CIPS L4M2 Defining Business Need

CIPS L4M2 Defining Business Need Types of Purchases new buy, straight rebuy, modified rebuy Straight rebuy purchase Routine purchases of the same products under approximately the same terms of sale Modified rebuy purchase When new-task purchases are changed on repeat orders or straight rebuy purchases are modified New purchase A purchase of an item for the first time Examples of straight rebuy purchases Utilities (gas, water, electricity) MRO ( Maintenance, repair and operating items) Raw materials (steel, chemicals) Examples of modified rebuy purchases Services (Consulting) Components or semifinished products ICT Examples of New purchases Capital Items Finished products Products from resales Task in a new purchasing Understand the business requirement Writing and effective communication Researching the supply market Researching key suppliers in that market Deciding on the key capabilities that suppliers must have Writing invitation to tender documentation Managing the tender process Negotiating Selecting the supplier. straight re-buy decision A purchase decision resulting from an ongoing purchasing relationship with a supplier modified rebuy decision a purchase decision that occurs when a buyer has experience in purchasing a product in the past but is interested in acquiring additional information regarding alternative products and/or suppliers new purchase decision A purchase decision that made when the buyer identifies a new requirement. (New Product, technology change, changes in the legislation to offer a new service) Private sector Mission and Purpose Supply the needs and improve the enduser lives maximizing the profits and provide a financial return to its share holders. Public sector Mission and Purpose Provide services not available by non profit organization. Terms of RAQSCI Model Regulatory Availability Quality Service requirement Cost Innovation RAQSCI Regulatory Covers any legal requirements or requirements of regulatory bodies RAQSCI Abailability Covers the continuing supply of goods and services when required and is based on factors , such as capacity , financial stability and risk. RAQSCI Quality this is the consistency, repeatability and how fit for propose the procured goods and services are RAQSCI Service requirements are factors associated with the way services are supplied for example flexibility, support and help desk. RAQSCI Cost Cost and price: target cost, total cost of ownership, benchmarked prices, continues improvements. RAQSCI Innovation improvement customer experience Use of RAQSCI Model Identified business requirements Business requirements things to consider Collect Information categorize potencial stakeholders Identify individuals who contribute to the acquisition On completion analisys Straight rebuy steps List of approved suppliers New suppliers are not considered the process for ordering is a procurement approved and routine Buyers experience Why is the capability of a supplier important to a a buyer? Provide special skills World-class processes Qualification from regulatory bodies (ISO) Leading edge software Specific capital equipment Uniq or dominate access to rare resources (including human skills) Reasons to prepare a business case A contract is coming to an end and the product or service need to be procured again. Cost reduction need to be made and this requires changes to the way that the organization operates. An alternative product or service has been found that potentially delivers a number of benefits business case approach 1) state problem 2) solution 3) resources problem solving the process of finding ways to correct situations (closed problems or unblock the blockages (open ended problems). Groups of problems Closed Open-ended Closed problems These appears when something happen that should not have happen. Open-ended problems these are where something is stopping the achievement of an objective or blocking progress Buying off-contracts The purchase of an item without a contract when a contract for that item already exist. moving from the problem to the solution steps Problem Problem definition Data collection Analysis Insight Hypotheses Test Solution 5 Whys stretegie Helps to describe a problem. Why this is happening? Kepner-Tregoe Method -Relies on 3 key activities 1) Describe problem in terms of identity, location, timing and magnitude 2) Compare problematic conditions with similar situations that are normal 3) Identify changes suggesting possible causes -Works best if showing something abrupt (stop vs go) Kepner-Tregoe aproach What is the problem What is not the problem What is distinctive about it? Where is the problem Where isn't the problem steps for problem solving process in procurement? 1. What is going on? 2. What do we know? 3. What are the underlying issues? 4. What could we do? 5. What is the best thing to do? 6. How do we go about it? 7. Have we achieved our objectives? 8. Can we improve on what we have? Step 1. What is going on? Step to identify a close problem using performance monitoring systems Step 2. What do we know? Data-gathering step: Interview, Questioners, Observations, Documents and records Step 3. What are the underlying issues? Step to analyze the data collection and draw conclusions that help to develop the problem definition: maps, flip charts, Step 4. What could we do? Step to generate options to addressing issues and achieving the target: (SCAMPER Technic) Substitute Combine Adapt Modify Put to other issues Eliminate Reverse Step 5. What is the best thing to do? Select solution step: checklist 1.Define the ideal solution 2.Eliminate those which do not meet any constrains that there may be 3.Evaluate the remaining solutions against the ideal solution definition 4.Asses the risk associated with the best solution. Step 6. How do we go about it? step to choose a sourcing strategy plan, roles and responsibilities need to be defined (milestones) RACI MATRIX RACI Matrix Responsible, Accountable, Consulted, Informed Step 7. Have we achieved our objectives? Plan implementation and test step using six step process 1.Create a team to implement the plan 2.Create a project Plan with activities, dependences, outputs and dates 3.Create a dashboard for tracking and demonstrating Progress 4.Communicate ongoing activity and results 5.Adapt the plan to changing circumstances 6.Document the results when the project is completed Step 8. Can we improve on what we have? This step recognize there need to be trigger events that start the process all over again. Sections to prepare a Business case for a procurement new purchase or modify rebuys Executive summary Long-term strategy consideration