Procurement management
Procurement refers to the act of acquiring a service or product, often for financial counterpart. In
practice, it consists of:
Prospecting the markets
Select products or services that meet internal or external needs
Negotiate financial terms
Chronological progress of the Procuring process:
Supplier
Sourcing & Supplier
Portfolio Analysis Procuring strategy Relationship
Evaluation
Management (SRM)
1- Portfolio Analysis:
Portfolio analysis consists of analyzing the internal and external needs of companies, as well as
the supplier’s market and costs in general.
The needs analysis refers to the classification of procurements according to their importance and
their place in relation to value creation, then we segment them by nature/family:
Procurements of raw materials
Investment Procurements
Procurements of new work
Component Procurements
Subcontracting Procurements
Procurements of overhead and consumables
Maintenance Procurements
Purchase of intellectual services
Procurements of trading products
Supplier market analysis refers to good supplier panel management. At the same time, cost
analysis allowed us to identify our expenses in a specific way to better manage them.
For this reason, multiple methods have been put in place to guide and perform a qualitative and
representative analysis:
Pareto 20/80 method which is followed by the ABC method
The FMEA method
The TCO
Pareto and ABC: The Pareto principle is the general method of sorting any aggregate into two
parts: vital problems and more secondary problems - in any case, the application of the Pareto
principle makes it possible to identify the properties of strategic problems and separate them
from others. , Pareto's law refers to an observed statistical regularity according to which 80%
of the total value is produced by 20% of the most important units. This rule highlights the
importance of optimizing resources to achieve the best return. In other words, we would have to
, focus on the 20% of resources to produce 80% of the results. In the world of Procurement, this
opens a reflection on the optimization of costs.
The Procurement function uses a classification method inspired by Pareto's law to prioritize its
purchase, called "ABC Method", we distinguish three categories of Procurements:
Class A: represents 80% of the company's total Procuring budget for 20% of
Procurements
Class B: represents 15% of the company's total Procuring budget for 30% of
Procurements
Class C: represents 5% of the company's total Procuring budget for 50% of Procurements
Class A: 20% Suppliers 80% Budget
20% Suppliers 80% Budget
Class B: 30% Suppliers 15% Budget
80% Suppliers 20% Budget
Class C: 50% Suppliers 5% Budget
FMEA method: Failure Mode and Effects Analysis, is a method of predictive analysis of
reliability which makes it possible to identify potential failure modes whose consequences
affect the proper functioning of the means of production, equipment or process studied, then
to estimate the risks related to the occurrence of these failures, in order to initiate the corrective
or preventive actions to be taken during the design, construction or operation of the means of
production, the product or the process. FMEA might be applied to all systems that may not meet
the objectives of reliability, maintainability, quality of the product manufactured and/or safety.
FMEA makes it possible to establish a quantitativeity of risque which determines the advisability
of triggering action plans of a preventive nature.
One of the strengths of FMEA methods is the risk rating it carries out on three dimensions:
The frequency occurrence of Risks: F
The gravity of risks: G Criticality C = F * G * D
Risk detectability: D
TCO: the Total Cost of Ownership, represents the total amount that the owner of a property had
to spend during the life cycle of the latter, the direct and indirect costs are taken into account.
This is to take into account the total cost that the company will have to assume to operate an
asset, and not only the initial cost of acquisition.
The main objective of the approach is to get rid of the only criterion "purchase price", starting
from the verified principle, that the cheapest purchase is not necessarily the most economically
worthwhile. The interest is to facilitate the arbitration between several offers when buying
equipment
Procurement refers to the act of acquiring a service or product, often for financial counterpart. In
practice, it consists of:
Prospecting the markets
Select products or services that meet internal or external needs
Negotiate financial terms
Chronological progress of the Procuring process:
Supplier
Sourcing & Supplier
Portfolio Analysis Procuring strategy Relationship
Evaluation
Management (SRM)
1- Portfolio Analysis:
Portfolio analysis consists of analyzing the internal and external needs of companies, as well as
the supplier’s market and costs in general.
The needs analysis refers to the classification of procurements according to their importance and
their place in relation to value creation, then we segment them by nature/family:
Procurements of raw materials
Investment Procurements
Procurements of new work
Component Procurements
Subcontracting Procurements
Procurements of overhead and consumables
Maintenance Procurements
Purchase of intellectual services
Procurements of trading products
Supplier market analysis refers to good supplier panel management. At the same time, cost
analysis allowed us to identify our expenses in a specific way to better manage them.
For this reason, multiple methods have been put in place to guide and perform a qualitative and
representative analysis:
Pareto 20/80 method which is followed by the ABC method
The FMEA method
The TCO
Pareto and ABC: The Pareto principle is the general method of sorting any aggregate into two
parts: vital problems and more secondary problems - in any case, the application of the Pareto
principle makes it possible to identify the properties of strategic problems and separate them
from others. , Pareto's law refers to an observed statistical regularity according to which 80%
of the total value is produced by 20% of the most important units. This rule highlights the
importance of optimizing resources to achieve the best return. In other words, we would have to
, focus on the 20% of resources to produce 80% of the results. In the world of Procurement, this
opens a reflection on the optimization of costs.
The Procurement function uses a classification method inspired by Pareto's law to prioritize its
purchase, called "ABC Method", we distinguish three categories of Procurements:
Class A: represents 80% of the company's total Procuring budget for 20% of
Procurements
Class B: represents 15% of the company's total Procuring budget for 30% of
Procurements
Class C: represents 5% of the company's total Procuring budget for 50% of Procurements
Class A: 20% Suppliers 80% Budget
20% Suppliers 80% Budget
Class B: 30% Suppliers 15% Budget
80% Suppliers 20% Budget
Class C: 50% Suppliers 5% Budget
FMEA method: Failure Mode and Effects Analysis, is a method of predictive analysis of
reliability which makes it possible to identify potential failure modes whose consequences
affect the proper functioning of the means of production, equipment or process studied, then
to estimate the risks related to the occurrence of these failures, in order to initiate the corrective
or preventive actions to be taken during the design, construction or operation of the means of
production, the product or the process. FMEA might be applied to all systems that may not meet
the objectives of reliability, maintainability, quality of the product manufactured and/or safety.
FMEA makes it possible to establish a quantitativeity of risque which determines the advisability
of triggering action plans of a preventive nature.
One of the strengths of FMEA methods is the risk rating it carries out on three dimensions:
The frequency occurrence of Risks: F
The gravity of risks: G Criticality C = F * G * D
Risk detectability: D
TCO: the Total Cost of Ownership, represents the total amount that the owner of a property had
to spend during the life cycle of the latter, the direct and indirect costs are taken into account.
This is to take into account the total cost that the company will have to assume to operate an
asset, and not only the initial cost of acquisition.
The main objective of the approach is to get rid of the only criterion "purchase price", starting
from the verified principle, that the cheapest purchase is not necessarily the most economically
worthwhile. The interest is to facilitate the arbitration between several offers when buying
equipment
