Procurement Tactics

Procurement Strategy Case Studies — 5 Insightful Examples

  • InDemand’s co-creation model
  • Copenhagen supplies seasonal and diverse organic fruit and vegetables
  • Catalonia’s aim to clean air
  • The Ministry of Defense of the Kingdom of the Netherlands procuring textiles
  • Combining procurement models
  • Procurement Expert’s Insights 

Frequently asked questions

  • Successful procurement strategies often involve collaboration between stakeholders, including end-users, suppliers, and public entities.
  • Procurement strategies that align with broader environmental, health, or policy objectives can have far-reaching positive impacts.
  • Understanding market dynamics and building strong relationships with suppliers contribute to successful procurement outcomes.

Example 1 — InDemand, Co-creation Model Helping to Procure Innovation in Public Organizations

Actual case:, final deal:, what can we learn from it, example 2 — the city of copenhagen supplying seasonal and diverse organic fruit and vegetables, example 3 — catalonia’s aim to clean air through clean vehicle procurement.

Procurement Strategy Course

Example 4 — The Ministry of Defense of the Kingdom of The Netherlands Procuring Textiles Made From Recycled Fibers

Example 5 — combining procurement model for sustainable buildings, procurement expert’s insights on procurement strategy case studies, what is a procurement strategy case study, what types of procurement strategies are commonly explored in case studies, what can organizations learn from mistakes in case studies, about the author.

Marijn Overvest Procurement Tactics

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Procurement and Strategic Sourcing

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Procurement can be tough to handle, as lack of internal communication, obscure focus and failure to streamline the process often stand in the way. This is why we developed the Procurement and Strategic Sourcing presentation so you can create an action plan to achieve procurement objectives and improve areas of implementation. Also, to get ahead, learn how IBM is successfully reimagining its procurement systems.

1 questions and answers

What is Category Management?

Category Management is a strategic approach aimed at organizing procurement resources to focus on specific areas of spends. This approach involves segmenting the spend into categories which are goods or services that are similar or related to the market they serve. The categories are then managed as a portfolio of business-led projects. Category Management allows for deeper understanding and strategic management of spend leading to enhanced performance and competitiveness. IBM, for example, has been successful in reimagining its procurement systems by leveraging advanced technologies like AI and Blockchain to streamline and automate their procurement processes. This has led to increased efficiency, reduced costs, and improved supplier relationships.

Slide highlights

With this slide, communicate your procurement objectives. Some examples are: supporting operational requirements, managing the supply base efficiently and effectively, cost savings and risk mitigation, as well as talent development.

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Use this slide to cover your supply chain management Key Performance Indicators (KPIs). These may include cash-to-cash time cycle, inventory turnover, Gross Margin Return On Investment (GMROI), freight bill accuracy and on-time shipping.

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Mapping out your procurement processes helps to gain greater supply chain visibility and identify potential threats and avoid them. With this slide, introduce your procurement map and walk your team and stakeholders through the strategy.

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Application

Procurement and sourcing are two related, but different terms that are often used interchangeably. The main difference between them is that sourcing concentrates on direct goods and services and procurement deals with indirect goods and services. EPS News suggests this seven-step model for applying strategic sourcing principles to modern procurement:

  • Procurement plan – select your team and begin with a project kickoff. It's important to collect your current analysis of the industry, customers and suppliers and determine procurement expenditures before moving on to the next step.
  • Supply market analysis – when you gather data, consider both team members and stakeholders and their priorities, which secure more guidance for you in the future. "Issue detailed requests for this data from stakeholders and suppliers as needed to create a unified document," the experts say.
  • Develop a strategy – when you gather data, consider both team members and stakeholders and their priorities, which secure more guidance for you in the future. "Issue detailed requests for this data from stakeholders and suppliers as needed to create a unified document," the experts say.
  • Requirements and evaluation criteria - pinpoint the requirements for your suppliers and determine how they'll be evaluated. For example, service, quality, transparency, delivery time and total unit cost.
  • Implement - indicate the required activities to implement the contract, such as a work plan, communication strategy and benchmarking.
  • Review and establish areas for improvement - once you've established the basis for a strategic sourcing framework, the experts point out, there will always be opportunities for improvement. "Maintaining suppliers relationships is key but being aware of potential risks and revisiting the strategy annually are also essential elements of your ongoing success," they say.

IBM posted a Procurement Transformation case study on its website to show how the company is reimagining its own procurement systems. "With operations in over 170 countries and over 13,000 suppliers, procurement has always been the lifeblood of IBM. However, long-entrenched processes and siloed data across this heavily matrixed organization were leading to frustrations with the procurement process. IBM needed an updated approach to their procurement capabilities," IBM shares. At some point, the company had to figure out whether it had competitive pricing, as well as what the target prices for an in-flight deals were and the way to manage non-core transactions.

After these puzzles were solved, the IBM team came up with the following procurement solutions: master data management, analytics and insights, sourcing and contracting, content management, order management and helpdesk and payables. The new procurement process allowed IBM to deliver $67 million in savings in the first year, reduce procurement costs by 13% and achieve an immediate four-point improvement in Net Promoter Score (NPS).

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Turning procurement around: 6 case studies of success.

Welcome to our blog post on turning procurement around! In today’s fast-paced and competitive business landscape, effective procurement strategies are crucial for organizations looking to stay ahead of the curve. However, many companies struggle with their procurement processes , leading to increased costs, missed opportunities, and strained supplier relationships.

But fear not! In this article, we’ll dive into six inspiring case studies of successful procurement transformations that have revolutionized some of the biggest players in various industries. From automotive giants like Ford to tech titans like Samsung and IBM, these organizations have overcome challenges and implemented innovative approaches to achieve remarkable results.

So if you’re ready to discover how these industry leaders turned their procurement woes into triumphs – grab a cup of coffee and let’s get started! We guarantee you’ll walk away with valuable insights on how your organization can do the same. Let’s dive right in!

The Problem with Procurement

Procurement, despite its importance, can often become a complex and inefficient process for organizations. The problem lies in the numerous challenges that businesses face when trying to manage procurement effectively .

One of the primary issues is a lack of visibility and transparency throughout the procurement cycle. Without clear insight into supplier performance, pricing structures, and contract terms, organizations struggle to make informed decisions. This leads to increased costs and missed opportunities for savings.

Another challenge is ensuring compliance with regulatory requirements and ethical standards. Organizations must navigate a web of regulations while also upholding their values and promoting sustainable practices. Failure to do so not only exposes companies to legal risks but also damages their reputation among stakeholders.

Moreover, poor communication between departments within an organization can hinder effective procurement management . When different teams operate in silos without sharing information or collaborating closely, it becomes difficult to align goals and optimize processes.

Additionally, outdated technology systems contribute to inefficiencies in procurement operations . Manual processes like paper-based documentation or legacy software solutions slow down workflows and create room for error.

Furthermore, managing supplier relationships can be a daunting task if not handled properly. Building strong partnerships requires proactive engagement, effective communication channels, negotiation skills, and mutual trust – all of which can be challenging without proper strategies in place.

Limited access to accurate market intelligence poses yet another obstacle in successful procurement management . Without real-time data on market trends or competitive pricing information across suppliers/vendors/products/services/regions – businesses may find themselves making suboptimal purchasing decisions based on incomplete information.

These are just some of the problems that organizations encounter when it comes to procurement management. However daunting they may seem though – fear not! We will explore how industry leaders have overcome these obstacles through our case studies next! Stay tuned for some inspiring success stories from Ford, Samsung, IBM Boeing,and Nestle that will surely spark ideas for turning your organization’s procurement around!

Case Study #1: Ford

When it comes to turning procurement around, Ford stands as a shining example of success. The automotive giant recognized the need for change and took decisive action to transform its procurement processes.

Ford focused on enhancing supplier relationships. They understood that strong partnerships were crucial for sourcing high-quality materials at competitive prices. By engaging in open and transparent communication with suppliers, they built trust and fostered collaboration.

Additionally, Ford implemented advanced technology solutions to streamline their procurement operations . This allowed them to automate manual tasks, reduce errors, and improve efficiency. With real-time data analytics and reporting capabilities, they gained valuable insights into their supply chain performance.

Ford also prioritized sustainability in their procurement practices by promoting environmentally friendly sourcing initiatives. By working closely with suppliers who shared their commitment to sustainable practices, they were able to reduce carbon emissions and minimize environmental impact throughout the value chain.

Furthermore, Ford embraced innovation by leveraging emerging technologies such as artificial intelligence (AI) and machine learning (ML). These technologies enabled predictive analysis of market trends, optimizing inventory management strategies.

In conclusion without concluding or summarizing anything specific about Case Study #1: Ford , this case study highlights the importance of strategic partnerships with suppliers, technological advancements in procurement processes,and a focus on sustainability and innovation for successful turnaround in procurement operations.

Case Study #2: Samsung

Samsung, the South Korean multinational conglomerate, faced significant challenges in its procurement processes. However, through strategic initiatives and innovative approaches, they successfully turned their procurement around.

One key aspect of Samsung’s success was their focus on supplier relationships. They recognized that building strong partnerships with suppliers would result in better quality products and improved supply chain efficiency. By collaborating closely with suppliers and establishing open lines of communication, Samsung was able to streamline their procurement operations.

Additionally, Samsung implemented technology-driven solutions to enhance their procurement processes. They leveraged data analytics and automation tools to gain insights into supplier performance and identify opportunities for cost savings. This enabled them to make more informed decisions and optimize their sourcing strategies.

Furthermore, Samsung prioritized sustainability in their procurement practices. They actively sought out suppliers who adhered to environmentally-friendly manufacturing processes and ethical labor standards. By incorporating sustainability criteria into their supplier selection process, they not only reduced risk but also enhanced brand reputation.

Samsung’s commitment to nurturing supplier relationships combined with technological advancements and sustainable practices allowed them to transform their procurement function into a strategic asset for the organization’s growth and success.

Case Study #3: IBM

IBM, one of the world’s largest technology companies, has also faced its fair share of procurement challenges. However, through strategic initiatives and innovative approaches, they have successfully turned their procurement around.

One key aspect that contributed to IBM’s success was their focus on supplier relationships. They realized that building strong partnerships with suppliers would not only improve efficiency but also drive innovation. By fostering collaboration and open communication with suppliers, IBM was able to enhance the quality of goods and services while reducing costs.

Another factor that played a crucial role in turning procurement around for IBM was their adoption of advanced analytics and data-driven decision-making processes. By utilizing predictive modeling and real-time data analysis, they were able to identify potential risks and opportunities in the supply chain proactively. This enabled them to make informed decisions regarding sourcing strategies and inventory management.

Moreover, IBM recognized the importance of sustainability in procurement practices. They implemented sustainability criteria when selecting suppliers, ensuring adherence to ethical standards and environmental regulations. This commitment not only enhanced their brand reputation but also resulted in significant cost savings through waste reduction initiatives.

Furthermore, embracing technology played a vital role in transforming procurement at IBM. They implemented an integrated digital platform that streamlined purchasing processes across various departments within the organization. The automation of routine tasks freed up time for employees to focus on more value-added activities such as strategic sourcing and supplier relationship management .

In addition to these efforts, continuous improvement was at the core of IBM’s approach towards procurement transformation. They regularly reviewed performance metrics, sought feedback from stakeholders, and identified areas for enhancement or optimization within their procurement operations.

Overall, IBM demonstrates how a combination of factors including strong supplier relationships, data-driven decision-making, sustainability considerations, technological advancements, and continuous improvement can successfully turn around procurements challenges . By adopting similar strategies tailored specifically to your organization’s needs and leveraging the power of collaboration between internal teams and external partners, your company can also achieve procurement success .

Case Study #4: Boeing

Boeing is a global leader in the aerospace industry, known for its innovative aircraft and cutting-edge technology. When it comes to procurement, Boeing has faced its fair share of challenges but has managed to turn things around successfully.

One of the key strategies that led to Boeing’s procurement success was their focus on supplier relationships. They recognized that strong partnerships with suppliers were crucial for timely delivery and high-quality products. By nurturing these relationships and fostering open communication, Boeing was able to streamline their procurement process and ensure smooth operations.

Additionally, Boeing embraced digital transformation in their procurement practices. They implemented advanced analytics tools and automation software to improve efficiency and reduce costs. This allowed them to make data-driven decisions regarding supplier selection, pricing negotiations, and risk management.

Furthermore, Boeing prioritized sustainability in their procurement strategy . They actively sought out suppliers who shared their commitment to environmental responsibility by reducing waste generation and carbon emissions throughout the supply chain.

Through strategic supplier relationships , embracing digital transformation, and prioritizing sustainability goals, Boeing successfully turned around its procurement processes. These case studies demonstrate that with the right approach and mindset shift towards more collaborative approaches with suppliers can lead organizations towards successful transformations in this critical area of business operations.

Case Study #5: Nestle

Nestle, the multinational food and beverage company, has undergone a remarkable transformation in its procurement practices. Facing challenges such as increasing costs and supply chain complexities, Nestle made strategic changes to turn their procurement department around.

One of the key initiatives undertaken by Nestle was to implement a centralized procurement strategy. By consolidating their purchasing activities across different business units and regions, they were able to leverage their buying power and negotiate better deals with suppliers. This not only resulted in significant cost savings but also improved efficiency in the procurement process.

In addition to centralization, Nestle also focused on supplier relationship management . They established long-term partnerships with key suppliers, which enabled them to drive innovation and ensure consistent quality standards. Furthermore, they implemented stringent ethical sourcing policies to promote sustainability throughout their supply chain.

Another important aspect of Nestle’s success story is their investment in technology. They adopted advanced analytics tools that provided real-time insights into market trends, supplier performance, and risk assessment. This allowed them to make informed decisions quickly and proactively mitigate potential disruptions.

Furthermore, Nestle prioritized talent development within the procurement function. They invested in training programs for employees to enhance their skills in negotiation tactics, contract management , and risk mitigation strategies.

Overall,Nestlé’s commitment towards transforming its procurement practices has yielded impressive results.

They have successfully turned around their procurement department by implementing strategies such as centralization,supplier relationship management,and technology adoption.

This case study serves as an inspiration for other organizations lookingto improve their own procuement processes

Turning Procurement Around in Your Organization

Procurement plays a crucial role in the success of any organization. But what happens when procurement becomes a hindrance rather than an asset? It’s time to turn things around and optimize your procurement processes for better efficiency and cost savings. Here are some effective strategies that can help you transform procurement within your organization.

First and foremost, it’s important to have clear goals and objectives for your procurement team. Define what success looks like in terms of cost reduction, supplier relationships, and overall value creation. This will provide direction and motivation for your team to work towards these goals.

Next, focus on streamlining your procurement processes. Identify any bottlenecks or inefficiencies in the current workflow and find ways to eliminate them. Implementing automation tools or adopting digital platforms can greatly improve efficiency, reduce manual errors, and provide real-time insights into your procurement activities.

Building strong relationships with suppliers is another key aspect of turning procurement around. Cultivate partnerships based on trust, transparency, and mutual benefit. Regular communication with suppliers can lead to better negotiation outcomes, improved delivery times, and access to innovative solutions.

Leveraging data analytics is also essential in optimizing procurement practices . By analyzing historical purchasing data, you can identify patterns, trends, and potential areas for cost savings. Data-driven decision-making enables more informed choices when selecting suppliers or negotiating contracts.

Investing in employee training is vital as well. Equip your team with the necessary skills and knowledge to excel in their roles. Stay updated on industry trends through continuous learning initiatives such as workshops or conferences.

Lastly,is identifying opportunities for innovation within your procurement function .

Innovation does not only apply to products but also extendsto processesand methodologies.

Explore new sourcing strategies,such as strategic alliancesor collaborative partnerships,to drive efficiencies.

Without constant adaptation,you risk falling behind competitors who embrace change

In conclusion,taking proactive steps towards turning around procuremtninvolves setting clear objectives,strea

Conclusion:

These case studies highlight the immense potential for turning procurement around and achieving success in organizations. Companies like Ford, Samsung, IBM, Boeing, and Nestle have proven that with the right strategies and mindset, procurement can be transformed into a powerful lever for growth and competitive advantage.

The common threads among these success stories are clear: a commitment to innovation, strategic partnerships with suppliers, data-driven decision-making processes, effective risk management practices, and a focus on sustainability. By implementing these strategies and learnings from the case studies discussed here, organizations can set themselves on a path towards procurement excellence.

However, it is important to remember that there is no one-size-fits-all approach when it comes to turning procurement around. Each organization may have unique challenges and opportunities that require tailored solutions. It’s crucial to assess your own organization’s needs and capabilities before embarking on any transformation journey.

By embracing change, fostering collaboration between stakeholders both within the organization and externally with suppliers or partners – businesses of all sizes can unlock the full potential of their procurement function. Turning procurement around is not an easy task but with determination perseverance – it is possible!

So why wait? Start exploring new strategies today! Turn your procurement department into a catalyst for growth and success in your organization!

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Case studies.

Read our case studies to see how our clients, including hundreds of Fortune 500 and Global 2000 enterprises, leveraged our supply chain and procurement technology solutions and strategies to overcome significant challenges.

These stories offer an in-depth view of our client engagements and explain exactly how we secured excellent outcomes.

How a Global CPG Leader Optimized $500M of Direct Materials Spend and Exceeded Savings Goal by Partnering With GEP

How a Global CPG Leader Optimized $500M of Direct Materials Spend and Exceeded Savings Goal by Partnering With GEP

procurement case study ppt

Industrial Manufacturing

How a u.s.-based manufacturer mitigated supply risks in china operations by partnering with gep.

How a Fortune 500 CPG Company Saved 20% on Key Raw Material Category by Partnering With GEP

Consumer Packaged Goods

How a fortune 500 cpg company saved 20% on key raw material category by partnering with gep.

How a Fortune 500 Oil & Gas Major Partnered With GEP To Achieve a 15% Jump in Procurement ROI

Oil & Gas

How a fortune 500 oil & gas major partnered with gep to achieve a 15% jump in procurement roi.

How a Global Fast-Food Chain Saved €14M in Raw Materials and Improved Supply Chain Resilience With GEP

How a Global Fast-Food Chain Saved €14M in Raw Materials and Improved Supply Chain Resilience With GEP

How a Fortune 500 Retailer Saved 10% Costs on Key Spend Categories by Partnering With GEP

How a Fortune 500 Retailer Saved 10% Costs on Key Spend Categories by Partnering With GEP

How a U.S. Retailer Diversified Supplier Base and Improved Supply Chain Resilience by Partnering With GEP

How a U.S. Retailer Diversified Supplier Base and Improved Supply Chain Resilience by Partnering With GEP

Global Heavy Equipment Manufacturer Saves $45M in Direct Material Sourcing With GEP SOFTWARE

Global Heavy Equipment Manufacturer Saves $45M in Direct Material Sourcing With GEP SOFTWARE

Top U.S. Battery Manufacturer Diversifies Supplier Base, Mitigates Supply Chain Risks by Partnering With GEP

Top U.S. Battery Manufacturer Diversifies Supplier Base, Mitigates Supply Chain Risks by Partnering With GEP

Key insights.

Procurement and supply chain leaders worldwide look to GEP for process, technology and industry expertise, and we are happy to share our learnings from years of complex problem solving. The GEP Knowledge Bank encompasses proprietary research, issue-orientated white papers and webinars, case studies, and playbooks and primers.

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Presenting procurement presentation slides. This deck covers all the major areas of procurement process. It highlights all the important aspects of the topic. This complete presentation comprises of amazing visuals, icons, graphs, and templates. Our designers have crafted this presentation with a thorough research. These slides are easily customizable. You can add or delete the content as per your requirement. Compatible with all screen types and monitors. Supports Google Slides. Premium Customer Support available. You can get access to this readymade professionally designed procurement presentation with just one click. Download it now.

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Sourcing And Procurement Assessment Process Importance Business

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Procurement Management Process Powerpoint Ppt Template Bundles

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Procurement Savings Continuous Improvement Performance Investment Cost Reduction

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Procurement Risk Powerpoint Ppt Template Bundles

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Steps Of Strategic Procurement Process Powerpoint Presentation Slides

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Cost Savings Dashboard Procurement Planning Deployment Management

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Procurement Spend Analysis Powerpoint Presentation Slides

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Service Map Procurement Process Business Framework

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Procurement Strategy Powerpoint Ppt Template Bundles

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Procurement Risk Management Powerpoint Presentation Slides

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Procurement Value Powerpoint Ppt Template Bundles

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Driving Business Results Through Effective Procurement Strategy Powerpoint Presentation Slides Strategy CD

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Achieving Business Goals Through Effective Procurement Strategies Strategy CD V

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E procurement business elevator funding pitch deck ppt template

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Procurement Process Automation For Efficient Business Operations DK MD

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Procurement information business relationships performance departments

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Sourcing And Procurement Assessment Process Importance Business

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Current Business Situation Analysis Overview Evaluating Key Risks In Procurement Process

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Positive Purchase Order Kpis Achieving Business Goals Procurement Strategies Strategy SS V

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Positive Supplier Defect Rate Roi Achieving Business Goals Procurement Strategies Strategy SS V

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Inclusion Business Document Entrepreneurs Puzzle Procurement

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Procurement Risk Analysis And Mitigation Impact Of Managing Procurement Risks On Business

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Business Objectives Of Contract Management In Procurement

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Impact Of Managing Procurement Risks On Business Evaluating Key Risks In Procurement Process

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Risk Management Process Impact Of Managing Procurement Risks On Business

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Procurement Risk Analysis And Mitigation Current Business Situation Analysis Overview

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Procurement Negotiation Strategies Step 2 Determine Current And Future Business Needs Strategy SS V

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Procurement Negotiation Strategies Step 3 Market Analysis To Analyze Internal Business Strategy SS V

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Project Ignite – Strategic Sourcing Case Study

In this issue 18 February 2020:

Introduction.

In my last blog Procurement Capability and Maturity Model dated 30 January 2020, one of the improvements focussed on was the introduction of strategic sourcing. The practical approach adopted is discussed below.

Project Objectives

  • Identify sourcing opportunities and build category plans.
  • Identify sourcing opportunities and sourcing approaches to effectively deliver sourcing benefits.
  • Establish the sourcing governance for effective procurement decision making.
  • Obtain approval from the relevant governance committees to move into the sourcing phase of this project.

Determine Market Competition

  • Barriers to entry include high capital outlays and high operating costs, the market remains very competitive in the battle for market share

External Market Forces

The company should focus on identifying suppliers with good local content credentials. Appointed vendors must however be compliant with legislation and should be able to meet environmental requirements.

  • Although there is a trend away from cash, most countries on the continent are still very cash dependent. Suppliers are shifting their focus from risks to managing costs in a better way. Technology plays a key role in reducing costs and will be critical from reducing the dependence on humans as well through the advent of ATM’s, note sorters and Cash in Transit companies
  • The countries should focus on identifying suppliers with good local content credentials. Appointed vendors must however be compliant with legislation and should be able to meet environmental requirements

Category and Supplier Positioning

Suppliers are not aligned to how the company views the commodity. The company must align the profile of this commodity with suppliers and treat them as strategic if they wish to negotiate better deals, service improvements and get sustained value from vendors.

Sourcing Maturity

The commodity is relatively immature in the selected countries. By adopting procurement best practices and focusing on closing the gaps ROA will benefit financially and operationally from improved vendor relationships.

Sourcing Opportunities – levers

Workshops held with the team identified and prioritised spend consolidation, best cost evaluation, specification improvement and total cost management the primary sourcing levers to focus on in the initial phases.

What this means in practise is that procurement focussed on negotiating and implementing the following…….

Suggested Sourcing Approach

  • Option A : Sourcing is done centrally by ROA team
  • Option B : Sourcing is facilitated by ROA team in conjunction with the in-Country teams
  • Option C : Sourcing is done by the in-country teams

Pros and cons for the 3 possible options

High level sourcing strategy.

Based on the introduction of category management and other strategic sourcing principles the savings improved as follows:

Year 1: R7m Year 2: R61m Introduction of strategic sourcing with emphasis on category management happened after year 2. This included improved demand planning, market analysis and benchmarking, improvement in the sourcing approach based on a 3-pronged approach (group, regional, in-country), contracting and the introduction of supplier performance and relationship management.

Year 3: R 169.3m Year 4: R 205. 0m

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outsourcing procurement in the public sector a case study

Outsourcing Procurement in the Public Sector, A Case Study

Apr 04, 2019

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Outsourcing Procurement in the Public Sector, A Case Study. Jeff Taylor Operations Services and Financial Management Department Asian Development Bank. Introduction. Project design will generally include procurement capacity and risk assessments

  • public procurement service source
  • east asia complete evaluations
  • technical import center
  • similar goods
  • public sector

shasta

Presentation Transcript

Outsourcing Procurement in the Public Sector, A Case Study Jeff TaylorOperations Services and Financial Management Department Asian Development Bank

Introduction • Project design will generally include procurement capacity and risk assessments • Sizeable amounts of MDB lending has been dedicated to capacity development • Question to consider: • Do executing agencies have the capacity to manage procurement? • Can the private sector undertake procurement?

Do executing agencies have the capacity to manage procurement? • Is actual capacity insufficient to meet procurement needs? • What are the costs of maintaining or building procurement capacity? • Does the agency have the financial resources to invest in the procurement function? • Is delivery of procurement a core mandate? • Are the transactions repeatable?

Can the private sector undertake procurement? • Does the law allow it? • Is there an existing domestic market? • Long term or transactional agreements? • Full outsourcing (Agency) or partial? • Costs and fee structure (percentage; target pricing; success fees etc.) • Risks – dependency; lack of control; quality etc.

Procurement Agents in the Public Sector • Less of an agency (outsourced role) more advisory/consultancy • Public procurement regulations (and MDB policies) can constrain the potential benefits • Shorter term relationships that deliver less value • Focus on the agents fee and not transactional benefits and value creation

Procurement Agents in ADB Projects ADB Experience

Procurement Agents in ADB Projects • ADB Experience • Weak procurement capacity harms projects

Why Does East Asia Complete Evaluations twice as fast? • China’s Use of Procurement Agents • Functions of PAs: a. Decision making and consultation. PAs provide professional advice on the relevant laws, the market and suppliers b. Coordination. PAs coordinate the transactions and relations among all involved c. Administrative function. PAs handle all the administrative tasks involved in the public procurement activity, including importation and tax relief requirements Source: Foreign Capital & Technical Import Center, Ministry of Railways, PRC

China’s Market-Based Model • Advantages of Procurement Agents: • Minimizes information asymmetry • Reduces legal risks • Professionalism • Contributes to advancement of new and international practices • Accreditation of Procurement Agents • Impact of a regulated fee structure (CBTA estimates) • Value of PRC’s tendering market (2012): US$2 Trillion • Gross procurement industry revenue 0.01% • Gross profit 11% of revenue

Centralized Procurement Agency • Consip, Italy • From 50,000 purchasing entities to single a centralized agency • Public spend for goods/services accounts for 8% of GDP (US$162 billion) • 40% spent on generic goods • Public agencies that buy from Consip save around 28% of purchase price

Centralized Procurement Agency • Korea’s Public Procurement Service Source: Ministry of Strategy and Finance, Republic of Korea (2011) Source: Public Procurement Service, Republic of Korea (2011)

Centralized Procurement Agency • Korea’s Public Procurement Service Source: Public Procurement Service, Republic of Korea (2011)

Centralized Procurement Agency • Philippines’ Procurement Service Source: Procurement Service, Department of Budget and Management, Philippines (2012)

Philippines’ System • Agency-to-agency, like the centralized approach of PS-DBM • Outsourced procurement of non-commonly used goods and works to private or public agencies • Allowed by IRR of RA 9184. Guidelines to be issued • Procurement management

Conclusion • Public procurement can: • Around 8-20% of GDP • As high as 30% of total public expenditure • Leakages through fraud, abuse and waste can be 20-50% of spending (WB and OECD) • Ex.: Percentage of difference between highest and lowest prices of similar goods in UK: Source: National Audit Office, UK

Conclusion • Advantage of Procurement Agent will depend heavily on reputation and ability to tap markets – increases confidence of market (esp. international firms) and competitiveness • Savings generated by successful procurement exercise increases impact of ODA projects • Use figure of 20% of spend lost through leakages, but assume conservative estimate of 15% potential savings • Juxtapose with ADB’s 2011 procurement portfolio of around US$10.7 B: estimated savings of US$1.6 B (roughly ADB’s annual lending program for East Asia region

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PROCUREMENT COST REDUCTION PROCESS

Manufacturability. supplier proc capability. 2. commodity management. matl acq cost. ... enhances understanding of cost driver sensitivity to performance requirements. ... – powerpoint ppt presentation.

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