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Sourcing Process:: - Specification Development
Sourcing Process:: - Specification Development
Sourcing is the stage that comes before any purchases are made and can be
considered a subsection of the procurement department.
When you have an effective strategic sourcing process in place, you’ll find
reliable, affordable, and quality suppliers to supply the goods you need.
Good work here makes the procurement process more streamlined and
efficient.
You must assess your purchasing needs, map out a plan, conduct market
research, and identify potential suppliers. After all this is completed, you’ll
then evaluate the suppliers, and then choose the most suitable supplier for
the need.
Stages in Sourcing:
1. Specification development
What are the needs of your internal customer i.e. the person who requires the
product or service to be purchased? As a buyer, your challenge and “translate” these needs
in specifications that suppliers can understand.
2. Market Assessment
Once you have a clear picture of the business requirements, your next step is to
formally invite suppliers to quote for your business.
This is used to pre-qualify suppliers to whom you would send the RFQ.
An RFI is usually a simple and short questionnaire for the supplier, which
enables the buyer to judge if the supplier is promising and has a good chance to
win the business.
An RFI is optional. If you know the market relatively well, there is no need for an
RFI.
This is a formal request to the supply market to quote for your business.
The RFQ is a more complex document with a company presentation, bidding
instructions for suppliers and detailed information about the project and
requirement
Right price
Right place:
Right time
Right source/vendor
Right quality
Purchasing:
Purchasing process focuses on how products and services are acquired and ordered,
such as raising purchase orders and arranging payment.
Payment terms
Service
Cash contribution:10%-5%
Price Based/ QTY (Standard): terms considered 1lkh/m/c= price /unit high
Material cost
Processing cost (Man hour rate and machine hour rate )
Non Recurring Engineering cost (NRE) XYZ= ABC pen manufacturing(for first
time)
Scarp or wastage
Utility cost
TS
Package
Loading and unloading
Tax
Insurance
Profit margin
Supplier contribution:
o Free of charge (FOC) units 10,000-100FOC=9900
o Cash contribution=10000*10=1,00,000--(3%)
o Part package contribution= 50+3%
o Year over Year (YOY)
o Launch contribution
DT: 1 month
STEPS:
1. Analysis of PR: QTY is more and DT and also its regular material
f. RR cables Mysore
1-3 week
6. Negotiation
8. PO to vendor
DT in
Vendor Price/unit Negotiated price
months
Northen cables
3 35 ---
Bangalore
Cubic cables
1 28 26
Hyderabad
Finolex Across
1 30=15000 26.3
India
Havels Across
1 30 26.3
India
RR cables
1.5 31 ----
Mysore
Payment terms:
Northen cables
Bangalore
Cubic cables
Hyderabad
Finolex Across
India
Havels Across
India
RR cables
Mysore
Negotiated Payment
Vendor Remarks
price terms in days
Northen cables
--- ---
Bangalore
Finolex Across
26.3 15
India
Havels Across
26.3 15
India
RR cables Mysore ---- ---
Indirect PR:
Qty: 250
15days
3. Requirement: Fasten
Qty: 1,00,000
Price: 7-9/unit
3. Requirement: Thermo plastic Machine (to print paths in PCB)
Qty: 1
DT: 1 month
Supplier: Precision Electronics UK
Issue: During last purchase vendor demanded the payment by 15days but buyer
negotiated and convinced vendor for 30 days, as per the discussion buyer should make the
payment 30days but ended up making payment on 65th day.
Now we have the above requirement for material and internal customer wants the
material from same vendor so how to Approach the Supplier?
PO: 25 - 30%
GRN: 30%
Installation: 40%
Possible reasons for delay of the payment.
1. Wrong payment
3.
Qty: 250
1. PR analysis: price
Capricon Technologies
120/tile: 115/tile
Supplier contribution:
o FOC
o Cash contribution
o Part package
o Launch contribution
Should costing is nothing but suppliers expenses made on the product. Made for accessing
110/tile
Average 295/year 195550
107/tile
RFQ-1 vendor: discussion-sample costing
Should costing:
RFQ sample preparation pricing 5000
Material information
Composition of material
Material market price
Manufacturing process involved
Scrap or wastage
Utility cost
Profit margin
Overhead charges
Market survey
Techno commercial discussions
Industry catalogue
Online sources
Payment to the vendor: 30days 15days payment terms 10lkh: onetime payment
ABC material purchased from Xyz 30days payment terms, 13th Oct 10 or 25th
Buyer: ABC=Payment days 10th and 25th vendor payment
Right price: The primary function of purchasing is to buy goods at right price. The right price
can be market price or Competitive price or Negotiated price or vendor quoted price. The right
price has greater influence on price of the final product.
The two distinct and closely terms of right price are:
A cutting tool purchased from new source at too low price 450/tool many not represent
a good purchase if the tool doesn’t give adequate life.
Cutting tool: 1000-(550+450)=Product value from previous vendor.
Tool life
Temperature 5000
Cutting force
Historical vendor: 750/tool
New vendor: 450/tool
10 km – 50km
EWay Bill is an Electronic Way bill for movement of goods to be generated on the eWay Bill
Portal. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs.
50,000 (Single Invoice/bill/delivery challan) without an e-way bill that is generated on
ewaybillgst.gov.in.
1. X
What supplier needs
1. proper specification
2. Prompt payment
4. Bulk orders.
5. Contract.
9.