The Procurement ClassRoom

Procurement Packaging

On Procurement Strategy Development

6 Comments

It is difficult to talk about procurement planning without mentioning procurement strategy, because procurement strategy is developed in conjunction with and during the procurement planning phase and is a key factor in determining the most appropriate procurement method given the complexity and monetary value of the requirement, and market availability.

While procurement planning deals with “when”, procurement strategy looks at “what”, “how”, “where” and “why”; which need to be decided before the ‘when”.

  1. Why buy it?
  2. How to buy it?
  3. What is the objective of the purchase?
  4. How much does it cost?
  5. Where can it be sourced?
  6. How many sources are available?
  7. What is the risk cz-lekarna.com?
  8. What is the benefit?

But even after a preliminary procurement plan is developed, there are still further strategic questions that need to be answered, such as:

  1. Does the procurement process need expediting?
  2. Are there opportunities for packaging requirements in order to purchase in bulk?
  3. What are the monetary or strategic advantages/disadvantages of grouping requirements?
  4. Are there any dependent requirements?

The above list of questions is not exhaustive.

A procurement strategy can be developed for one requirement or a group of requirements, and although the development of a procurement strategy is important when planning procurements, the extent of the strategy developed is dependent on the level of risk and monetary value of each requirement.

The strategy that is developed must take into consideration the various procurement principles; primarily, economy and efficiency. Consideration needs to always be given to whatever savings (or economies of scale) can be achieved by strategically planning how procurements will be carried out.

This might entail consulting with the various requesting entities to determine if there are any extenuating circumstances that warrant making their purchases in a special manner and in any way different from the rest of the planned procurements of similar items.

Requesting entities should also be involved and consulted on whatever decisions are made in the planning and strategy phase, to obtain their agreement and to avoid planning their requirements in such a manner that could be counterproductive to their operations.

For example, although there might be a need to purchase a total of 10 vehicles by consolidating 3 requirements, one requesting entity might have valid reasons why their vehicle should not be purchased in bulk, because they need to receive the vehicle in a shorter period than it would usually take depending on the procurement method used. So, this requirement (after having consulted with the requesting entity) might need special attention, which could be reflected in the requirements of the package or be purchased using a different procurement method which would permit this requesting entity to receive their vehicle ahead of (and in a separate shipment) from the other vehicles purchased in bulk.

Procurement Packaging

Leave a Comment

Knowledge of the scheduling of procurement requirements and of the timeline of each key milestone in the evaluation and selection process (duration of the evaluation process, approval requirements, contract negotiations, etc.) is crucial to effectively package procurement requirements.

What is procurement packaging?

There are two principal forms of procurement packaging: (i) the grouping (or bulking) of procurement requirements within a procurement category for the purpose of acquiring them under a single contract, and (ii) the division of one requirement into multiple lots, where bidders can submit bids for one, several or all lots (as would be stipulated in the solicitation documents), and where a contract could be awarded for each lot. On the one hand only one contract is awarded; on the other several contracts may be awarded.

Another form of packaging is done by grouping several procurement categories when this is considered most practical. An example of such packaging is when there is a requirement for acquiring a particular type of equipment, and where there may also be a requirement for the installation of the equipment, and sometimes training on the use of the equipment once installed. In such cases, it may be most practical to call for bids for the supply, installation and training on the operation and use of the equipment. Although this may seems the most logical arrangement, the equipment, its installation and training could also be procured from three different sources under three different contracts.

When to consider procurement packaging cheska-lekarna.com?

The packaging of procurement requirements should be considered during the requirements determination and procurement planning phases, so that the decision is taken into account during procurement scheduling.

What needs to be considered when deciding on packaging procurements?

The following needs to be taken into account when considering procurement packaging:

(i) If the group of requirements are needed (or can be received) simultaneously, or are there different delivery dates between requirements. Unless the selected supplier can deliver at different intervals, receiving all the goods at one time could result in a potential logistical problem; therefore, under these circumstances it may be preferable not to package the various requirements.

(ii) The likelihood of local suppliers being able to fulfill the requirement and if the packaging would limit their participation.

(iii) The availability of several suppliers that can provide a combination of procurement categories as may be required in the case of supply, installation and training.

(iv) If the procurement unit lacks the capacity to coordinate several suppliers this may create a preference for packaging to reduce the number of suppliers that the procurement unit would have to coordinate.

When to avoid procurement packaging?

Procurement packaging should be avoided:

(i) When the failure of one supplier could have a negative impact on the outcome of a project, given the interdependence of requirements under a project.

(ii) When it may limit competition or the participation of suppliers in the procurement process.

(iii) When packaging a requirement into several lots may increase the need for supervision beyond the capacity of the unit responsible for contract administration.

(iv) When there is no economic or efficiency gains to be derived from the packaging.