Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

How Formal
...

 Informal approach
 Enquiry-quotation approach
 Formal tendering

ITC

M6:U3:3
...
The informal approach
Simple process, e
...

 Ask for quotes by phone, & follow-up
in writing or receive supplier’s invoice as record
 Place orders online at suppliers’ websites
Use for:
 Low value/low risk purchases involving a high
administrative cost
12
 Emergency requirements
3

9

6
ITC

M6:U3:3
...
The informal approach
Features:

 Both sides know and trust each other
 Minimum effort and no process delay
 Generally, a maximum value is set depending on…
The size of the company
The nature of the business (e
...
commodities)
The amount of trust the company has in its staff

 These purchases are often delegated to users (e
...
using
purchasing cards or reimbursable cash)

ITC

M6:U3:3
...
2-1

Informal purchasing in your company
Which is your company’s maximum value that can be carried out
informally by purchasing & supply staff?
Which is the maximum value that can be delegated to end-users? (or
alternatively what do you think this value should be?)

What are your views as to whether these amounts currently set are
appropriate or not (take into account administrative costs involved in
a rigorous process)?

ITC

M6:U3:3
...
The enquiry-quotation approach
Intermediary process:

4

---- ------ ---- ---- ------- ------ --- ------ ---- ------- -- -----

-- -- -- -- -- ----------- -- ---- -- -- --

 Limited number of pre-selected suppliers
 Written or electronic enquiry, inviting them to offer
 Offers are evaluated and supplier selection is documented and
signed off by relevant personnel

Because decisions may be autonomous and with little
control, remember to:
 Always make an impartial and fair assessment of the offers
ITC

M6:U3:3
...
The enquiry-quotation approach
This procedure is appropriate when:
 Purchase is sufficiently complex so that not
everything agreed verbally can be remembered
 Products are not standard, and different options need to be evaluated
carefully and compared
 The level of expenditure is higher, and the cost of evaluating multiple
offers will be outweighed
 by the advantage of greater competition
 Some supply risk is involved, and this needs to be documented so as
not to allow later misinterpretation
ITC

M6:U3:3
...
3-1

Negotiating with suppliers under the enquiry- quotation
approach
What do you think are the advantages and disadvantages of
negotiating with suppliers after having made an enquiry and
received quotations?

ITC

M6:U3:3
...


-- -- - ----- -- -- -- -- ---- - -

3
...
4-1

Action Point

3
...
4-2

3
...
4-3

3
...
4-4

Features:

Open tendering

 Advertise widely to invite all interested suppliers
 All suppliers meeting the tender criteria are invited
 All bids are evaluated
 Opens up the maximum level of competition

It is most appropriate when:

 The requirement is straightforward and easy to specify
 Many potential suppliers openly compete with each other
 The cost of the process is less than the benefits
 Price is the most significant evaluation criterion

Do not use it when:

 The nature of the requirement is highly specialised
 Previous experience with the supplier is important
ITC

M6:U3:3
...
4-2

Open tendering
List three advantages and three disadvantages of open tendering
• Advantages:

• Disadvantages:

ITC

M6:U3:3
...
4-7

Restricted tendering
It is most appropriate when:

 Your company’s requirement is specialised
 You already know which suppliers are best
capable of meeting your requirement
 Only a few suitable suppliers available
 The required lead-time and/or value of the
purchase does not justify the time and/or
expense of an open tender
ITC

M6:U3:3
...
4-3

Restricted tendering
List three advantages and three disadvantages of restricted tendering
• Advantages:

• Disadvantages:

ITC

M6:U3:3
...
4-10

Action Point

3
...
4-11

The stages in the tendering process (1):
Develop a plan for the tendering process
Define the basis for the tender evaluation
Define the minimum criteria for screening out suppliers
from being invited
Prepare the invitation to tender package
Appoint the tender opening panel
Advertise the requirement
Ensure the suitability of those suppliers expressing their interest
in tendering
ITC

M6:U3:3
...
4-13

The stages in the tendering process (3):
Evaluate the tenders and clarify these with the corresponding
suppliers if necessary
Undertake post-tender negotiations, if applicable
Award the contract
Debrief unsuccessful suppliers

ITC

M6:U3:3
...
5-1

eCatalogs
• Simplest method of buying over the Internet
• eCatalogs managed by:
 Supplier
 Buyer
 Content aggregators

ITC

M6:U3:3
...
5-3

Types of eAuctions
 English: Participants bid in open forum, each bid increasing the
price with the highest bidder winning
...
The first to
place a bid wins
...
At constant
intervals the price is increased until one bidder remains
...

 Close Bid: A reverse auction that allows suppliers to input their
bids while seeing only the current lowest bids
...

ITC

M6:U3:3
...
5-1

Using e-marketplaces
Have you ever used e-marketplaces to obtain offers? If yes, when?
Was it effective?

If you have never used e-marketplaces, why not? What is to be done
to take advantage of this option?

ITC

M6:U3:3
...
Many
suppliers not
given opportunity

Fairly low

Common, but
should follow
strict principles
Highest

Process cost &
time required

Lowest

Medium

Post-offer
negotiation

ITC

Open: maximum
Restricted & 2stage: medium

Highest,
particularly open
tendering
M6:U3:3
...
6-2



---