TABLE OF CONTENTS
1 PROCUREMENT MANAGEMENT ............................................................................................................. 3
1.1 PROCUREMENT VS PURCHASING .................................................................................................................. 3
1.1.1 Strategic - Tactical - Operational Procurement .............................................................................. 5
1.2 BUSINESS CONTEXT ................................................................................................................................... 5
1.2.1 4 Economic Sectors ......................................................................................................................... 6
1.3 IMPORTANCE OF PROCUREMENT (DEPARTMENT) ............................................................................................ 8
1.4 PROCUREMENT ROLES/FUNCTIONS ............................................................................................................ 10
1.4.1 Interaction with others ................................................................................................................. 10
1.4.2 DMU (Decision Making Unit) : Roles ............................................................................................. 11
1.5 THE FUTURE OF PROCUREMENT MANAGEMENT ........................................................................................... 12
2 TYPES OF GOODS & TYPES OF PROCUREMENT ..................................................................................... 13
2.1 GROUPS & CLASSIFICATIONS..................................................................................................................... 13
2.2 4 TYPES OF GOODS ................................................................................................................................. 13
2.3 DIRECT VS. INDIRECT ............................................................................................................................... 15
2.4 GOODS VS. SERVICES ............................................................................................................................... 16
2.5 INVESTMENTS ........................................................................................................................................ 17
2.6 CAPEX VS OPEX .................................................................................................................................... 18
2.7 PROCUREMENT CATEGORIES ..................................................................................................................... 20
2.8 OEM – IAM ......................................................................................................................................... 20
3 PROCUREMENT PROCESS (STEP-BY-STEP) ............................................................................................. 23
3.1 SPECIFYING............................................................................................................................................ 23
3.2 SELECTING............................................................................................................................................. 26
3.3 CONTRACTING ....................................................................................................................................... 28
3.4 ORDERING ............................................................................................................................................ 33
3.5 DELIVERIES / FOLLOW-UP ........................................................................................................................ 36
3.6 PERFORMANCE FOLLOW-UP ..................................................................................................................... 39
4 TASKS OF A BUYER/PURCHASER ........................................................................................................... 41
5 GROUP PURCHASING ORGANIZATION (GPO) ........................................................................................ 46
6 STRATEGIC SOURCING .......................................................................................................................... 52
6.1 STRATEGIC SOURCING : DEFINITION ........................................................................................................... 52
6.2 OUTSOURCING ....................................................................................................................................... 52
7 PORTFOLIO ANALYSIS & TOOLKITS ....................................................................................................... 56
7.1 PETER KRALJIC PORTFOLIO MATRIX ............................................................................................................ 56
7.2 PARETO ANALYSIS................................................................................................................................... 58
7.3 DAY ONE ANALYSIS................................................................................................................................. 61
7.4 PESTEL ANALYSIS .................................................................................................................................. 62
8 PRICING & DISCOUNTS ......................................................................................................................... 65
9 CONTRACT MANAGEMENT ................................................................................................................... 70
9.1 WHAT? WHY? HOW?............................................................................................................................. 70
9.2 STAGES OF CONTRACT MANAGEMENT ........................................................................................................ 71
9.3 CONTRACT ANALYSIS SOFTWARE ............................................................................................................... 71
, 9.4 LEGAL TERMS, TERMS & CONDITIONS ........................................................................................................ 72
10 SLA MANAGEMENT (SERVICE LEVEL AGREEMENT) ............................................................................... 74
11 SRM MANAGEMENT (SUPPLIER RELATIONSHIP MANAGEMENT) .......................................................... 77
11.1 DEFINITION ........................................................................................................................................... 77
11.2 RLEATIONSHIPS ...................................................................................................................................... 77
11.3 SUPPLIER SEGMENTATION ........................................................................................................................ 78
12 E-PROCUREMENT ................................................................................................................................. 83
12.1 DIGITALIZATION & DRIVERS ...................................................................................................................... 83
12.2 E-PROCUREMENT ................................................................................................................................... 84
12.3 E-TRANSACTING ..................................................................................................................................... 87
12.4 BLOCKCHAIN.......................................................................................................................................... 92
1 SALES INTRODUCTION .......................................................................................................................... 95
1.1 FIRST OBSERVATION: THE MARKET SHIFT .................................................................................................... 95
1.1.1 Shift 1: Product → Customer orientation...................................................................................... 95
1.1.2 Shift 2: Market evolution:Pressure on the mid-market segment from two directions ................. 96
1.1.3 Shift 3: Increasing segmentation .................................................................................................. 97
1.2 SECOND OBSERVATION: THE SALES ENVIRONMENT CHANGES ......................................................................... 97
1.2.1 Change 1: Environmental changes................................................................................................ 97
1.2.2 Change 2: Growing importance of R&D .................................................................................... 101
2 NEW SOLUTIONS SELLING ................................................................................................................... 105
2.1.1 Change 3: Growing “gap” B2B // B2C ......................................................................................... 107
3 THIRD SHIFT: SHIFT IN DECISION MAKING .......................................................................................... 108
4 PART 3: BUYING AND SELLING IN A COMPLEX B2B WORLD ................................................................ 115
5 CHANGING ROLE OF SALES ................................................................................................................. 124
6 STRATEGY IS KEY................................................................................................................................. 127
6.1 SHIFT 2: MARKET EVOLUTION................................................................................................................. 128
,1 PROCUREMENT MANAGEMENT
1.1 PROCUREMENT VS PURCHASING
▪ Both Procurement & Purchasing often used.
▪ Interaction -> What is difference ? Other Terms ?
o Procurement: bigger umbrella, more strategic aspects, where to buy?
o Purchasing: operational cycle of buying something, companies do this every day
The Purchasing Process Model
▪ Sourcing & Supply : mostly used in production environment
▪ Buying : mostly used in retail
▪ Purchasing : mostly associated with the Operational activities
Procurement vs. Purchasing
▪ Procurement
o Broader context incl the stategical elements, incl
Sourcing, incl supplier mgt
o “the process of finding and acquiring all of the goods, services, and works an
organization needs to operate and fulfill its business model”
o Activities include
▪ Identify goods and services required
▪ Approve purchase requests
▪ Procurement
▪ Identify suppliers
▪ Sending inquiries (RFQs and RFPs)
▪ Receipt of quotes from suppliers
▪ Negotiate pricing and terms
▪ Select vendors
, Purchasing
• Focus on the Operational activities
• “set of tasks involved in buying goods and services. Purchasing involves tasks such as
ordering, raising purchase orders, receiving, and arranging payment”
• Activities include
• Acknowledge purchase orders
• Advance shipment notice
• Receive goods
• Inventory management
• Invoice recording
• Three-way match
• Payment to supplier
!! Terms “Procurement” & “Purchasing” often used interchangeably..but they are different !!
Purchasing is part of the bigger umbrella of procurement
SAP: creates purchase order for customer (quantity, price, etc.), generated via the ERP system SAP,
then forwarded to supplier A via SAP
Next: goods delivery and invoice via the SAP system
Next: cash receipt (only pay once you receive the invoice)
Procurement covers different aspects :
• strategic elements (single supplier vs multi supplier)
• Operational (…steps to buy )
• Technology (e Procurement)
1 PROCUREMENT MANAGEMENT ............................................................................................................. 3
1.1 PROCUREMENT VS PURCHASING .................................................................................................................. 3
1.1.1 Strategic - Tactical - Operational Procurement .............................................................................. 5
1.2 BUSINESS CONTEXT ................................................................................................................................... 5
1.2.1 4 Economic Sectors ......................................................................................................................... 6
1.3 IMPORTANCE OF PROCUREMENT (DEPARTMENT) ............................................................................................ 8
1.4 PROCUREMENT ROLES/FUNCTIONS ............................................................................................................ 10
1.4.1 Interaction with others ................................................................................................................. 10
1.4.2 DMU (Decision Making Unit) : Roles ............................................................................................. 11
1.5 THE FUTURE OF PROCUREMENT MANAGEMENT ........................................................................................... 12
2 TYPES OF GOODS & TYPES OF PROCUREMENT ..................................................................................... 13
2.1 GROUPS & CLASSIFICATIONS..................................................................................................................... 13
2.2 4 TYPES OF GOODS ................................................................................................................................. 13
2.3 DIRECT VS. INDIRECT ............................................................................................................................... 15
2.4 GOODS VS. SERVICES ............................................................................................................................... 16
2.5 INVESTMENTS ........................................................................................................................................ 17
2.6 CAPEX VS OPEX .................................................................................................................................... 18
2.7 PROCUREMENT CATEGORIES ..................................................................................................................... 20
2.8 OEM – IAM ......................................................................................................................................... 20
3 PROCUREMENT PROCESS (STEP-BY-STEP) ............................................................................................. 23
3.1 SPECIFYING............................................................................................................................................ 23
3.2 SELECTING............................................................................................................................................. 26
3.3 CONTRACTING ....................................................................................................................................... 28
3.4 ORDERING ............................................................................................................................................ 33
3.5 DELIVERIES / FOLLOW-UP ........................................................................................................................ 36
3.6 PERFORMANCE FOLLOW-UP ..................................................................................................................... 39
4 TASKS OF A BUYER/PURCHASER ........................................................................................................... 41
5 GROUP PURCHASING ORGANIZATION (GPO) ........................................................................................ 46
6 STRATEGIC SOURCING .......................................................................................................................... 52
6.1 STRATEGIC SOURCING : DEFINITION ........................................................................................................... 52
6.2 OUTSOURCING ....................................................................................................................................... 52
7 PORTFOLIO ANALYSIS & TOOLKITS ....................................................................................................... 56
7.1 PETER KRALJIC PORTFOLIO MATRIX ............................................................................................................ 56
7.2 PARETO ANALYSIS................................................................................................................................... 58
7.3 DAY ONE ANALYSIS................................................................................................................................. 61
7.4 PESTEL ANALYSIS .................................................................................................................................. 62
8 PRICING & DISCOUNTS ......................................................................................................................... 65
9 CONTRACT MANAGEMENT ................................................................................................................... 70
9.1 WHAT? WHY? HOW?............................................................................................................................. 70
9.2 STAGES OF CONTRACT MANAGEMENT ........................................................................................................ 71
9.3 CONTRACT ANALYSIS SOFTWARE ............................................................................................................... 71
, 9.4 LEGAL TERMS, TERMS & CONDITIONS ........................................................................................................ 72
10 SLA MANAGEMENT (SERVICE LEVEL AGREEMENT) ............................................................................... 74
11 SRM MANAGEMENT (SUPPLIER RELATIONSHIP MANAGEMENT) .......................................................... 77
11.1 DEFINITION ........................................................................................................................................... 77
11.2 RLEATIONSHIPS ...................................................................................................................................... 77
11.3 SUPPLIER SEGMENTATION ........................................................................................................................ 78
12 E-PROCUREMENT ................................................................................................................................. 83
12.1 DIGITALIZATION & DRIVERS ...................................................................................................................... 83
12.2 E-PROCUREMENT ................................................................................................................................... 84
12.3 E-TRANSACTING ..................................................................................................................................... 87
12.4 BLOCKCHAIN.......................................................................................................................................... 92
1 SALES INTRODUCTION .......................................................................................................................... 95
1.1 FIRST OBSERVATION: THE MARKET SHIFT .................................................................................................... 95
1.1.1 Shift 1: Product → Customer orientation...................................................................................... 95
1.1.2 Shift 2: Market evolution:Pressure on the mid-market segment from two directions ................. 96
1.1.3 Shift 3: Increasing segmentation .................................................................................................. 97
1.2 SECOND OBSERVATION: THE SALES ENVIRONMENT CHANGES ......................................................................... 97
1.2.1 Change 1: Environmental changes................................................................................................ 97
1.2.2 Change 2: Growing importance of R&D .................................................................................... 101
2 NEW SOLUTIONS SELLING ................................................................................................................... 105
2.1.1 Change 3: Growing “gap” B2B // B2C ......................................................................................... 107
3 THIRD SHIFT: SHIFT IN DECISION MAKING .......................................................................................... 108
4 PART 3: BUYING AND SELLING IN A COMPLEX B2B WORLD ................................................................ 115
5 CHANGING ROLE OF SALES ................................................................................................................. 124
6 STRATEGY IS KEY................................................................................................................................. 127
6.1 SHIFT 2: MARKET EVOLUTION................................................................................................................. 128
,1 PROCUREMENT MANAGEMENT
1.1 PROCUREMENT VS PURCHASING
▪ Both Procurement & Purchasing often used.
▪ Interaction -> What is difference ? Other Terms ?
o Procurement: bigger umbrella, more strategic aspects, where to buy?
o Purchasing: operational cycle of buying something, companies do this every day
The Purchasing Process Model
▪ Sourcing & Supply : mostly used in production environment
▪ Buying : mostly used in retail
▪ Purchasing : mostly associated with the Operational activities
Procurement vs. Purchasing
▪ Procurement
o Broader context incl the stategical elements, incl
Sourcing, incl supplier mgt
o “the process of finding and acquiring all of the goods, services, and works an
organization needs to operate and fulfill its business model”
o Activities include
▪ Identify goods and services required
▪ Approve purchase requests
▪ Procurement
▪ Identify suppliers
▪ Sending inquiries (RFQs and RFPs)
▪ Receipt of quotes from suppliers
▪ Negotiate pricing and terms
▪ Select vendors
, Purchasing
• Focus on the Operational activities
• “set of tasks involved in buying goods and services. Purchasing involves tasks such as
ordering, raising purchase orders, receiving, and arranging payment”
• Activities include
• Acknowledge purchase orders
• Advance shipment notice
• Receive goods
• Inventory management
• Invoice recording
• Three-way match
• Payment to supplier
!! Terms “Procurement” & “Purchasing” often used interchangeably..but they are different !!
Purchasing is part of the bigger umbrella of procurement
SAP: creates purchase order for customer (quantity, price, etc.), generated via the ERP system SAP,
then forwarded to supplier A via SAP
Next: goods delivery and invoice via the SAP system
Next: cash receipt (only pay once you receive the invoice)
Procurement covers different aspects :
• strategic elements (single supplier vs multi supplier)
• Operational (…steps to buy )
• Technology (e Procurement)
