Malaika Asad Butt

NESCOM, CENTech

 What is supply chain management?

Supply chain management is the practice of coordinating the various activities
necessary to produce and deliver goods and services to a business's customers.
Examples of supply chain activities can include designing, farming, manufacturing,
packaging, or transporting. It is the handling of the entire production flow of a
good or service, starting from the raw components all the way to delivering the final
product to the consumer. The entities in the supply chain include producers, vendors,
warehouses, transportation companies, distribution centers, and retailers. SCM is based
on the idea that nearly every product that comes to market results from the efforts of
various organizations that make up a supply chain. Although supply chains have existed
for ages, most companies have only recently paid attention to them as a value-add to
their operations.  A well-managed supply chain can significantly reduce a company's
operating expenses, therefore driving up profits. This efficiency can be reflected in every
aspect of the chain, from idea creation to the marketing of the final product.

 SCM importance in government sector:

A supply chain “encompasses all activities associated with the flow and transformation
of materials. Materials, services, funds and information all flow through the chain.
Effective management integrates these activities to achieve specific objectives such as
medical supply capacity and readiness for pandemics or improved response capabilities
for natural disasters. Managers and executives in government roles can expect to be
involved with numerous supply chain activities including joint planning, management of
information systems, bidding, negotiation, sourcing, procurement, scheduling of supplier
and distributor tasks, contracting, order processing, inventory management,
warehousing, disposal of waste and even customer service. Government supply chain
professionals may work closely with upstream suppliers such as raw material and
service providers, information technology vendors, infrastructure contractors, logistics
providers and many others.

 Types of procurement:
1) Open tender/public tender:
 This tender is open to all eligible contractors. Open tenders are invited by publishing a tender
notice in a newspaper or any other social media. Healthy competition exists among the
contractor in the open tendering process. Most of the public works are carried out through
open tenders only. In this Evert eligible contractors can bid for any project.
2) Limited/Selective tender:
It comes into existence when any big/complicated process is to be carried out. Only reputed
and experienced contractors are invited for tendering processes. The degree of competition
amongst the contractors is less.

3) Negotiated/Single tender:
 Whenever any big, special and valuable construction project is to be executed only one highly
experienced, trusted and the financially sound contractor is called for the tendering process.
 Negotiations take place between departmental authority and contractor regarding
specifications rate per item, the total cost of the project, time of completion, site details etc.

 Procurement methods:
1. Open tender/public tender:
 This tender is open to all eligible contractors. Open tenders are invited by publishing a
tender notice in a newspaper or any other social media. Healthy competition exists
among the contractor in the open tendering process. Most of the public works are
carried out through open tenders only. In this evert eligible contractors can bid for any
project. Most transparent type of tendering.
2. Spot purchase:

 Spot purchasing (or spot buying) occurs when there is an immediate requirement

and a purchase must be made, quite literally, “on the spot.” These purchases are
usually unplanned, made up of small orders, and often paid for immediately. This can
be done in the event of an emergency, but more often, spot procurement occurs in case
where the purchase is unique or one-off, or in the case where transaction is not
complex or is for an inexpensive item.

3. Purchase committee:

A Purchase Committee is a group of designated staff established for independent

review and evaluation of purchasing documentation whose main role is to
recommend the most appropriate supplier or service provider based on price, quality,
stock availability, references etc. The committee should consist a minimum of three
participants.

4. Proprietary purchase:

A proprietary purchase is similar to a sole source when no other is suitable or acceptable to

meet the need but there is more than one potential bidder because the manufacturer has
chosen to sell his product through multiple distributors.

 Procurement cycle
The procurement cycle (or procurement process) is the transition of events that make
up the process of procuring goods. ... Whether you're initiating a new process from
scratch, or you feel that you need to reassess existing procurement procedures, below
are seven crucial steps in the procurement life cycle.

Stages:

 Step 0: Needs Recognition.

 Step 1: Purchase Requisition.
 Step 2: Requisition review.
 Step 3: Solicitation process.
 Step 4: Evaluation and contract.
 Step 5: Order management.
 Step 6: Invoice approvals and disputes.
 Step 7: Record Keeping.

Step 0: Needs Recognition

The needs recognition stage of a procurement process enables businesses to sketch out
an accurate plan for procuring goods and services in a timely manner and at a reasonable
cost.

Step 1: Purchase Requisition

Purchase requisition are written or electronic documents raised by internal
users/customers seeking the procurement team’s help to fulfill an existing need. It
comprises key information that is required to procure the right goods, services, or works.

Step 2: Requisition review

The procurement process will officially commence only after the purchase requisition is
approved and cross-check for budget availability. In the review stage, functional managers
or department heads review the requisition package and double-check if there is a
genuine need for the requested goods or service and also verify whether necessary
funding is available.

Approved purchase requests become POs, while rejected requests are sent back to the
requisitioned with the reason for rejection. All these can be handled with a
simple purchase order software

Step 3: Solicitation process

Once a requisition is approved and PO is generated, the procurement team will develop
an individual procurement plan and sketch out a corresponding solicitation process. The
scope of this individual solicitation plan depends ultimately on the complexity of the
requirement.

Once the budget is approved, the procurement team forwards several requests for
quotation (RFQ) to vendors with the intention to receive and compare bids to shortlist the
perfect vendor.

Step 4: Evaluation and contract

Once the solicitation process is officially closed, the procurement team in conjunction with
the evaluation committee will review and evaluate supplier quotations to determine which
supplier will be the best fit to fulfill the existing need.

Once a vendor is selected, the contract negotiation and signing are completed, and the
purchase order is then forwarded to the vendor. A legally binding contract activates right
after a vendor accepts a PO and acknowledges it.

Step 5: Order management

The vendor delivers the promised goods/services within the stipulated timeline. After
receiving them, the purchaser examines the order and notifies the vendor of any issues
with the received items.

Step 6: Invoice approvals and disputes

This is a crucial step in the procurement process and having procurement software
like Kissflow Procurement Cloud gives you a competitive edge over others. With Kissflow,
 you can perform three-way matching between GRN, Supplier Invoice and PO to check if
you have received the order correctly and there aren’t any discrepancies. Once three-way
matching is complete, the invoice is approved and forwarded to payment processing.

Step 7: Record Keeping

After the payment process, buyers make a record of it for bookkeeping and auditing. All
appropriate documents right from purchase requests to approved invoices are stored in a
centralized location.

 Describe Inco-terms.
The basic purpose of the Incoterms is to delineate how obligations, costs and risks will be
divided between the parties in connection with delivery of the goods from the vendor to the
purchaser

Incoterms, a widely-used terms of sale, are a set of 11 internationally recognized rules which
define the responsibilities of sellers and buyers. Incoterms specifies who is responsible for
paying for and managing the shipment, insurance, documentation, customs clearance, and other
logistical activities.

Classification of Incoterms

The Incoterms are divided into four principal categories: E, F, C and D.

Category E (Departure), which contains only one trade term, i.e. EXW (Ex Works).

Category F (Main Carriage Unpaid), which contains three trade terms:

 FCA (Free Carrier)
 FAS (Free Alongside Ship)
 FOB (Free on Board)

Category C (Main Carriage Paid), which contains four trade terms:

 CPT (Carriage paid to)

 CIP (Carriage and Insurance paid to)
 CFR (Cost and Freight)
 CIF (Cost, Insurance and Freight)

Category D (Arrival), which contains three trade terms:

 DAP (Delivered at Place)
 DPU (Delivered at Place Unloaded)
 DDP (Delivered Duty Paid)
 The four above-mentioned categories can also be classified as per the means of
transportation:

 Incoterms for any mode of transport: EXW, FCA, CPT, CIP, DPU, DAP and DDP;
 Incoterms only for sea and inland waterway transport: FAS, FOB, CFR and CIF.