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Procurement planning involves activities carried out by institutions or companies in their process of acquiring goods or services. This plan is always scheduled for a specified period of time. It defines all the activities and steps that a company will use to purchase goods or services needed.
Planning or scheduling of activities, which involves the procurement of goods and services in organizations enables them to purchase quality goods or services. It also ensures that an organization is able to acquire the products or services with the least cost possible.
Organizations are able to meet purchasing objectives easily when they have a procurement plan than those companies that do not have a procurement plan (Heldman, 2011).
The purpose of a Procurement Plan in Organizations
The main purpose of a procurement plan is to inform the companies involved in procurement process how they will carry out the process of product acquisition. It states how the acquisition will be organized, executed and managed throughout the process.
Scheduled activities always help the organization to manage time and measure the quality of the services or the products purchased. It ensures that the work is completed within the stipulated time frame (Berry & Milosevic, 2005).
Logistics Services
In the case of Silwan Food International and AGS Logistics LLC, where these two companies are under an agreement, the procurement plan will ensure that the companies follow the conditions provided in their agreement until their contract is over. It will also ensure that AGS Logistics LLC performs the services as required by the agreement and that they follow all steps needed (Berry & Milosevic, 2005)
Procurement Definition
Silwan Food International is a company that supplies milk powder, dried nuts and fruits, cocoa, gear and other products. The company decided to source logistics services to enable it concentrate on other important services to the customers. Through a review of available logistics providers in UAE, the company approved AGS Logistics LLC to be their logistics providers.
This company uses technology to transact their business and to provide the services to their customers. This is why the company has been able to maintain its position as a logistics provider in the market. Their goal is to use innovative approaches to meet the needs of their customers (Saxena, 2008).
Silwan Food International requires logistics services that also include loading, warehousing, and offloading among others. The companies have customers from outside the country and therefore freight services are required. AGS Logistics LLC will provide freight services for the Silwan Food International to take the products needed outside the country.
Assistant managers in the procurement department of Silwan Food International will have the authority to authorize transactions in the absence of the procurement managers. This is because all terms and conditions are provided in the logistics agreement signed by the two companies (Berry and Milosevic, 2005).
Type of Contract to be Made
All products transported to the customers will be sold on the organizations fixed price. The procurement teams from both companies will determine the maximum quantity that AGS Logistics LLC will transport at a time as required by the contract.
As per the agreement between the Logistics Company and Silwan Foods International, they will negotiate the price, which will be charged for those three activities required to be performed as specified on the first part of this plan. This is to ensure that the exercise will use the least cost possible.
AGS Logistics LLC has shown its ability to perform their duties effectively by transporting as per the orders of customers. It saves Silwan Foods International a lot of cash since they only release to order therefore do not make oversupplies or buy a lot of products which are not needed by the customers (Turner & Simister, 2001).
The logistics providers are required to transport the right product to the right place while maintaining the quality and condition of the products at the minimum cost. Bids from the qualified suppliers are solicited to acquire the services or goods within the agreed time frame (Berry & Milosevic, 2005).
Contract Approval Process
Before a company decides on outsourcing goods or services, cost analysis should be conducted for a purpose of comparing costs. If a company gets that outsourcing is much economical than providing the services themselves, then they are free to outsource.
The main reason why companies outsource the services is to enable them to concentrate on their core activities of meeting the needs their customers and also in meeting the objectives of the firm.
For a company like Silwan Foods International to outsource logistics services from a logistics provider, its aim is to reduce excess inventories, warehouses and to reduce labor cost. This also reduces the working capital investment and fixed costs.
The company needs to analyze the costs of services that they are planning to outsource and compare them with the costs of providing it internally. Solicitations are sent to vendors who provide the goods or the services the company wants to outsource. The vendor who meets the criteria set by procurement team is identified (Saxena, 2008).
For the transaction between Silwan Food International and AGS Logistics LLC, purchases below $ 5000 can be approved by the procurement managers. Any transaction which exceeds such amount of money must be approved by the joint agreement of the board of contract review.
It will require the board to meet for them to determine which of the contract they will take for the transactions exceeding $ 5000. The board must be made by individuals from the all the departments of the company who understands the goals and objectives of the company (Turner and Simister 2001).
Decision Criteria
Decision criteria are used to determine the reliability efficiency and effectiveness of the organization that has been awarded the contract to provide the services. Silwan Food International must evaluate the accountability of AGS Logistics LLC in providing the logistics services to them.
The performance of AGS Logistics LLC must be evaluated against the expectations of Silwan Food International. The company must ensure that logistics providers enable them to meet their objectives of meeting their customer’s needs within the least time possible. Firm’s performance is affected by a lot of factors which includes its structures, environment, strategies resources and learning.
Performance of any organization can be measured under different categories. Demand-oriented capabilities involving delivery, reliability, after sale services and responsiveness to target markets are among the factors which are used by many organizations to measure performance. The supply oriented capabilities include reduction of distribution cost of the organization and the geographical coverage (Turner and Simister 2001).
Quality of logistic services provided by the AGS Logistics LLC will be measured by comparing the performance with the expectations and on the basis of the contract between the two companies. Customer’s feedback is a requirement to gauge the effectiveness of the services. One of the Silwan Food International is to meet the needs of the customers efficiently.
The speed in which the products enter to the market can win the company a competitive advantage or leads to customers shifting to the competitors. The perception of Silwan Food International customers may be affected negatively if they do not get the products they ordered in the right place and at the right time.
Quality of logistic services provided by AGS Logistics LLC can be measured against the number of orders gotten from the areas served by the company (Shadrach & Ekeanyanwu, 2003).
Past performance and history of the organization can determine the future performance. Past performance is a key indicator of the ability of the organization to meet their duties well. It places the organization in a better position to forecast the quality of the services which is to be provided.
This performance indicator enables the suppliers uphold high performance in providing goods and services. This indicator enables organizations to recognize strengths, weaknesses and capabilities of their supplies (Turner & Simister, 2001).
Silwan Food International can be in a good position if it is able to determine the capability of AGS Logistics LLC through the review of its past performance. Performance evaluation of suppliers is vital since it guarantees the organization with quality service and customer satisfaction.
If AGS Logistics LLC past performance had not been good and there are records showing inefficiency of logistics services, then Silwan Food International would get the reason to turn down agreement. The two companies have the right to disclose information about their past performance and this information should be used to determine each company’s future expectation (Shadrach & Ekeanyanwu, 2003).
According to Saxena (2008), Comparison of in-sourcing and outsourcing cost is used to reduce operational cost in organizations. This is because the organization is able to make a decision on whether to outsource or in-source. Before a company decides to outsource, they consider the benefits each decision will make to the organization.
The fee charged by the service providers assists organizations in making decision. Some organizations fail in making an outsourcing decision by considering the suppliers with the least cost without considering the effectiveness and quality of services. Quality of services provided by AGS Logistics LLC made the Silwan Food International to select it as their main suppliers of the logistics services (Turner & Simister, 2001).
The last performance measurement in the decision criteria is the date of delivery. A company may be able to select its suppliers based on how well they meet the deadlines set. Suppliers who fail to meet deadlines are not support to be considered for contracts. This is because they can cause mistrust from the customers if their needs are not met in time.
When supplies deliver the products or services in time, they save the organization a lot of operating cost and they are also winning that organization a competitive advantage. The organization is able to reach more customers and satisfy them. AGS Logistics LLC company provides high services to other organizations within the agreed time.
Their past performance in delivery of goods has shown that the organization is able deliver large amount of stock to the customers in the right time that the customers need them. Its association with prominent and well performing organizations in UAE has placed it in a position that every organization wants to outsource the logistics services from them (Shadrach & Ekeanyanwu, 2003).
Term and Termination
The conditions of the agreement start from the date that the agreement was signed between the two companies. The agreement will take a period of three years if the two companies do not a reason to terminate it. During those 3 years, there will be a meeting every first day of May to negotiate the charges. AGS Logistics LLC will give a report on any increase in charges in 45 days before they meet to negotiate.
The increase in warehouse charges will also be presented in writing to the Silwan Food International 15 days before the date of negotiation and at least 5 days before the transportation date. All notices required by this agreement will be made in writing.
Any other parties under this agreement can file a request to terminate the agreement. This may be due to default materials. If one of the parties writes a notice containing the details of the default and the other party ignores the complaint or fails to rectify the default within 20 days, the company can terminate the agreement and seek other reliable companies.
The termination of the agreement can also happen if one party fails to vacate the appointment of the other party within the agreed time in the contract. After the termination of the contract, the AGS Logistics LLC will return all the copies of documents, data, records which belong to the Silwan Foods International.
Silwan Foods International will have an obligation to return the document to the AGS Logistics LLC upon the termination of the contract. The notices which will be made with regard to this agreement will be delivered directly to the company not longer than one day. The addresses of each company are given in the details sheet presented with the contract document.
Vendor Management
In this section, the roles of every person involved in the procurement of services and products will be stated to ensure that every person has a role to play in the acquisition of products in the organization. Quality and appropriateness of the products or services are verified by the procurement team to ensure that they are of good quality and that they are in quantities which the companies agreed.
Vendor management ensures that the suppliers continue to supply the required goods and services of good quality as it is stated in the agreement. Procurement managers are responsible to manage vendors and to schedule for meetings to monitor the progress of their progress.
Key performance indicators enable the manager to evaluate the work done by the suppliers whether they have met the requirements in the agreement. In a contract agreement, the parties indicate the time, venues and dates when they will be meeting to evaluate their progress.
Communication is vital in vendor management because errors which might arise or changes that must be made are solved early before they cause unsatisfaction. Project specifications guide procurement teams from both organizations in checking the quality and effectiveness (Saxena, 2008).
The agreement of AGS Logistics LLC and Silwan Food International stated that they will be meeting one in six months to monitor the progress of their contract.
It is during these meetings that procurement managers and his team from Silwan Food International value the quality of services that AGS Logistics LLC provides to them and whether they meet the requirement of customers in delivering them their products which they have ordered.
Any changes in price charge fro the suppliers are communicated at the meeting for negotiation purposes (Saxena, 2008).
Performance Metrics for Procurement Activities
Metrics to be used in assessment of the performance of the procurement activities are stated in this section of procurement plan. These metrics ensures that the suppliers observe the schedule that they agreed in supplying their products and services. They are used to measure the supplier performance.
Procurement team uses them to compile data on procurement activities of the organization to guide them in choosing a supplier in future.
Procurement departments develop their own performance metrics which guides them in selecting future suppliers and also ensures that the performance of the current suppliers is within the schedule of the organization. Rating tables are developed by the procurement team for a purpose of building past performance database (Turner & Simister, 2001).
Each company in the agreement has the obligation to protect the other party’s information” (2006, p. 35). One party can gain access to the other party’s information without the consent of the other party. The company is, therefore, obliged to use the information only in the performance of the duties in the agreement but not for other purpose whatsoever.
They are bound to disclose the information only to their employees who needs in the process of providing the services. However, the parties are free to disclose the confidential information if and only if the information is needed by law.
If under any circumstances, the information is being needed by law, the disclosing party has to inform the other party through writing and ask for assistance in the disclosure of the information. If the disclosing party informs the other party before it discloses the information, this will not be regarded as a bleach of contract since both the parties will be aware of the disclosure
Rating table
Scale 1-3 where:
- Unsatisfactory
- Acceptable
- Exceptional
Procurement managers from Silwan Food International manages their performance metrics to monitor and measure the performance of AGS Logistics LLC so that after their contract is over, they can be able to decide on whether to renew that contract or get other logistics suppliers.
The metrics summarizes the whole performance and progress of the suppliers and also gives them a challenge to deliver quality goods and services for the fear that their contract may not be renewed.
Project plan must be approved by the sponsor and signed by the procurement manager.
References
Berry, A. & Milosevic, Z. (2005). Extending choreography with business contract constraints. International Journal of Cooperative Information Systems, 6, 131-179.
Heldman, K. (2011). Project management jump-start. New York, NY: John Wiley & Sons.
Saxena, A. (2008). Enterprise contract management: A practical guide to successfully implementing an ECM Solution. New Jersey, NY: J. Ross Publishing.
Shadrach, B. & Ekeanyanwu, L. (2003). Improving the Transparency, Quality and Effectiveness of Pro-poor Public Services Using the ICTs: An Attempt by Transparency International, pp 120-138.
Turner, J and Simister, S (2001). Project contract management and a theory of organization: International Journal of Project Management.PP.457-464.
Do you need this or any other assignment done for you from scratch?
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