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The Procurement and Supply Manager's Desk Reference, 2nd Edition

ISBN: 978-1-118-23849-3
400 pages
May 2012
The Procurement and Supply Manager
Every supply manager's essential desktop tool with in-depth, authoritative coverage of each topic

Leaving no stone unturned in covering all aspects of the procurement and sourcing functions, The Procurement and Supply Manager's Desk Reference, Second Edition is filled with everything every organization needs to know about the key roles and responsibilities of a procurement professional. Presented logically to match the flow of the procurement and sourcing functions, the book is filled with practical aids such as step-by-step guides to each segment of the process, as well as checklists and customizable forms. The new edition of this essential book provides an easy-to-use road map for the procurement and supply manager in the new millennium.

  • Coverage on how to select suppliers and measure performance
  • Reveals the easiest way to drive continuous improvement in the supply base
  • Features tips on providing value to the organization
  • Helps you identify those strategies that will work best for your business for years to come

Written for the worldwide profession of procurement and supply management, The Procurement and Supply Manager's Desk Reference, Second Edition offers detailed coverage and tips with an eye toward incorporating proactive strategies and best practices.

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Preface to the Second Edition xi

Acknowledgments xiii

CHAPTER 1 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

CHAPTER 2 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

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

CHAPTER 3 Solicitation of Bids and Proposals 59

Solicitation Planning 59

Solicitation Methods 66

Summary 68

CHAPTER 4 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

CHAPTER 5 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

CHAPTER 6 Supplier Diversity 109

Diversity Programs 110

U.S. Small Business Support 112

The U.S. Small Business Administration (SBA) 112

Contracting 113

The Business Case for Diversity 115

Supplier Diversity Best Practices 116

Global Supplier Diversity 118

Diversity Advocacy Organizations 119

Summary 123

CHAPTER 7 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

CHAPTER 8 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

CHAPTER 9 Negotiation 155

Assessing the Negotiating Environment 155

Gathering Information and Analysis 158

Preparing for the Negotiation 161

Conducting the Negotiation 167

Summary 172

CHAPTER 10 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

CHAPTER 11 Project Management 189

The Five Project Management Processes 189

Stage One: Initiating a Project 191

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

CHAPTER 12 Quality 215

Managing Quality Performance 215

Ensuring Quality Performance 220

Summary 226

CHAPTER 13 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

CHAPTER 14 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

CHAPTER 15 Leveraging Computer Systems 267

Using Basic Information Technology Processes 268

Using Software for Procurement 271

Sourcing Supply Management Tools 279

Summary 281

CHAPTER 16 Financial Decisions for Sourcing 283

Performing Make-or-Buy Analysis 283

Performing Lease-or-Buy Analysis 288

Formulating Financial Strategies 291

Summary 296

CHAPTER 17 Source to Settle 297

Why Source to Settle? 297

Implementing an S2S Process 303

Managing the S2S Process 307

Outsourcing the S2S Process 308

Summary 309

CHAPTER 18 Material Management and Supply Operations 311

Inventory Control and Management Systems 311

Physical Management and Inventory Accounting 321

Disposition of Surplus Assets 323

Summary 326

CHAPTER 19 Logistics 327

The Logistics Process 327

Modes of Transportation 332

Traffic Management 335

Customs 336

Logistics in the Context of International Trade 339

Supplemental Information 345

Links 347

Summary 348

Notes 349

CHAPTER 20 Regulatory Compliance 351

Regulatory Factors Governing Procurement 351

Government Organizations and Roles, Regulations, and Controls 358

Tax Laws 363

FASB 364

Conformance to Law 364

Preventing Workplace Discrimination and Harassment 364

Summary 368

Note 368

About the Authors 369

About the Website 371

Index 373

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FRED SOLLISH, MS, C.P.M. (San Francisco, CA), is the Managing Director of eParagon, LLC, a consulting firm specializing in providing training and working tools for the supply chain management profession. He is a working professional in supply chain management and procurement with over 30 years' experience as a manager. Fred is former president and CEO of the Institute for Supply Management (ISM) Silicon Valley affiliate. He is also an instructor for sourcing and procurement–related courses.

JOHN SEMANIK, MBA, C.P.M. (San Jose, CA), is cofounder and Director of eParagon, LLC. He has served in senior corporate supply chain positions at leading-edge companies such as Hewlett-Packard and Sun Microsystems. He is the former Managing Director and instructor for San Jose State University's Professional Development curriculum in Supply Chain Management and Purchasing, and former CEO of the Institute for Supply Management (ISM) Silicon Valley affiliate.

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