Procurement is a key activity in the supply chain. It can significantly influence the overall success of an emergency response depending on how it is managed. In humanitarian supply chains, procurement represents a very large proportion of the total spend and should be managed effectively to achieve optimum value. Procurement works like a pivot in the internal supply chain process turning around requests into actual products/commodities or services to fulfil the needs. It serves three levels of users:
The principles and their importance stem from three key facts:
- that the resources utilised are usually funded by donordonors;
- that transparency contributes to the establishment of sound and reliable business relations with suppliers; and,
- that efficiency and cost effectiveness has a direct impact on operations and ultimately on beneficiaries.
The aim and objective of procurement is to carry out activities related to procurement in such a way that the goods and services so procured are of the right quality, from the right source, are at the right cost and can be delivered in the right quantities, to the right place, at the right time.
Meeting the following objectives of procurement enables the Logisticians to fulfil the “Six Rights”:
services are procured according to the "Six Rights." These "Six Rights" are:
- Right QUALITY
- Right SOURCE
- Right COST
- Right QUANTITIES
- Right PLACE
- Right TIME
The “Six Rights” can inform the procurement process and includes:
- buying quality materials, items and services economically from reliable sources;
- ensure ensuring timely delivery through the selection of capable and efficient suppliers;
- continuously locatelocating, evaluate evaluating and develop developing economical and reliable supply sources;
- identify identifying the most reliable sources of supply through either open tender, multi-stage tendering (pre-qualifying suppliers and retaining only those that are capable of meeting the organisation's requirements - strategic sourcing) and limited tendering. For more information, see Types of tender in the Annexes;
- investigate investigating the availability of new materials and monitor monitoring trends in market prices;
- buy buying in accordance with the organisations policies;
- estimateestimating, position positioning and monitor monitoring appropriate levels of stocks based on estimated needs, operational policy, objectives and priorities, estimated time for replenishment and availability of funds; and
- participate participating in planning and coordinating purchasing needs across all central procurement teams and the field in field in order to reduce administration and make the best use of money spent.
It is important to recognise that the ‘Six Rights’ are these steps are interrelated and may influence each other but do not carry the same weight depending on the situation. For example, in an emergency situation it may be possible to obtain the right quantity but not at the right price. There may be competition for certain goods, so to get the quantities required may mean paying a slightly higher price.
Procurement policies will vary from organisation to organisation but are the organisational rules and regulations governing the procurement function. The policies determine how different aspects of procurement will be carried out in the organisation and how people working in procurement should behave. In summary, theythe policies; -
- provide general and specific guidelines for managing the buying of items and services;
- establish a purchasing criteria and decision making process
- ensure that implementing staff are well trained;
- provide specific guidelines for establishing and managing relationships with external entities in relation to procurement;
- encourage and enhance internal control measures;
- act as a management tool for better decision-making and better stewardship of the resources entrusted to organisations by its donors.
As a guide, a typical procurement policy should include, but not necessarily be limited to the following subjects:
Diagram 2: Procurement Process
Requirements for goods and services originate from different users. In emergencies, the response teams in various sectors request for basic supplies to meet the needs of those affected. The needs range from blankets, mosquito nets, tents to food supplies, household items, etc.
Specification is a detailed description of the design, the service, or materials. It describes in detail the requirements to which the supplies or services must conform. The basic requirement of a good specification is to clearly identify the service or product to stakeholders. The specifications must be clear to all parties . That is the ( user, Procurement and the procurer, supplier).
Factors to consider in specifying a product:
- physical attributes
- technical specificationspecifications
- intended use
- technical specifications
Care must be taken not to specify a specific product so as to limit competition.
Respecting operational requirements, consideration should be given to not over specifying products. Over specification can limit competition and increase cost.
Source, awarding and placing orders
Some of the methods of purchasing or obtaining goods and services for an emergency are:
Sourcing is the process of identifying sources of supply that can meet the organisations immediate and future requirements for goods and services. In an emergency situation the immediate needs would be priority consideration. Under the circumstances, identifying sources of supply and accessing supplier capabilities will either be carried out as users’ place their requests to Procurement procurement or once a request has been received.
Diagram 3: Sourcing Process.
Sourcing from the Open Market EnquiryThe process of inviting and evaluating tenders or quotations will vary
Sourcing from the open market will require using quotations and/or tenders. The process for this will vary depending upon an organisation’s own internal procedures. But the following are considered ‘best practices’.
The next step in the process involves placing orders for the goods or services with the supplier, or establishing contracts which need to be sent to suppliers. In emergency situations the approval levels and limits are adjusted, based on an approved process, to speed up the process of acquiring goods and services. Under normal circumstances, the approval processes may be more elaborate. The orders establish contractual relationships between the organisation and the supplier. Depending on the organisations guiding policies, this contractual relationship can be represented in various forms (see attachments in Annexes). Examples of these documents include:
Important features of a contract or agreement:
For information on international trade, see International Commercial Terms used in international contracts of sale: INCOTERMS 2000 , INCO terms explanation, INCOTERMS narrative, INCOTERMS practical application chart.
Important features of a contract or agreement:
- lead-time / delivery time
- date of issue
- serial number
- terms and conditions (including penalties)
- INCOTERMS / place of delivery
Expedite/ Progressing /ExpeditingOrders
Once the order is placed and the supplier has confirmed receipt and agreed to the contract terms and conditions, the role and the amount of work that staff in procurement have to undertake will be affected by the performance of the suppliers. It is necessary therefore, for the procurement staff to monitor the progress of orders and the performance of the suppliers. Supplier performance will determine the amount of time and money that has to be spent in expediting orders and the managing of suppliers. To ensure an uninterrupted flow of goods and services, expediting should be a continuous process, especially in emergencies. The continuous monitoring enables the organisation to pick out break-down points in the system and quickly identify solutions.
Concern Worldwide Commodity Distribution Manual ECHO Procurement GuidelinesICRC
IFRC Logistics Manual
IOM Emergency Operations Manual UNHCR Handbook for Emergencies
World Vision International Procurement and Reference manual
Rushton,A., Oxley,J., and Croucher,P., The Handbook of Logistics and Distribution Management (Second Edition), Kogan Page (1989,2000)- Link
Mangan, J., Lalwani, C., and Butcher, T., Global Logistics and Supply Chain Management, John Wiley & Sons, Ltd- Link
Fritz Institute Certification in Humanitarian Logistics Module-Link