Certified Purchasing Professional

Training
A division of Vinsys IT Services (I) Pvt. Ltd.

Ideals induced, imbibed and implemented!

 Welcome to Training from Vinsys

 Introduction
 Understanding Context of Training
 Purchasing basics
 Purchasing deep dive
 Purchasing cross-functional areas
 Purchasing professionals case studies
 Case Studies
 Activities
 Examples
 Training Conclusion, Q & As
 Introduction to Purchasing

Project vs. Operations Procurement

Purchasing Cycle
Complex Procurement
Purchasing System
 Purchasing Steps

1.The Need
You need to identify that there is a need to update the inventory or stock. You may also need a business service
or ad hoc product.
2.Specify
Now you need to decide how much and when you want the products or services delivered.
3.Requisition or Order
This is when you write the purchase order or requisition order.
4.Financial Authority
Before the order can be placed, it usually requires some kind of authority for its purchase. With some purchase
orders, this is reasonably automatic. With a large order that will be put out to tender it could be multi staged.
5.Research Suppliers
Repetitive orders usually have set suppliers, although it does no harm to review the options sometimes. Other
orders will either need to go out to tender or there will be a choice of suppliers.
6.Choose Supplier
The supplier is now chosen.
7.Establish Price and Terms
In a large company, many suppliers will be contracted with a Master Agreement where prices and terms are set
for a defined period. For other orders, now is the time to negotiate terms and prices.
 Purchasing Steps

8. Evaluation
This is the most exciting part of the purchasing cycle and can take many weeks for a big tender. All the
tenders are evaluated and the requirement awarded to the winning bidder.
9. Negotiation
The fine print of the terms and conditions are negotiated with the chosen supplier. The price is fixed at the
bid price.
10. Contract Award
In a very short time, the contract is awarded to the chosen bidder.
11.Manage Contract
This is the period in the purchasing cycle when the goods are delivered.
12.Approval And Payment
If the contract is carried out completely then full payment is made. If there are problems, there may be a
damage request.
13. Sign Off
At the end of the contract work and deliveries, the contract is signed off and all relationships with the
supplier are finished.
14. Update Of Records
The purchasing ledger and stock records are updated. This is automatically done by many purchasing
computer systems.
Procurement Planning
Procurement Planning
 Inputs - Procurement Planning

• Project charter
• Business documents
• Benefits management plan
• Project management plan
• Scope, Quality & Resources

• Project documents
• Project team assignments
• Requirements documentation
• Requirements traceability matrix
• Resource requirements
• Risk register
• Stakeholder register
Procurement Planning – Contract Types

Contract
Types

Time &
Fixed Price Cost
Material
Contracts Reimbursable
Contracts

FFP CPFF

FPIF CPIF

FPEPA
 Procurement - Tools & Techniques

• Source Selection Criteria

• Least Cost
• Qualifications Only
• Quality-based/highest technical proposal score. Quality and cost-based.
• Sole source
• Fixed budget

• This can be used as multicriteria decision analysis.

 Procurement Planning – Outputs

Procurement Strategy:

The procurement management plan contains the activities to be undertaken during the procurement
process. It should document whether international competitive bidding, national competitive bidding,
local bidding, etc., should be
done.

Delivery methods:

Turnkey, EPC, DB, DBB, DBO, BOT, PPP.

 Procurement Planning – Outputs

Bid Documents:

RFI, RFQ, RFP, POC, POV

Procurement Statement of Work (SOW/TOR):

The statement of work (SOW) for each procurement is developed from the project scope baseline and
defines only that portion of the project scope that is to be included within the related contract..
 Procurement Planning – Outputs

Source Selection Criteria:

• Capability and capacity;
• Product cost and life cycle cost;
• Delivery dates;
• Technical expertise and approach;
• Specific relevant experience;
• Adequacy of the proposed approach and work plan in responding to the SOW;
• Key staff’s qualifications, availability, and competence;
• Financial stability of the firm;
• Management experience; and
• Suitability of the knowledge transfer program, including training.
 Source Selection Criteria: Activities

Defining the Source Selection Criteria using weighted average method.

1. Identify Sources/ Vendors

2. Vendor Analysis
3. Assigning Scores
4. Calculating weighted average
5. Selecting the most optimum vendor/source as per context
 Procurement Planning – Outputs

Make or Buy Decisions:

A make-or-buy analysis results in a decision as to whether particular work can best be accomplished by the
project team or needs to be purchased from outside sources.

Independent Cost Estimates:

For large procurements, the procuring organization may elect to either prepare its own independent estimate or
have a cost estimate prepared by an outside professional estimator to serve as a benchmark on proposed
responses
Summary
Procurement Methods

Procuremen
t Methods

Competitive Non-
Contract Competitive
Contracts
Contract
Types

Time &
Fixed Price Cost
Material
Contracts Reimbursable
Contracts

FFP CPFF

FPIF CPIF

FPEPA
 Contracts and its components
 Contract Type Contract
Types
 High Level Planning Input from Contract
 Start, Finish Milestone, NTP, SC. Time &
Fixed Price Cost
Material
Contracts Reimbursable
 Contract Documents: Contracts
 Agreement Form: Project Name, Owner,
Contract Value, Scope FFP CPFF
 General Conditions: High Level Liabilities,
Obligations, Responsibilities
 Special Condition: Detailed Liabilities, FPIF CPIF
Obligations, Responsibilities

FPEPA
 Components of Contract and Order of Precedence

Order of Precedence :

Sequential hierarchy of nominal importance of items.

Example:

Order of Precedence. In the event of a conflict between the terms and conditions included
in the body of this Exhibit W and the terms and conditions included in any of the
attachments hereto, the order of precedence shall be: (a)Exhibit W; (b)the attachments to
Exhibit W, with the exception of Attachment 2 to Exhibit W, and (c)Attachment 2 to ExhibitW.
 Components of Contract and Order of Precedence

Order of Precedence :

Sequential hierarchy of nominal importance of items.

Example:

Order of Precedence. In the event of a conflict between the terms and conditions included
in the body of this Exhibit W and the terms and conditions included in any of the
attachments hereto, the order of precedence shall be: (a)Exhibit W; (b)the attachments to
Exhibit W, with the exception of Attachment 2 to Exhibit W, and (c)Attachment 2 to ExhibitW.
 Make or Buy Decisions

A make-or-buy analysis results in a decision as to whether particular work can best be accomplished by the project
team or needs to be purchased from outside sources.
Solution
 Solicitation Planning

Solicitation planning relies on the outputs of procurement planning.

The Procurement Management Plan will guide the process as the project team has planned, as the performing
organization requires, or under the guidance of a procurement office within the performing organization.
 Written Solicitation

Request for information (RFI)

An RFI is used when more information on the goods and services to be acquired is needed from
the sellers. It will typically be followed by an RFQ or RFP.

Request for quotation (RFQ)

An RFQ is commonly used when more information is needed on how vendors would satisfy the
requirements and/or how much it will cost.

Request for proposal (RFP)

An RFP is used when there is a problem in the project and the solution is not easy to determine.
This is the most formal of the “request for” documents and has strict procurement rules for
content, timeline, and seller responses
 Supplier Ratings

 Categorical Method
 Capability and capacity;
 Product cost and life cycle cost;
 Delivery dates;
 Technical expertise and approach;
 Specific relevant experience;
 Adequacy of the proposed approach and work plan in responding to the SOW;
 Key staff’s qualifications, availability, and competence;
 Financial stability of the firm;
 Management experience; and
 Suitability of the knowledge transfer program, including training.
 Categorical Method
 Cost Point Method
 Vendor Profile Analysis

Supplier Activity
 International Sourcing & Overview

• It is the process of sourcing goods and services from the international market across geopolitical
boundaries.
• It aims to exploit global efficiencies such as lower cost skilled labor, cheaper raw materials and other
economic factors like tax breaks and low trade tariffs.
• Examples are call centers in the Philippines, clothing and shoes manufactured in China and Thailand.
 Trade Barriers

Trade barriers are government-set, artificial restrictions on the trade of goods and/or services between two
countries.

Huawei is unable to acquire US parts and software or sell its products in the US. That has cut the company
out of an important market and hurt its ability to compete outside of China.

Huawei is unable to buy new laptop processors from Intel, and flagship phones 
like the P40 and the Mate 30 Pro can’t offer Google’s apps or Google’s app store, making them nonstarters
for many customers
 Procurement Risk Management

• Introduction to Procurement Risk Management processes

• Types of Risk
• Stakeholder’s Risk Attitudes
• Planning for Procurement Risks
• Identify Risks
• Perform Qualitative Risk Analysis
• Perform Quantitative Risk Analysis
• Plan Risk Responses
• Control Risks
 Procurement Risk Management

• An uncertain event or condition that, if it occurs, has a positive or a negative effect on a procurement
objectives.
Types of Procurement Risks
Stakeholder’s Risk Attitude
Risk Identification and Technique
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk/Threats Responses
 Procurement Risk Management Activity

Develop the procurement risk register, identify procurement risks, perform risk
analysis and define risk responses / risk response planning ?
 Types of Purchasing Strategies

Supplier Optimization: Supplier optimization chooses a solid mix of vendors who can provide the goods
that the company will need in order to meet their business needs.

TQM: Total quality management TQM) is another common way that companies are optimizing their supply of goods
and products. The TQM procedure allows businesses and companies to help increase the quality of their products
while also reducing their total cost to obtain the supplies.

Centralized Purchasing: Centralized purchasing can help limit waste as all products are purchased from one central
location. 

Risk Management: Businesses and companies all operate in a world of some uncertainty. This uncertainty can pertain
to a variety of things from how the market will perform to how their business will do in the upcoming year and
everything in between

Global Sourcing: Global sourcing allows a company to reach out to other parts of and places in the world to get the
supplies they need to run their business when those resources are not readily available at a reasonable price in their
homeland.

Vendor Development: The world of business is a fierce competition and this holds true for vendors, too. Companies
look for vendors who are continually developing and offering new, better products to the businesses looking to
purchase them.
 Types of Purchasing Strategies

Green Purchasing: Green purchasing is becoming more and more common as more companies seek to move to
"green" production of their goods.

Continue Negotiations: Continue negotiations with vendors on a consistent basis to ensure you are getting the best
prices for the products you are purchasing.
 Purchasing Strategy
• A purchasing strategy identifies how
an organization purchases materials
or services.

• Its main goal is to decrease the

bottom line and maximize cost
savings.

• This can be achieved by reducing

inefficiencies, forming buying plans,
and establishing approval workflows to
get the result that the organization
desires.

• One of its goals is to establish clear

policies when purchasing goods and
services. The procurement team and
finance department can analyze tail
spend by using a great purchasing
strategy
Linking Purchasing and Corporate Strategy
Linking Purchasing and Corporate Strategy
Purchasing Goals and Objectives
Strategic Management for Purchasing Professionals – Case Study

Core Values – Who are we?

"integrity, honesty, openness, personal excellence, constructive self-
criticism, continual self-improvement, and mutual respect" - Microsoft

Vision Statement - Why are we here? Example: “..to help

people and businesses throughout the world realize their full
potential.” - Microsoft
Mission Statement - What do we do?
“Google's mission is to organize the world's information and
make it universally accessible and useful.”
Strategic Goals
What and when do we want to accomplish ?

Tactics
Short term goals, projects
Management Functions
Levels of Management
Supply Chain Management
 Project Management for Purchasing Professionals

 What is a Procurement Project ?

 An endeavor with specific start - specific end – 2 years project

 Produces Unique Deliverable – product or service
 Within Cost Constraints – 10 million budget
 According to Stakeholders expectations – quality
Why projects are initiated ?
One fifth of the world’s GDP is spent on projects [1]

Technological
Advancement
Customer E-ticketing system
Request

Construction of High Rise Building

Market Demand

Fuel Efficient Cars

Organizational
Need

Establishing PMOs
Agile Vs. Waterfall Project Management
Traditional vs. Agile Project Management
 When to use Agile ?

Why do we need Agile Project Management ?

Delivering value,

Predictive

Agile
Agile Mindset, is all about adhering to agile values and principles !
Lean Procurement
 Interpersonal Skills for Purchasing Professionals

 Written and oral communication skills

 Teamwork and collaboration
 Self-awareness –Agility
 Conflict resolution
 Patience
 Skills in dealing with difficult personalities
 Influence/persuasion skills
 Negotiation skills
 Networking skills
• EI is the strongest predictor of workplace performance in Procurement
Management.

• 90% of top performers have high Emotional Intelligence.

• People with average EQs outperform those with the highest IQs 70% of the time.

• Decades of research now point to EI as being the critical factor that sets star
performers apart from the rest of the pack.
• Ability to recognize and understand emotions in yourself and in project stakeholders.
• Ability to use this awareness to manage your behavior and relationships.
• Introspective
• Observe the ripple effect from your emotions
• Visit your values
• Check yourself
• Know who and what pushes your buttons
• Stop and ask yourself why you do the things you do
• Seek feedback
• Take control of your self-talk & prejudices-which may
impact project outcomes.
• Think before acting, Deliberate Action.
• Smile and laugh more, It develops trust.
• Learn a valuable lesson from everyone you
encounter!
• Greet project stakeholders by name, it
builds trust.
• Watch body language, non-verbal
• Live in the moment, Present Orientation.
• Practice the art of active listening
• Step into their shoes
• Empathy.
• Be open and curious
• Take feedback well
• Build trust
• Acknowledge the other person’s feelings
• Tackle a tough conversation
• Remember the little things that pack a
punch
 Incoterms
• Incoterms defined by International Chamber of Commerce (ICC) make international trade easier and help
traders in different countries to understand one another.

•  Incoterms are standard definitions of trade terms and are internationally recognized as indispensable

evidence of the buyer’s and seller’s responsibilities under a sales contract

• Incoterms will not apply unless specifically incorporated into the contract.

• Packing Lists

• Airway bill

• Bill of Lading
•
Letter of Credits LC
Incoterms
Incoterms Reference Chart Transfer or costs and Risks
Training Summary, Conclusion Q & As

Questions
Thank You!!

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