The Professional Purchaser

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THE PURCHASING ORGANIZATION
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Purchasing History
The Dark Ages

• Decentralized Purchasing System

• Individual Departments and Users handle own
  purchasing
• User is better aware of own needs
• Possibly faster simply picks up the phone and
  orders

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Purchasing History
The Middle Ages

• Purchasing Agent position created and given
  authority to make buying decisions.
• Move to Centralized Purchasing

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Purchasing History
Centralized Purchasing System

• Standardized Procedures
• Cut down on administrative duplication and lower
  administrative costs
• Combined requirements increase business volume
  and get suppliers interested
• Policy and Regulatory compliance
• Better control over purchase commitments and
  dollars
• Enable the development of specialization and
  expertise in purchasing decisions
• A better use of City staff time

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But a Centralized System

• Can be overly bureaucratic
• Cause internal political strife
• Too much busy work for the purchasing
  professional
• Questionable value add on individual small value
  purchases

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Purchasing History
Purchasing Today Centralized/Decentralized

• Application of Purchasing Policy
• Standardized competition methods and
  specifications
• Regulatory compliance AIT, WCB, Insurance, etc.
• Centralized agency handling RFQs, RFPs, and
  Tenders with user department participation
• Supplier performance - Involvement from
  Purchasing and User Departments
• Management of delivery and lead times
• Delegation of low value acquisitions to
  individual departments
• Purchasing Cards

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Contract Management

• Purchasing Manages contracts, individual
  departments buy items on contract
• Examples
• Purchasing Card
• Stationery
• Consumable supplies
• Large Service Contracts
• Janitorial
• Construction (partner with Facilities)

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Purchasing Procedures

• Recognition of need
• Requisition approval
• Placement of the purchase order
• Follow-up and expediting
• Receipt and approval of goods/services

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Purchasing Procedures
Recognition of Need

• Planned v. Unexpected demands
• Identify quantity and specifications
• Date the item or service is required
• Emergency and rush orders
• Conformance to specification (Approved Products
  List)
• Small v. large orders
• Stores purchases

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Purchasing Procedures
Requisition Approval

• Specifications set by user
• Purchasing suggests alternatives
• Authority level
• http//www.mala.ca/policies/policy.asp?rdPolicyNum
  ber42.09
• Council/Board approval

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Purchase Order
Purchasing Procedures

• Regular PO - linked to requisitions
• Open PO - use where the PO value and purchase
  quantity are indeterminate
• Reserve or EPO - used sparingly in case of urgency

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Purchasing Procedures
Follow-up and Expediting

• Follow-Up Ensuring that product is delivered on
  time as ordered
• Expediting Convincing the supplier to take
  extraordinary measures to deliver before the
  agreed date

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Purchasing Procedures
Receiving

• Central Receiving
• Receiving at Point of Use
• Verifying that delivery matches order
• Communicate with Accounting

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Purchasing Considerations

• Purchasing policy
• Getting the best value
• Dealing with Suppliers
• Ethics and the Law

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Purchasing Policy

• Applies to ALL acquisitions of goods and/or
  services
• Varies by organization e.g.
• Acquisitions up to 5,000 - direct purchase or
  tender
• From 5,000 to 25,000 require written quotations
• From 25,000 to 100,000 require public tender
• From 100,000 to 250,000 require public tender
  and approval of deputy city manager
• 250,000 and above require approval by
  Council/Board
• http//www.mala.ca/purchasing/policy.htm

Purchasing Policy
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Getting the Best Value

• Prequalifications
• Expressions of Interest
• Cooperative Purchasing
• Purchasing Methods
• - Direct Award
• - Tendering

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Direct Award
Getting Best Value

• Law of contracts
• Purchasing card
• Purchase orders
• Pricing already set
• Low value
• Single source

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Tendering
Getting Best Value

• Law of competitive bidding
• No fishing expeditions
• Obligation on all parties
• Very structured
• Budget in place
• Contract A and contract B

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Getting Best Value
Tendering

• May be preceded by pre-qualification (RFEI)
  Request for Expression of Interest
• Request for quotation (RFQ)
• Invitation to tender
• Request for proposal (RFP)

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Getting Best Value
Request for Quotation (RFQ)

• May be verbal, written fax or e-mail request
• 3 bids and a buy
• Quick purchases, standard commodities
• Price the dominant decision factor

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Getting Best Value
Invitation to Tender

• Projects of sufficient size, complexity,
  political sensitivity,
• detailed specifications
• Prime evaluation criterion is cost
• We know what is wanted and how it is to be
  done

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Getting Best Value
Request for Proposal (RFP)

• Similar to invitation to tender. Award is
  determined by several criteria, not just cost
• Seeks creative input of marketplace - details
  what, when and why but not how
• Greater flexibility in tender wording
• Appraisal Criteria detailed in request

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Getting Best Value
Competition Timeline

• Document preparation (2 weeks)
• Advertising (1 week)
• Tendering period (3 weeks)
• Site meeting
• Closing date and tender opening
• Evaluation (1 week)
• Approvals (1day 4 weeks)
• Award
• Commencement/Delivery (2 weeks)

Timeline
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Appraisal of Responses

• The key areas for evaluation are summarized as
  follows

Mandatory Elements Performance on Rated Criteria Design Functionality Aesthetics Life-Cycle Cost Total Pass/Fail Maximum Points to be Awarded 45 points 10 points 45 points 100 points
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Suppliers
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Suppliers

• Finding qualified suppliers
• Market the Bid Opportunity!
• BC Bid, Newspaper ads, Call and Fax Notice
• http//www.bcbid.gov.bc.ca/open.dll/welcome?langua
  geEn
• http//www.mala.ca/purchasing/tenders.asp
• Search web, Yellow pages and Contact list

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• www.city.nanaimo.bc.ca/b_purchasing
• www.bcbid.gov.bc.ca/open.dll/welcome

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Suppliers
Supplier Selection

• Input from User Departments
• Based on the criteria stated in the RFP
• Price, specifications, availability, creativity,
  personnel, experience, references
• Open and Transparent
• Be prepared to de-brief the loosing bidders

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The Purchasing Department

• ETHICAL
• OPEN
• FAIR
• ACCOUNTABLE

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The Professional Purchaser

• Who Are They?
• What Do The Know?
• How Did They Get The Knowledge?
• Where Do You Find Them?
• When Do You Need Them?

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Every Business Buys

• Some do it better than others
• Purchasing is a learned skill
• There are accreditation programs that offer
  purchasing skills

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Who Are They?

• Business People
• Regular Folks With a Specialized Skill Set
• Good Listeners
• Analytical
• Astute
• Ethical
• Negotiators

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What Do They Know?

• Lever Your Profits Up
• Every dollar saved goes straight to the bottom
  line
• How to extract value from the supply chain
• Cost of goods
• Transaction costs

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What More Do They Know?

• How to organize around the supply function
• Different acquisition methods
• Analysis of what you buy
• How to reduce inventory

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Anything Else?

• Integrate the supply function with the strategic
  direction of the company
• Make or Buy
• Strategic Alliances
• Minimize Product Liability
• Project Management

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How Did They Learn All This?

• Professional Associations
• Purchasing Management Association of Canada
• PMAC Accreditation Program
• http//pmac.ca/education/education.asp
• US based Institute of Supply Management
• http//www.ism.ws/Certification/CPMEvolution.cfm
• National Association of Education Buyers
• And others

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PMAC Accreditation

• Business Courses
• 4 Principles Courses
• Principles of Buying
• Principles of Logistics and Transportation
• Principles of Quality
• Principles of Inventory and Operations
• 12 Seminar Days
• One week live in Course

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Business Courses

• Mandatory Courses
• Marketing Consumer analysis, marketing mix,
  channels of distribution, market research,
  advertising, pricing, sales management.
• Macroeconomics Basic understanding of
  macroeconomics, insight into the economic
  policies which affect business conditions and
  decisions.
• Introduction to Management Basic management
  concepts including common management methods in
  decision making, analysis, planning and control.
• Managerial Accounting Cost analysis, budgeting,
  performance analysis, information and control
  systems.
• Organizational Behaviour Human behaviour
  (individual, group and organization),
  productivity, motivation, and communication.

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Electives-5 Required

• Business policy Organization objectives,
  strategy, policy, strategic analysis,
  environmental analysis, strategy implementation
  and the role of the top executive.
• Microeconomics Factors affecting the
  determination of prices, production levels,
  employment and wages and profits in individual
  industries under varying competitive conditions
  are considered. Particular attention is directed
  to competition policy, government regulation,
  income distribution, labor unions and taxation.
• Financial Management The financial structure of
  an organization, stocks, bonds, liquidity,
  leverage, cash flows, ROI, financial statements,
  funds flow and ratio analysis, financing,
  earnings retention, dividend policy, leasing,
  mergers, consolidation of holding companies, etc.
  
• Law A review of basic law and the law of
  contracts, agency, etc.
• Public Administration Management of public
  institutions, public finance, policy and its
  relationship to the political structures of
  Canada.
• Computer Science Basic computer theory and
  applications in business, exposure to programming
  and systems analysis.
• Operations Management Operations and process
  analysis, standards, scheduling and control,
  technology, capacity and operations strategy.
• Visit http//pmac.ca/education/CPP_management_cour
  ses.asp for details

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Where Do You Find Purchasers?

• Most larger organizations have a purchasing
  specialist or department
• http//www.pmac.ca/

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Gino Di Menna C.P.P. Purchasing Manager, City
of Nanaimo

• Thanks To

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Professional Purchasing Pays

• Rusty Joerin C.P.P.
• Purchasing Manager Malaspina University-College
• joerin_at_mala.bc.ca 250-740-6234
• http//www.mala.ca/purchasing/