Procurement Principles and Management in the Digital Age, Twelfth edition
By Peter Baily, David Farmer, Barry Crocker and David Jessop
Contents:
Preface xiv
Acknowledgements xvii
Part 1 PROCUREMENT OBJECTIVES AND DEVELOPMENT 1
1 Procurement scope and development 3
Introduction 3
Objectives of this chapter 3
The scope of purchasing 4
Sustainable procurement 5
The procurement cycle 9
Procurement transformations 16
The changing role of procurement and supply 19
Proactive procurement 23
The changing nature of relationships 24
Procurement positioning 26
Supplier preferencing 31
Total acquisition cost and total cost of ownership 33
Procurement development 35
Best practice in strategic supply management 39
Summary 40
Self-assessment tasks 41
References and further reading 41
2 Strategic procurement and supply chain management 43
Introduction 43
Objectives of this chapter 43
Strategic procurement 44
The concept of strategy 46
The mission statement 46
Levels of strategy 47
Category management (CM) 48
Skills for category management 50
Strategic management 51
Contents
Strategic analysis 51
Strategic development 58
Strategy implementation 59
Objectives for purchasing/procurement 59
Selecting a strategy 61
Effective supply market strategies 62
Integrated approaches 63
The supply chain 64
Supply chain resilience 65
The supply chain concept in action 69
Improving the efficiency of the supply chain 70
Hierarchy of objectives 75
The future of procurement and supply management 80
Summary 85
Self-assessment tasks 85
References and further reading 86
3 Public sector procurement 89
Introduction 89
Objectives of this chapter 89
Part A 90
Historic background 90
Public sector sustainability and social value 93
Third sector – not-for-profit procurement 94
UK National Health Service (NHS) 96
UK Metropolitan Police procurement 97
The Ministry of Defence (MoD) 98
Part B 103
The EU and procurement 103
EU competition procurement cycle for goods and services 104
EU procurement directives 104
Public procurement after Brexit 105
Summary 107
Self-assessment tasks 107
References and further reading 108
Part 2 KEY PROCUREMENT ISSUES 111
4 Outsourcing 113
Introduction 113
Objectives of this chapter 113
Outsourcing 114
Outsourcing methodologies 121
Outsourcing – pitfalls 124
How to avoid pitfalls 126
Outsourcing update 128
Summary 130
Self-assessment tasks 130
References and further reading 131
5 Quality management 133
Introduction 133
Objectives of this chapter 133
What is quality? 134
Continuous improvement 138
Statistical process control 140
Taguchi methods for the ‘off-line’ control of quality 142
Failure mode and effect analysis 143
The House of Quality 144
Specification 145
Producing a specification 146
Sustainable specifications 147
Early supplier involvement 148
Standardisation 149
Correction of defects 150
Quality circles 151
Value analysis/value engineering 151
Make-or-buy decisions 152
Six Sigma 154
Quality update: Quality 4.0 157
Summary 157
Self-assessment tasks 158
References and further reading 159
6 Inventory management 160
Introduction 160
Objectives of this chapter 160
Provisioning systems 161
Order quantities and stock control 161
Materials requirements planning (MRP) 167
Manufacturing resource planning (MRP2) 170
Enterprise resource planning (ERP) 173
Just-in-time (JIT) 174
Lean and agile supply 178
Vendor-managed inventory (VMI) 187
Covid-19: just-in-case inventory? 189
Summary 192
Self-assessment tasks 192
References and further reading 192
7 Lead time and time compression 194
Introduction 194
Objectives of this chapter 194
Time and competitive advantage 194
On-time delivery 198
Lead-time improvement 204
Effect of Covid-19 pandemic on supply chains 205
Supply chain resilience 205
Summary 205
Self-assessment tasks 206
References and further reading 206
8 Sourcing strategies and relationships 208
Introduction 208
Objectives of this chapter 208
The nature of the sourcing decision 209
Attributes of a good supplier 210
Sourcing decisions 210
Sources of information on potential suppliers 212
Supplier evaluation 213
Carter’s 10 Cs model 219
Impact of supply chain disruption – Covid-19 pandemic 223
Award criteria 223
Sustainable sourcing 225
The right relationship 227
Other aspects of sourcing 229
Collaboration and partnering 232
The Bensaou model of relationship management 236
Tiering of suppliers 240
Summary 242
Self-assessment tasks 243
References and further reading 243
9 Price and total cost of ownership (TCO) 245
Introduction 245
Objectives of this chapter 245
Factors affecting pricing decisions 245
How buyers obtain prices 253
Auctions 253
Discounts 253
Price analysis and cost analysis 255
Pricing major contracts 265
Investment appraisal 268
Learning curves and experience curves 269
Conclusion 271
Summary 271
Self-assessment tasks 271
References and further reading 272
10 Negotiations 273
Introduction 273
Objectives of this chapter 273
Negotiation 273
Negotiation skills 275
Preparation 276
The introductory stage 284
The discussion stage 284
The agreement stage 286
The post-negotiation stage 286
SPEED negotiation process 286
Competition and cooperation in negotiation 287
Distributive and integrative approaches 293
Body language 294
Negotiation strategies 294
Best practice negotiation 295
Summaries of other examples of best practice negotiation approaches 299
Virtual negotiations 300
Summary 302
Self-assessment tasks 302
References and further reading 302
Part 3 APPLICATIONS 305
11 Project procurement 307
Introduction 307
Objectives of this chapter 307
Introduction to projects 308
Project planning 309
Project control 310
The ‘should cost model’ (SCM) 316
Subcontracting 316
Network analysis 318
Risk 323
Disaster recovery 328
Blockchain in project management 329
Predictive analytics 330
Summary 330
Self-assessment tasks 331
References and further reading 331
12 Procurement of commodities 333
Introduction 333
Objectives of this chapter 333
The principal commodities 334
Why do commodity prices fluctuate? 337
Price stabilisation schemes 338
The role of the speculator 339
Hedging with futures contracts 339
The difference between futures and forwards 341
Some buying techniques 342
Indifference prices 344
Traded options 347
Rare earth metals 348
Application of Blockchain for sustainability and traceability 348
Glossary 349
Summary 349
Self-assessment tasks 350
References and further reading 350
13 International sourcing, global sourcing and onshoring 352
Introduction 352
Objectives of this chapter 352
Global sourcing and international procurement 353
Why source internationally? 355
Increases in offshoring 356
Issues with international sourcing 357
Incoterms (2020) 362
How to change 365
Countertrade 367
Latest developments – onshoring and nearshoring 368
Summary 371
Self-assessment tasks 372
References and further reading 372
14 Capital procurement 375
Introduction 375
Objectives of this chapter 375
The acquisition of capital equipment 375
What are capital items? 377
Leasing and hiring of capital equipment 377
Capital requisitions 378
The project approach 379
Lifetime costs 380
Investment appraisal 380
Investment appraisal criteria 382
Conclusion 387
Summary 387
Self-assessment tasks 387
References and further reading 388
15 Retail procurement 389
Introduction 389
Objectives of this chapter 389
Retailing 390
Retailing research 392
Supply chains in retailing 392
Indirect procurement 394
Application of technology 394
Brands 395
Developments in the retail sector 396
Conclusion 400
Summary 401
Self-assessment tasks 401
References and further reading 401
16 Services procurement 403
Introduction 403
Objectives of this chapter 403
Special factors 403
Service quality 405
Managing perceptions and satisfaction 407
Procurement of marketing services 413
Procuring public relations (PR) 418
How to buy legal services 421
Procurement of consultancy services 423
Summary 429
Self-assessment tasks 429
References and further reading 430
17 Corporate social responsibility and sustainability 431
Introduction 431
Objectives of this chapter 432
Corporate social responsibility (CSR) 432
Sustainability 434
Business drivers for socially responsible procurement 442
Social Accountability 8000 (SA8000) 444
Three pillars of CSR 447
Diversity 449
Social value 452
Summary 452
Self-assessment tasks 453
References and further reading 453
Part 4 INDUSTRY 4.0: E-PROCUREMENT SYSTEMS AND
CONTRACT MANAGEMENT 457
18 Industry 4.0: e-procurement, digitalisation and analytics 459
Introduction 459
Objectives of this chapter 459
What is e-procurement? 460
The benefits of e-procurement 462
Complex procurement 462
Reverse auctions 463
Measuring the benefits of e-procurement 466
Industry 4.0 468
Analytics 479
Conclusion 482
Summary 483
Self-assessment tasks 483
References and further reading 483
19 Contract law 486
Introduction 486
Objectives of this chapter 486
Contract law 486
International contract law 514
Summary 515
Self-assessment tasks 516
References and further reading 516
20 Contract management 517
Introduction 517
Objectives of this chapter 517
Contract management 517
Critical success factors 518
The Contract Management Cycle 520
Trust 529
360-degree relationship assessment, measurement and feedback 531
Performance management 533
A balanced performance measurement system 534
Benefits of contract management 535
Examples of performance metrics 537
Service level agreements (SLAs) 539
Procurement as the intelligent customer 543
Benchmarking in procurement and supply 544
Summary 545
Self-assessment tasks 545
References and further reading 546
Index 548
Publisher’s acknowledgements 563