The Procurement and Supply Manager's Desk Reference

402 Pages·2012·12.99 MB·English

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The Procurement and Supply
Manager’s Desk Reference
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The Procurement and Supply
Manager’s Desk Reference
Second Edition
FRED SOLLISH, MS
JOHN SEMANIK, MBA
JohnWiley&Sons,Inc.
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Copyright © 2012 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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LibraryofCongressCataloging-in-PublicationData:
Sollish,Fred.
Theprocurementandsupplymanager’sdeskreference/FredB.Sollish,JohnSemanik.–2nded.
p.cm.
Includesindex.
ISBN978-1-118-13009-4(hardback);ISBN978-1-118-22568-4(ebk);
ISBN978-1-118-23849-3(ebk);ISBN978-1-118-26309-9(ebk)
1.Industrialprocurement—Handbooks,manuals,etc. 2.Purchasing—Handbooks,manuals,
etc.3.Materialsmanagement—Handbooks,manuals,etc. I.Semanik,John. II.Title.
HD39.5.S662012
658.7(cid:2)2—dc23
2012004857
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
PrefacetotheSecondEdition xi
Acknowledgments xiii
CHAPTER1 Procurement and Best Business Practices 1
Understanding Procurement 1
Understanding and Conveying Requirements 2
Creating Strategic Plans and Tactics 4
Finding Innovative Methods and Exploring Alternatives 5
Providing Procurement Services 6
Accepting Orders 7
Placing Orders 10
Mastering Procurement and Business Tactics 13
Budgets and Expense Allocation 13
Internal Control Systems 14
Establishing Procurement Methods 15
Internal Cost-Related Analysis Tools 18
Keeping Supplier Information 22
Summary 23
CHAPTER2 Sourcing Management 25
Establishing Requirements 25
Creating and Organizing Requirements 25
Developing Specifications and Formats 27
Statement of Work 31
Terms and Conditions 32
Specification Traps 32
Locating and Developing Sources of Supply 33
Types of Competition 36
Locating Suitable Suppliers 37
Market Analysis: Determining Changing Marketplace Factors 39
Obtaining Bids and Proposals 41
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Bidding Guidelines 41
Formulating the Bid or Proposal Type 42
Managing Sourcing Data 45
Categories of Existing Sources 45
Maintaining Sourcing Lists 47
The Strategic Sourcing Plan 47
Operational Sourcing Strategy 54
Summary 57
CHAPTER3 Solicitation of Bids and Proposals 59
Solicitation Planning 59
Solicitation Methods 66
Summary 68
CHAPTER4 Supplier Selection Criteria 69
Selecting the Supplier and Awarding the Contract 69
Operational Measures and Measures of Efficiency 75
Applying Selection Criteria 77
Administering the Contract 86
Summary 87
Note 88
CHAPTER5 Contracts and the Legal Aspects of Procurement 89
Contract Essentials 89
Contract Requirements 91
Contract Types 92
Other Contract Types 98
Methods of Exchange 99
Other Contract Elements 100
Legal Authority and the Buyers’ Responsibilities 101
Reviewing Contracts for Legal Requirements 103
Aligning Contracts and Practices with Policy 105
Maintaining Procurement Documents and Records 107
Summary 108
CHAPTER6 Supplier Diversity 109
Diversity Programs 110
U.S. Small Business Support 112
The U.S. Small Business Administration (SBA) 112
Contracting 113
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Contents vii
The Business Case for Diversity 115
Supplier Diversity Best Practices 116
Global Supplier Diversity 118
Diversity Advocacy Organizations 119
Summary 123
CHAPTER7 Risk Management 125
The Nature of Risk 125
Why Is Understanding Risk Important? 125
Risk Management Principles 126
Resources for Additional Information 134
Summary 136
CHAPTER8 Sustainability 137
Issues in Sustainability 137
Guidelines 146
Lean Six Sigma 149
Criteria for Supplier Evaluation 150
Institute for Supply Management’s Principles of Sustainability
and Social Responsibility 151
Examples of Corporate Sustainability Efforts 152
Summary 154
Notes 154
CHAPTER9 Negotiation 155
Assessing the Negotiating Environment 155
Gathering Information and Analysis 158
Preparing for the Negotiation 161
Conducting the Negotiation 167
Summary 172
CHAPTER10 Contract Formation and Administration for Optimum
Supplier Performance 173
Managing Contract Compliance 173
Tracking and Expediting Deliveries 179
Handling Supplier-Related Deviations 181
Summary 188
CHAPTER11 Project Management 189
The Five Project Management Processes 189
Stage One: Initiating a Project 191
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Stage Two: Project Planning 193
Stage Three: Project Execution 199
Stage Four: Project Controlling 203
Stage Five: Project Closeout 206
A Key Knowledge Area: Project Procurement Management 207
Using a Matrix Model for Project Staffing 210
Summary 212
Notes 212
CHAPTER12 Quality 215
Managing Quality Performance 215
Ensuring Quality Performance 220
Summary 226
CHAPTER13 The Procurement Function’s Internal Relationships 227
Understanding Key Departmental Roles 227
Developing Good Working Relationships 233
Participating in Cross-Functional Operations 237
Reengineering Supply Management 240
Summary 245
CHAPTER14 Supplier Relationship Management (SRM) 247
Managing Productive Supplier Relationships 247
Developing Continuous Improvement 254
Pricing Factors and Supply 257
Representing the Organization 261
Summary 265
Note 265
CHAPTER15 Leveraging Computer Systems 267
Using Basic Information Technology Processes 268
Using Software for Procurement 271
Sourcing Supply Management Tools 279
Summary 281
CHAPTER16 Financial Decisions for Sourcing 283
Performing Make-or-Buy Analysis 283
Performing Lease-or-Buy Analysis 288
Formulating Financial Strategies 291
Summary 296