Position: Deputy Manager – Procurement & Supply Management
Time: 90 Minutes (1.5 hour)
Date: May 7, 2018 Total Marks: 50
Q.1 What are the main challenges of conducting emergency procurement? How to overcome those challenges? Explain minimum four challenge.
Ans: Emergency procurement always overlooks the opportunity of competitive advantages. It may not go for competitive bidding as competitive bidding requires plenty of time. It does not allow procurement functions to explore more due to time constraints.
The minimum four challenges are:
1. Getting minimum time for sourcing and understanding market (market intelligent): Due to the urgency the time constrains doesn’t allow the procurement professional to select/judge the best cost options. Here the delivery time takes the priority over quality and cost advantage. Moreover the suppliers also become unable/un-interested to participate in the urgent procurement due to their lack of capacity. Thus the other suppliers take the advantage and their bargaining power increases.
2. Loosing advantages of competitive bidding: As many supplier fails to participate due to lack of fast delivering capacity the remaining capable suppliers understand the urgency and they consider this moment as scope of asking high price with high profit margin in the plea of facing the urgent delivery challenges.
3. Less scope for negotiation: The buyer get less scope of bargaining, market analysis due to their time constraints. These process allows the suppliers to understand and take the advantage of asking high price. While negotiating they shows the difficulties of urgent delivery. Thus the buyer got very less scope of negotiation.
4. Ignoring scope of selecting products from product diversity: The product market now a day are very diversified with different price range according to the quality and specification. In case of emergency requirement the scope of selecting the best option for quality and price is avoided as it takes a huge time to analyse and select. Due to the urgency all these process of selection for quality and price becomes less important to meet the requirement by the users.
For avoiding this situation, users should involve procurement people in the early stage of specification/scope development and it requires advance planning from the users’ end. If procurement gets involved in the early stage – procurement can ensure sourcing from multiple suppliers and can take right market intelligence. Besides these, procurement may involve suppliers in the early (early suppliers engagement) stage as well where scope/spec is more technical.
Q.2 What is your best achievement in procurement role? In which Organization? What was your role in that achievement and how you achieve that?
Ans: While I was in Bangladesh army and I had been served there as Local Procurement Officer as Captain. We need to purchase various personal protective equipments and clothings for regular use and for sope special operation purposes in a certain season of time in a year. After I have joined there I found that there is a complain on winter protective materials and clothings are delivered quite late every year previously. I took and addressed that problem with high priority and determined to solve the problem immediately.
First of all I called a meeting with all my existing enlisted suppliers and users together to identify the problems. After identification of the problems I sat with all suppliers and asked them individually the likely lead time they would have taken to deliver the products. Basing on the lead time given by the suppliers and I took primary data from my own source regarding the consumption rate and no of purchase in a year I made a list of inventories which needs to be bought on which time of the year and when the procurement activities need to be started. My adopting that strategy enabled our department to remind us that the likely time we need to procure what item. Thereby we started our procurement activities at the right time of the year. On that year I could provide all the winter materials/clothing to all users 2 week prior to their actual requirements. I was highly appreciated for that steps and I think that was a great success for me.
Q.3 You have to negotiate additional 10% discount on top of submitted offer. What will be your strategies to negotiate with supplier to have an agreement?
Answer: The strategies should be multiple and based on the situation for the right negotiation; I shall have to take right preparation with the following:
1. Doing right homework before negotiation
2. Forming a negotiation team with diverse team members including user(s)
3. Develop negotiation strategies with the input of negotiation team (talk on the technical part and commercial and show up them long term business prospect and business sustainability)
4. Define specific roles for the negation part; who will discuss what and how (presentation style)
5. Develop MDO (Most Desired Outcome) and LDO (Least Desired Outcome)
6. Develop a BATNA for an effective negotiation
7. Sourcing market intelligence before negation for the particular spec/scope
8. Get information on the opponent parties that who will be in the negotiation meeting (take information on them as much as possible)
9. Be present in the meeting bit earlier and get introduced with the participants that will make the negotiation discussion much easier
10. You should discuss negation from 20% at least so that you can sustain a 10% as bottom line.
Q.4 Explain THREE circumstances in which a competitive tendering exercise might not be the best approach to making a purchase? Explain why.
Answer: The likely circumstances when competitive tendering types of procurement may not be the best approach to make a purchase are as follows:
a. The required items are regular inventory items and need to purchase frequently (Re-buy of modified re-bye procurements): While purchasing a regular inventory or user items it is wise not to go for competitive tendering process procurement. Because that requires huge paper work, consumes time for processing, unnecessary effort is driven to manage those processing work. A huge time will be wasted to follow the process of tendering. Instead another development issue can be done. On the contrary the tendering process will delay the timely delivery of the products which may hamper the operations or supporting activities. For example we need to buy stationeries for office works. If we go for competitive tendering the office may need to spend a huge time for sourcing, selection of supplier, selecting new product specifications, sampling and price negotiation. Instead it is wise to go for fixed contract for a particular period of time it becomes much easier for the procurement department and the users as well.
b. The list of items has an urgent requirement: If demand which is urgent in nature is recommended not be purchase through competitive tendering process. That will consume huge time on processing, collection of proposals, vetting of those proposals, price offers and negotiation and final decision to whom the contrat will be awarded. To minimize those time gap/duration we should avoid the competitive tendering process. For
c. The existing/enlisted suppliers provides a quite lean and very competitive price and delivery time with quality: Maximum time the already established organizations have set of existing enlisted suppliers who are quite matured enough regarding the materials performance/conformance specifications and lead time. They are quite aware of the process including meet the emergencies. As a result they provides the delivery with the minimum possible price which is fixed earlier in the contract. The supplier also becomes dedicated with minimum profit margin due to his own business sustainability with that organization. Moreover there are some products which are very special/ customized in nature. Thus the whole sourcing and production process was established/re-engineered by the supplier, which enables them to provide the exact/right products/materials required by the users determined in the performance or conformance specification developed earlier. In this case even the competitive bidding may increase the price instead of minimizing the cost.
Q.5 You have completed a complex procurement process of 16 Million BDT through tender process. List down various step of tendering and the documents which will be generated from this processes. Write them in ascending orders based on date.
Answer: These are the following steps of tendering:
1. Develop Scope of Work/Supplies
2. Develop Compensation schedules (Compensation Table)
3. Instruction to fill the Suppliers Qualification Questionnaire and Tax Form
4. Suppliers should submit the following:
a. Letter of Acknowledgement (that received the RFP)
b. Proposal Letter
c. Technical Questionnaire (that supplier may have against SOW or Specification)
d. Commercial and Compensation Structure (Generally – the format is provided in RFP Package)
e. Suppliers Qualification Questionnaire template (based on buyer’s org requirement)
f. Tax Questionnaire template (based on buyer’s org requirement)
g. Exception to the proposed contract (Based on the Model Contract, if supplier has any discomfort or want to raise a proposal against any specific clause of the Model Contract – then they/supplier might propose a new clause)
1. Sample of Model Contract / Contract Template
In addition to the following:
• Pre-bid meeting schedule (date, Time & Venue)
• Deadline to submit Intend to Bid: (Date), by (Time).
• Schedule for Contractors to send queries: within (Date & time)
• Proposal Submission Date: (Date & time)
• Name of Contact person: (Name, address & contact info)