CEC IITR BTG PROGRAM

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Here are the 13 essential stages of the procurement life cycle.

1. Define the needs of your business

The first step of the CIPS procurement cycle is to understand your businesses needs and
opportunities. These need to be clearly laid out before going forward to ensure you’re
following a plan.

It’s critical to involve numerous different stakeholders within this plan to help you build
a bigger, more broad image of what needs to be done, using various different kinds of
knowledge, expertise and viewpoints to build a comprehensive plan of action that
includes lots of different aspects and considerations.

2. Market analysis Make or Buy analysis

Next, you need to conduct market research in your industry and analyze the options
available to you in order to make the best decision. Weigh up your options based on
your current position and what is happening in the marketplace.

Analyzing both your own position and the conditions of the marketplace better equip
you with the information required to make better decisions for both the present and the
future. Use this information to help you decide whether to manufacture the product or
to outsource it.

3. Develop the plan or strategy

Once you have carried out thorough market analysis and familiarized yourself with the
changing market conditions it is time to put together a solid plan that considers the
potential effect of the external environment. Making competitive procurement offers is
good if you’re in a position to compete with others in your market with a quality
offering that distinguishes your capabilities above the rest. It may be better to develop
competition in the marketplace or bring this in-house if you only have one supplier.

4. Pre-procurement – Market Test & Engagement

This is the stage where you have to consider the individual needs of both the
stakeholders and the business as a whole and how changes to the procurement strategy
can flexibly meet those needs. This kind of market test will help you gauge whether it is
the right time to go into the marketplace or whether it’s best to hold back.

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5. Develop detailed documentation

Creating relevant and detailed documentation is critically important, including a detailed

breakdown of the volumes, service level agreements and terms and conditions. A
detailed breakdown should ensure consistency on pricing, operational functionality and
product quality, reducing the negative financial effect of the wrong specification.

6. Supplier selection to participate in Tender

Gain an understanding of the capabilities, size, financials, strengths and weaknesses of

the supplier to see if they are the appropriate candidates. Conducting a request for
information (RFI) should give you good insights into all of these factors and help you
decide whether the supplier is fit for purpose.

7. Issue Tender Documents (ITT + RFQ)

When you have selected the appropriate companies to take part, you need to send out
the formal documentation such as an Invitation to Tender (ITT) and a Request for
Quotation (RFQ) to the suppliers that have been selected to participate. Include as much
detailed documentation as possible regarding the business requirements, along with
clear timescales to respond.

8. Bid and Tender Evaluation and Validation

Once the tenders have been submitted and returned, the next step is bid evaluation and
validation against pre-defined award criteria. Identify which offering is the best value for
money (VFM) and select the best supplier based on these criteria. Make sure the tender
evaluation is disciplined, structured and transparent, including price comparisons and
technical aspects.

9. Contract Award & Implementation

Once you have the selected your chosen supplier you will award them the contract,
allowing both parties to fully understand their duties, responsibilities and key success
criteria as part of the agreement. This forms the proper foundations to manage the
contract and relationship effectively.

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10. Warehouse, Logistics and Receipt

Warehousing and logistics have to be considered to make sure that the procurement
and supply process is efficient and uncomplicated. Things like product coding and
classification, storage space, layout & racking and the delivery frequency. Be sure that
your supplier is able to handle the demand.

11. Measure Contract Performance and Improvement opportunities

You should monitor the contract performance and review it at agreed periods against
the key performance indicators that were agreed upon in the contract. Include
discussions on the relationship and its efficacy, resolving any issues or conflicts with
agreed-upon processes and timescales. Also, consider continuous improvement and set
the next date for review.

12. Supplier Relationship Management (SRM)

Supplier relationship management (SRM) is a crucial part of supply chain management

(SCM), reviewing your suppliers and considering the right level of cooperation and effort
required to develop the relationship and achieve specific objectives. Creating the right
relationships and environment fosters innovation and development as well as making
the process faster and more efficient.

13. Asset Management

As the process continues, regular assessments should be made to consider the changing
business requirements that are affected by numerous factors such as market changes,
economic climate, supplier relationships etc. This helps determine whether the current
agreement is still fit for purpose or whether a new, updated one needs considering,
bringing us back to stage one of the cycle.

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Procurement Process Stages (In Flow Chart) :

Here's a brief overview of each step in the procurement cycle:

1. Identification of Requirement: Recognizing the need for goods or services

within the organization.
2. Determination of Requirement Specification: Specifying the features,
quantities, and standards required for the goods or services.
3. Vendor Evaluation: Assessing potential suppliers to find the most suitable one
based on criteria like price, quality, reliability, and service.
4. Negotiation and Finalizing Payment Terms: Negotiating terms with the chosen
supplier, including price, delivery, and payment terms, and finalizing the contract.
5. Raising the Purchase Requisition: Creating and approving a formal request
within the organization to purchase the necessary goods or services.
6. Delivery of Purchase Order: Issuing a formal order to the supplier to deliver the
specified goods or services.
7. Expediting the Purchase: Managing the timeline and process to ensure timely
delivery of goods or services.
8. Supply and Inspection: Receiving and inspecting the supplied goods or services
to ensure they meet the specified requirements.
9. Payment Process: Processing payment to the supplier according to the agreed
terms following receipt and acceptance of the goods or services.
10. Documentation and Review: Maintaining records of all procurement activities
and reviewing the process to identify improvements for future cycles.

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INCOTEREMS :

The International Commercial Terms (Incoterms) are standardized sets of trade terms
designed to clarify the responsibilities of buyers and sellers in international transactions.

As of the latest update in 2020, the 11 Incoterms are grouped into two categories:

• Rules for any mode or modes of transport

• Rules for sea and inland waterway transport

Rules for any mode or modes of transport :

1. EXW (Ex Works): The seller makes the goods available at their premises. The
buyer is responsible for all costs and risks involved in taking the goods from the
seller's location to the desired destination.
2. FCA (Free Carrier): The seller delivers the goods to a carrier or another
person nominated by the buyer at the seller's premises or another named place.
It is suitable for all modes of transport.
3. CPT (Carriage Paid To): The seller pays for the carriage of the goods up to
the named place of destination. However, the risk transfers to the buyer once the
goods are handed over to the first carrier.
4. CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also
has to procure insurance against the buyer’s risk of loss or damage to the goods
during the carriage.
5. DAP (Delivered at Place): The seller delivers when the goods are placed at
the disposal of the buyer on the arriving means of transport ready for unloading
at the named place of destination.
6. DPU (Delivered at Place Unloaded, formerly DAT): The seller delivers
and unloads the goods at the named place of destination. This is the only
Incoterm that requires the seller to unload the goods.
7. DDP (Delivered Duty Paid): The seller delivers the goods, ready for
unloading at the named place of destination, having paid all costs including
import duties and taxes.

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Rules for sea and inland waterway transport :

8. FAS (Free Alongside Ship): The seller places the goods alongside
the ship at the named port of departure. The buyer assumes all costs
and risks of loss or damage from that point onward.
9. FOB (Free on Board): The seller loads the goods on board the ship
at the named port of departure. Once the goods have passed the ship’s
rail, the risk transfers to the buyer.
10. CFR (Cost and Freight): The seller must pay the costs and
freight necessary to bring the goods to the named port of destination,
but the risk transfers to the buyer once the goods pass the ship's rail at
the port of shipment.
11. CIF (Cost, Insurance, and Freight): Like CFR, but with the
addition that the seller has to procure marine insurance against the
buyer's risk of loss or damage to the goods during the carriage.

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