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Question 1: Structuring the procurement activities
Types of procurement structures range from a single person with responsibility for purchasing, to a
large, centralized department or decentralized organization with procurement professionals working in
separate locations or business units.
The procurement process can be complicated one. Strategic procurement is an organization-wide

process. It requires input from all departments and functional areas for an organization. Organizations
should set up a strategic procurement team. This team sets the overall direction for procurement,
aligned with the business strategy. The team will then use the data from the strategic procurement
process to develop and implement a strategic procurement plan. Here are the 7 steps that lead to a
successful procurement process.
Step 1: Conduct an internal needs analysis To begin, you’ll need to benchmark current performance and
then identify needs and targets before developing a procurement strategy. This involves the collection
of several different types of data. The purpose for collecting initial data is to benchmark current
performance, resources used, costs for all the departments/functions in the organization, and current
growth projections.
Step 2: Conduct an assessment of the supplier’s market In this step, the strategic procurement team
identifies potential countries that are feasible sources of the required raw materials, components,
finished goods or services. If there are specific requirements, it may limit the number of countries that
are suitable. For instance, if one of the raw materials used by the organization can only be found in one
country, then options are much narrower. For manufactured products, there will be a much wider range
of potential countries from which to select. Services may be limited by the technological requirements
of the organization.
Step 3: Collect supplier information It is important for a company to select suppliers carefully. A
supplier’s inability to meet selection criteria can result in significant losses for the organization. The
business reputation and performance of the supplier must be evaluated, and financial statements, credit
reports, and references must be checked carefully. If possible, the organization should arrange to
inspect the supplier’s site and talk to other customers about their experiences with the supplier. The use
of agents, who are familiar with the markets and stakeholders, can also be beneficial to this process.
Organizations may select more than one supplier to avoid potential supply disruptions as well as create
a competitive environment. This strategy is also effective for large multinational organizations and
allows for centralized control, but more regional delivery.
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Step 4: Develop a sourcing/outsourcing strategy Based on the information gathered in the first three
steps, an organization can develop a sourcing/outsourcing strategy. The following are examples of
sourcing strategies: Direct purchase: Sending a Request for Proposal (RFP) or a Request for Quote (RFQ)
to select suppliers. Acquisition: Purchasing from a desirable supplier. Strategic partnership: Entering into
an agreement with a selected supplier. Determining the right strategy for you will depend on the
competitiveness of the supplier marketplace and the sourcing/outsourcing organization’s risk tolerance,
overall business strategy and motivation for outsourcing
Step 5: Implement the sourcing strategy Sourcing strategies that involve acquisition or strategic
partnerships are major undertakings. In these cases, suppliers are likely to have the following
characteristics: 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.
Step 6: Negotiate with suppliers and select the winning bid The strategic procurement team must
evaluate responses from suppliers and apply its evaluation criteria. Bidding suppliers might request
additional information in order to make the most realistic bid, and the organization should supply this
information to all bidders and enable them to respond to the new information before making a final
decision. The strategic procurement team will then evaluate the received proposals, quotes, or bids, and
use the selection criteria and a process to either shortlist bidders to provide more detailed proposals (if
reviewing EOIs) or select a first and second successful bidder (if reviewing RFPs or RFQs). After the
evaluation process is complete, the strategic procurement team will enter contract negotiations with
the first selected bidder.
Step 7: Implement a transition plan or contractual supply chain improvements Winning suppliers should
be invited to participate in implementing improvements. A communication plan must be developed and
a system for measuring and evaluating performance will need to be devised using measurable Key
Performance Indicators (KPIs). This is especially true in the early stages of using a new supplier.
Transition plans are especially important when switching suppliers. Contractual Supply Chain
Improvements When bringing on new suppliers, it is necessary to transfer information and establish
linkages to logistics and communication systems, provide training and even specific physical assets, if
required. The implementation of these transfers takes time and expertise to set and start up.
Expectations during this time frame should be agreed upon during contract negotiations with time
frames for full operations and deliveries. Transition Plans The transition from in-house provision of
services to an outsourced service provider can be one of the riskier aspects of global outsourcing of
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services. How the transition to the outsourced service is handled and how it is perceived by staff and the
public are very important. Transparency and preparation are key to this aspect of the sourcing strategy.
These simple steps will help you and your team develop and implement a strategic procurement plan.
Question 2 : Rationalizing the product and supply chain
Rationalising the supply chain is the activity of selecting the right number of suppliers and the most
suitable suppliers within that numbers. Therefore the strategic consideration in rationalising the supply
chain is that, the company has to look and evaluate the supply chain in a tier level perspective. The
suppliers can be broken into several different tiers, with the first tier providing the major component to
the company. By rationalizing the supply base, the company only needs to handle a few suppliers in
delivering a complex product. This can be seen in the automotive industry and also aerospace industry.
However minimizing the number of suppliers does not necessarily translate the action into an effective
supply chain. The effectiveness is highly dependent on which suppliers the company chooses and the
commitment it have for long term growth and contracts. Rationalisation of the supply base is closely
related to the strategy of the company for long term growth. By limiting the company’s network, it can
affect the flexibility of the company to move forward. This action can only be mitigated by the means of
stringent selection criteria and choosing the best suppliers to become a part of the company.
you need to make the decision process centralize and consolidate the vendors across the company
Question 3 : Managing the Marketing Director who states corporate expenditure is his budget and he
will decide who has the last say on contract awards
We need to make marketing director understand that how the increased cost is hurting the Profit and
loss statement of the company. We need to explain the ways by which he can reduces the cost of the
company and increased the profitability which is required to improve the brand image of the company
before listing it on the market.
By consolidation of the vendors we can make the marketing more effective and more cost efficient
Question 4 : Managing the expenditure attributed to other Service Heads
here to manage the cost of service head, we need to understand what all the services which can be
managed centrally and which can be managed at different offices. We need to consolidate those
vendors and services which are common across the offices and reduces the cost. And need to introduce
the competative process to reduce the cost
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Question 1: Structuring the procurement activities

The procurement process can be complicated one. Strategic procurement is an organization-wide

Question 2 : Rationalizing the product and supply chain

Question 4 : Managing the expenditure attributed to other Service Heads

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