Engineering Management

(MGT-404)
Assignment # 06

Submitted to:

Engr. Fazeel Ahmed

Submitted by:

Muhammad Usama Saeed

Registration#:

Uw-19-Che-Bsc-016

Due Date:
27th December, 2022

Chemical Engineering Department

Wah Engineering College

University of Wah
 Conspectus
Procurement design occurs together with program/service planning. Procurement is based on the
premise that early planning, scheduling, and bulk purchase result in cost savings, more effective
corporate operations, and greater value for money. The public sector should utilize procurement
planning to evaluate/review the whole procurement process in order to facilitate overall project
implementation in the acquisition of products, works, and services. Group buying is the process of
integrating the overall resource requirements of several departments and making a single purchase
order. The departments can be physically placed in a number of structures, with the delivery dates,
quantities, and conditions specified in the purchase order.
Table of Contents

CONSPECTUS 2

PROCUREMENT: 4

PROCUREMENT PROCEDURE: 4

STRATEGY IN THE PROCUREMENT PROCESS: 4

STAGES OF PROCUREMENT: 6
IMPORTANCE OF PROCUREMENT PLANNING: 6

KRALJIC’S PORTFOLIO MATRIX: 7

REFERENCES: 8
Question 01): Describe the process of Procurement Planning in Process Industry?

Procurement:
Purchase planning is the act of identifying and combining requirements, as well as defining
timetables for their procurement, so that they are accessible when needed. A strong procurement
strategy will detail the procedures for locating and choosing suppliers/contractors/consultants.

Procurement Procedure:
The procurement process is usually divided into numerous parts. The corporation determines the
commodities and/or services that it needs, seeks suppliers who will help it fulfil its business
objectives, negotiates terms and pricing, and then purchases and gets the appropriate items. A
small firm may only have one person in control of all products and services procurement. Larger
organizations may have a team of specialists who interact with different suppliers or assist certain
internal business units.

Strategy in the Procurement Process:

Procurement processes vary greatly depending on the structure and needs of each company, but
they generally include the nine core steps listed below:
1. Identify which goods and services the company needs. Initially, a business must
establish its requirements for a given item or service. This might be a new item that the
firm has not previously acquired, a replenishment of current items, or a subscription
renewal.
2. Submit purchase request. A formal purchase request is sent when an employee or
company group need a big amount of new items or services (also known as a purchase
requisition).
3. Assess and select vendors. Already that you have a clear set of requirements and an
approved purchase request, it is indeed time to find the best vendor and submit a request
for quote (RFQ) - this is what the purchasing team sends to potential suppliers in order to
receive a quote - It's critical to be as specific as possible so that you can compare apples to
apples.
 4. Negotiate price and terms. It is typical practise to collect at least three estimates from
providers before making a decision. Examine each quote thoroughly and, if feasible,
bargain. If you must withdraw from a transaction, be sure you have viable alternatives.
Make a written record of your final conditions once you've agreed on them.
5. Create a purchase order. Fill up and submit a purchase order (PO) to the supplier. The
purchase order should be thorough enough to describe the specific services or items sought
and to allow the provider to complete the order.
6. Receive and inspect the delivered goods. Examine deliveries thoroughly for any errors
or damage. Ensure that everything is delivered according to the PO and that the quality
meets or exceeds expectations.
7. Conduct three-way matching. Accounts payable should compare the purchase order,
order receipt or packing list, and invoice three times.
8. Approve the invoice and arrange payment. Approve and pay the invoice if the three-
way match is correct. Businesses should strive for a consistent invoice payment process
that checks that payments match the invoice amount and due date.
9. Recordkeeping. It is vital to keep records for the whole procurement process, from
purchase requests through pricing discussions, invoices, and receipts, and everything in

between.

Figure 1 Steps in Procurement Process

Stages of Procurement:

The nine major steps of the procurement process can also be thought of in three distinct stages:
• The sourcing stages
• The purchasing stages
• The receiving stage.

Figure 2 Stages of Procurement

Importance of Procurement Planning:

Procurement planning is crucial for several reasons, including the following: • It is one of the
requirements for effective project execution.

• Limits the penalty of failing to follow agreed-upon procurement processes.

• Enhances predictability and transparency.
 • Establishes a strong framework for monitoring.
• Makes treasury management more efficient and effective by spreading out yearly purchase
operations based on demands and available resources.

KRALJIC’S Portfolio Matrix:

1) First, supply risk can be using three factors:
• Market risk: Potential commodity suppliers' availability, market type (monopoly or
oligopoly condition), and market entry barrier.
• Performance risk: Supplier quality and performance issues, such as the supplier's access
to new technology or the supplier's rate of adoption of new technology.
• Complexity risk: Problems associated with product or service standardization. Product or
service specifications are critical.
2) Second, profit impact can be defined as:
• Impact on profitability: This factor attempts to address the average profit made on the
purchase of each commodity.
• Importance of purchase: This factor attempts to address the average profit made on the
purchase of each commodity.
• Value of purchase: This addresses the tangible and intangible costs associated with or
derived from the purchase of each commodity.

Figure 3 Kraljic Matrix

These observations result in a two-by-two matrix with four groups, as illustrated in Figure:
bottleneck, noncritical, leverage, and strategic commodities.

References:
[1] S. M. Wagner, E. Zurich, and C. Bode, “The procurement process.” [Online]. Available:
https://www.researchgate.net/publication/297094030

[2] “Competition and Integrity in Public Procurement-Second Updated Edition ‘WINNING

PUBLIC PROCUREMENT CONTRACTS IN SERBIA-Manual’/Amazon Kindle
Edition/2017 View project Mainstream of ReSPA Activities (EU funded Project) View
project Slavica Joković.” [Online]. Available:
https://www.researchgate.net/publication/364651336

[3] N. Zhao, F. J. Ying, and J. Tookey, “Construction Procurement Selection Criteria: A

Review and Research Agenda,” Sustainability (Switzerland), vol. 14, no. 22. MDPI, Nov.
01, 2022. doi: 10.3390/su142215242.