Procurement Techniques for Metallurgical Products

Written by Ravi Subramaniyam, DPSM

by Ravi Subramaniyam, DPSM

One of the important processes in the manufacturing plant is procurement which is also a control mechanism of the flow of materials into the from the vendor or supplier. Half of the sales revenue depends on purchased materials manufacturing hence the profit potential of effective purchasing activities is huge compared with other practical management alternatives. You should pay less for what you buy or spend wisely. Commonly consented that it is simpler to buy well than it is to sell well. Wise purchasing can reduce operational costs appreciably and improve profitability. The selection of an appropriate procurement technique is important due to complex decision-making process due to risks and uncertainties.

Powder-metallurgy
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Importance of Procurement Techniques

Procurement techniques are crucial and should be determined at an early stage due to the impact on the procurement lead-time, and to ensure a realistic timeframe and the expectation for contract award is achieved. This initial activity will avoid disappointments, unrealistic expectations, and frustrations when, due to poor planning, it is impossible to meet expectations set during the requirement definition phase. At this phase of the process, it is also crucial to decide which procurement technique is competitive to use. Among the important factors to consider when deciding a procurement technique, will be the complexity of the metallurgy products, procurement type, and monetary value. A decision to use a procurement technique is normally based on the procurement rules. A legal framework is needed to guide on which method should be utilized. Among the factors that we need to consider are the value of the products, the degree to which the procuring entity is defines the requirement, the need for prospective bidders, the urgency of the demand, as well as market availability of the products.

Procurement Best Techniques for FM Services
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Open Tendering Technique

Open tender is a common procurement technique made available to public and all organizations who are interested to apply for the contract. Open tendering is a one-stage bidding process. All vendors who are interested to contract notice will be invited to share their tender. The contract notice will state where the tender documents can be obtained and the last date of tender acceptance. 

Restricted Tendering Technique

Restricted tendering is a procurement technique which is only made available to limited suppliers for due to economic and efficient situation. This process is only opened to tenders who have been selected through prequalification process which meet certain conditions of goods, services or works which might be available only by limited number of suppliers. This tendering option is normally considered if the time and cost required to examine and evaluate many tenders is inconsistent to the value of the goods, services and works to be procured.

Request for Proposals (RFP) Technique

The RFP technique is commonly referred toas the two-envelope procurement technique and can beused for goods, services, or works. This technique describes on the customers’ needs and specify each evaluation criteria assessed on the particular vendors proposal. This technique is operates when a specific solution to fulfil a requirement is required from a supplier. A technical and financial proposal is required to be submitted in two separate envelopes by the supplier. To fulfill the pre-determined evaluation criteria process, technical proposal will be prioritized. The RFP technique will be opened for further evaluation on those firms that achieved minimum qualifying marks (score) by looking into their financial proposals.

ERP Request for Proposal (RFP)
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Two-Stage Tendering Technique

Two-stage tendering is known as  RFP because the technical and financial proposals are submitted separately, but one before the opposite, instead of simultaneously. Submitted tenders will contain on the basis with minimal details only. Within the second stage, the employer’s team will develop the precise specification in conjunction with the popular tenderer. This technique is preferred for more complex projects, where the inputs from competent contractors are crucial to the success of the projects. This procurement technique requires the submissions to be done in two stages of the proposal. For the technical requirements scope of duty is often assisted by the bidders.

Global Sourcing Technique

Global sourcing are often identified as seeking for foreign supply sources to incorporate within the overall purchasing strategy. Outsourcing is engaging an outdoor agency to manage a business function or process of the corporate. Global sourcing, which is sort of almost like offshoring, except that the specialized capabilities are accessed from external agents across geographical borders. The most incentive for outsourcing is cost reduction, especially on labour. However, companies are more exposed to problems thanks to differences in standards and lack of control. Furthermore, for suppliers who had a better quantity production and experience can enjoy economies of scale and tap on capabilities like expert knowledge, technologies and other resources that are unavailable to the buying company.

Global Sourcing 2020: Top 5 Retail Expectations - CBX Software
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Request for Quotations (RFQ) Technique

The request for quotations is a procurement technique for non-competitive situation. This technique can be utilized for cheaper value of goods that are readily available, small value construction works, or small value services procurement. Shopping or invitation to quote is also known as this technique and preparation of tender documents are not required to the same extent as open tendering, request for proposals or two-stage tendering. 

Single-Sourcing and E-Procurement

The technique for a single source refers to purchasing from one selected supplier, despite having other suppliers that provide similar products. Single sourcing most of the time is suitable for lean purchase or JIT.E-Procurement is a sourcing technique of conducting B2B procurement activities using internet-based applications. This process allows buyers a wide range of flexibility in terms of the choice of vendors and products. E-procurement significant processes includes e-Sourcing, e-Tendering, e-Auctions, and e-Marketplaces.

E-Catalogues Technique

Electronic catalogues publish supplier product range available electronically and provide buyers more visibility into product and price information where enables the sourcing personal to retrieve all kind of various information from the e-catalogue. This technique became more common and valuable and benefit to both parties.They are the digital representation of a company and a powerful e-commerce tool.

B2B e-Catalog Software: Catalog Management Software | Pepperi
Image taken from https://www.pepperi.com/e-catalog-software/

Conclusion

There are various procurement techniques which are applicable in procuring metallurgy products in which the above report has highlighted 7 common procurement techniques. Based on my experience and knowledge, e-procurement is indeed the most adopted procurement technique in procuring metallurgy products. Though the pros and cons are obvious as highlighted above, e-procurement is flexible, convenient, and efficient. As long as, one is aware of the risk of e-procurement and mitigates it well, e-procurement will remain and continue to be the preferred future of procurement technique in metallurgy industry.


References

Calvin Khoo Eng Chye, DPSM. (2019). “Key Procurement Methods for Pharmaceutical Drugs and Devices”. Retrieved from SIPMM: https://sipmm.edu.sg/key-procurement-methods-pharmaceutical-drugs-devices, accessed 20/6/2020.

Huang Qing Dian, PDPM. (2019). “Six Effective Sourcing Techniques for Electronic Products”. Retrieved from SIPMM: https://sipmm.edu.sg/six-effective-sourcing-techniques-electronics-products, accessed 20/06/2020.

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Jane Koh Lye Choo, DPSM. (2019). “The Essential Strategies for a Successful Procurement Negotiation”. Retrieved from SIPMM: https://sipmm.edu.sg/the-essential-strategies-successful-procurement-negotiation, accessed 17/06/2020.

Joe Kok Kong Loong, DPSM. (2019). “Essential Technology Application for Public Procurement”. Retrieved from SIPMM: https://sipmm.edu.sg/essential-technology-application-public-procurement, accessed 20/6/2020.

Kissflow. (2020). “Procurement Management Process”. Retrieved from https://kissflow.com/procurement-process, accessed 17/06/2020. Tim Owen S. Yoro, ADPSM. (2018).

“How Digital Procurement Transforms the Way Companies Purchase Energy”. Retrieved from SIPMM: https://sipmm.edu.sg/how-digital-procurement-transforms-way-companies-purchase-energy, accessed 17/06/2020.

About the Author Ravi Subramaniyam has twenty six years of diverse experiences in the field of procurement, global sourcing, and supply chain and factory operations in both metallurgy and electronic industry. He is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Ravi completed the Diploma in Procurement and Supply Management (DPSM) on June 2020 at SIPMM Institute.

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