noticed that there was typically a huge amount of whatever I needed to get, probably enough to last the entire year. The restaurant's procurement plan probably relied on a lot of bulk purchases to save money. One con to this that I found was that unless inventory is properly tallied every so often, the diminishing amount of one item can easily be overlooked. This was exactly the case when one time we ran out of takeout bags. The manager didn't realize we had no more in storage and thus we had to go 2 weeks before more came in. Perhaps this may have been a good time to consider other suppliers (this is probably why it took so long for more to come in) but I wasn't privy to that information.
I don't have any experience of my own, but my father owns a company and procurement is a major key to a company's success. I agree with bb254. The points she mentioned are major points in procurement management. I would like to add from my father's experience that having a solid back up plan for vendors is necessary. Things come up with vendors, like price hikes and other situations that make a back up plan essential so the production process of the company stays stable under any sudden changes to the supplying vendor.
Personally I have no experience with procuring materials, however I know an admistrator of senior medical daycare who deals with a budget set by the state, specifically the department of agriculture. One of the things that must be purchased with the budget is a meal plan for the patients. This involves finding a vendor that will adhere to the nutritional needs of the patients set by dietitians and the administrator and still be cost effective. They go thru several vendors who bid to provide this service, but one of the issues that may arise is the strict regulations of the state where they can spot check the facility and the food at any time. They check proper food storage temperatures from the delivery, specific food portions and also necessary food groups. If one of these conditions is unsatisfactory, they can pull funding.
I don't have direct experience within procurement, but I know that procurement is very contract oriented and once these suppliers are approved into the company, the company essentially has rights to be purchased from the company. In addition, approved vendor may have the ability to be qualified for inspection incentives and aid in the manufacturing of products if applicable.
Choosing a vendor can be as simple as asking friends who they use for their business. Other, I would take certain steps to choose right vendor such as document my organization needs, identify the sources- do my own research, measuring supply performance, and communicate with different vendors and see how well they satisfy end-user. Other things, I would look for flexibility, time delivery, customer service. Important part of selecting a vendor to make sure that the discounts on the price list are always negotiable.
You bring up a great point Talha. Depending on the product or service you are procuring a certain standard must be met by the vendor. For a critical component, one that will be part of the implanted device, the supplier must meet industry and OEM quality guidelines in order to be purchased. However, there may be a plethora of items that are low risk or are simply production stock items that may not need as rigorous of quality control and may be bought from on the shelf as miscelaneous parts.
I would take the opportunity to review the financial stability of the vendor as problems often mean an unprofitable company.I would also look at the performance of the vendor coupled with their direct and indirect benefits is compared to the physical cost of doing business with them. These costs would include such matters as: overpricing, early requests for invoice payment, difficult delivery times that require extra staffing to manage.
In my experience, the procurement process is very straight forward but can sometimes be expensive. There have been several occasions where I have found a given product for a relatively cheap price but because it's not on the approved vendor list for my company, I'm forced to place a PO from a more pricey vendor. We have an office administrator that we run all of our PO's by. Often times, we just email our Office Administrator a link of the product we're looking for and she'll find it from one of the approved vendors and process the PO for us.
One of the project I worked required us to use specific captive bolts. The shoulder length, tread size, knob type, etc. all had to be a specific value. I researched companies for a while until I found one. That produced exactly the screw I wanted. Along with the procurement team we contacted them and were able to get a few samples, which were used in prototypes of the product we were developing. It was difficult to communicate with them since they were based in another country, but the samples we received met our specifications and strength conditions. So we ordered more screws from them, for production use. After our first order, which were fine, we ordered more for a second patch and they then explained they wouldn’t produce the screws anymore out of nowhere. I guess they weren’t profitable or no one really bought them. So now I was back to step one looking for another vendor with incomplete orders waiting. Lesson learned to make sure you have a backup plan or alternative source.