CIPS Procurement and Supply Cycle

1. Specification

Define Business Needs and Develop Specification

The first stage of the procurement cycle process is to understand and define the business opportunity or business need and any foreseen risks.

• Involving cross-functional stakeholders gives you a wide range of expertise to develop a comprehensive, high-level specification.
• Understanding the organisation’s values and sustainability goals including the environmental, social, and governance (ESG) criteria that need to be built into the specification is important.
• Considering ethical factors driven by consumers or regulation will ensure the specification meets the needs of the business long term and does not damage an organisation’s reputation if its obligations are not met.
• Engaging stakeholders at this early stage in defining the criteria means they are heard and will support the change process where stakeholder buy-in is required and avoid scrutiny from stakeholders or any unforeseen conflicts later in the process.

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2. Analysis

Market Analysis and Make or Buy Decision

The next stage is to conduct the market opportunity analysis research to assess the market options available in the marketplace.

• Scoping out your spend and current positioning and dynamics of the marketplace helps you identify potential suppliers and the degree of competition.
• Here, you can conduct analysis as to whether to make or buy the product or outsource the service. Using STEEPLED can help look at social and environmental macro environment factors.
• Understanding the market dynamics, e.g., what the market has to offer, what level of maturity there is now or needs to be developed and the market's appetite for sustainability is an important step.
• Insight into the innovation available, and any barriers or risks to delivering your goals will help to plan how to mitigate the risks.

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3. Strategy

Develop the Strategy and plan

Now you have defined the business needs and opportunity it’s time to develop a strategy and plan, which should consider the values and ESG goals of the organisation as well as the potential impact of the external environment.

• Conducting a competitive tender is a good idea if there is competition and you are well positioned to leverage the market.
• Developing competition in the marketplace or bringing this in house may be a better strategy if you are reliant on one sole source of supply.
• For example, if your volume represents 50% of your supplier’s total turnover your procurement power will be greater. However, this also presents risks and you will need to incorporate these considerations in your analysis before you develop a plan.

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4. Market

Pre Procurement - Market Test and Engagement

The pre-procurement process includes identifying both stakeholder and business needs now and, in the future, and how changes to implement the procurement strategy can meet those needs flexibly.

• Conducting market testing or a strategy test will help to identify if it is the right time to go into the marketplace.
• Consider other factors such as crop cycles, competitor activity, suppliers’ end of financial year or new legislation.
• Decide on the route to market for the tender process to give the best exposure to sustainability opportunities and innovation in the market.
• Request supporting information, e.g., on ESG at this stage to understand and mitigate any risks and establish if suppliers align on their values or practices. If not, any unsuitable tenderers can be eliminated early in the process.

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5. Documentation

Develop Documentation - PQQ and Detailed Spec.

It’s key to spend time developing the tender documents, including a detailed breakdown of the volumes, service level agreement and terms and conditions.

• Create a detailed specification to ensure consistency on pricing, product quality, and operational functionality. This means products are fit for purpose, reducing the financial impact of the wrong specification. The specification will form part of the tender documentation for suppliers.
• Distinguish in your specification between product requirements and preferences, building in tolerances for suppliers to adhere to.
• Ensure any technical evaluations are part of the core requirements in the specification and detail how these will be scored. Highlight and communicate the importance of these goals and requirements, to the tenderers.
• Including key stakeholders in this process will help to mitigate any risks.

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6. Criteria

Supplier Selection to Participate in Tender

Conducting a Request for Information (RFI) at this stage in the procurement cycle will help to gain insights into suppliers: size, capabilities, financials, strengths and weaknesses.

• Assessing the criteria can help you determine if they should be included in the tender process and receive a Request for Quotation (RFQ).
• Ranking the performance qualifiers against the business needs with key stakeholders is a useful exercise at this stage
• Carry out due diligence to check any potential supplier’s sustainability and ethical compatibilities to prevent any reputational risks, which could be caused by trading with organisations operating in unfavourable practices. This due diligence will validate their claims and should be inclusive and compliant of regulatory requirements.

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7. Tender

Issue Tender Documents

Once you have selected the companies to participate, you need to send formal documents.

• Send an Invitation to Tender (ITT) and Request for Quotation (RFQ) to selected suppliers to participate.
• Include the detailed specification and documentation developed around the business requirements and essential criteria, along with clear timescales to respond.
• Running a sustainable tender, without excessive travel, paper or transaction obligations should be considered as part of the tender process, and not just a tender requirement.

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8. Evaluation

Bid and Tender Evaluation and Validation

Once tenders are submitted, it’s time for bid evaluation and validation against pre-defined award criteria. This helps to identify which is offering the best Value for Money (VFM) and meets your sustainability needs to select the preferred supplier.

• Ensure your tender evaluation is structured, disciplined and transparent. To reduce any risks bid evaluations should explore price comparisons alongside policies, technical capability, capacity, quality, and financial health.
• A robust evaluation of credit checks, an assessment of environmental, social, governance and ethical elements of suppliers’ proposals is important, as well as supplier visits, technical audits, product sampling or trials.
• Post-tender negotiation often takes place, with multiple parties involved so whether this takes place face to face or virtually is a consideration here to not conflict with sustainability goals and carbon emissions targets.
• Consider whole life costs, including decommissioning, removal or disposal.

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9. Contract

Contract Award and Implementation

Once the supplier has been selected, you will award a contract to the preferred supplier. This allows both parties to fully understand their obligations and key success criteria as part of the agreement. This forms the foundation to manage the contract and relationship effectively.

• Award criteria offers agreed terms and conditions to minimise contractual risks and exposure when doing business, holding the supplier to account and to honour what they have agreed.
• The communication and implementation process sets out clear timescales and parameters on both sides, including relevant stakeholder groups to effectively manage the implementation and contract management.
• Ensuring that the supplier honours what they have agreed. Developing SMART KPIs in the contract that encourage responsible and sustainable practice should be measurable.
• Define the total life cycle of the products and any future plans for the assets or services.

See CIPS Contract Management Cycle.

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10. Delivery

Warehouse, Logistics and Receipt

The warehouse operations need to be considered to ensure a smooth, efficient process.

These can include:

• Product coding and classification.
• Space, layout and racking.
• Frequency of deliveries.
• Waste management and recycling.
• Consider environmental implications and ensure sustainability standards are adhered too both internally and externally.

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11. Performance

Contract Performance and Improvement

Contract performance should be monitored and reviewed at agreed periods against agreed Key Performance Indicators (KPIs).

• KPIs should be defined in the contract, agreed by both parties and used to track and improve performance.
• The contract review should include discussions on how the relationship is working and resolve any conflicts with agreed actions and timescales.
• Proactively discuss plans for continuous improvement and share learnings.
• Discuss any future business changes, added value activities, innovation, what may already built into the contract and how to achieve joint objectives.
• Define any actions and set the next review date.

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12. Management

Supplier Relationship Management

Supplier relationship management (SRM) is an important part of supply chain management (SCM), reviewing your portfolio of suppliers and establishing the right level of input to develop the relationship and achieve specific objectives.

• Time devoted to SRM depends on your strategy, type of purchase, length of contract, goals and objectives and the marketplace.
• SRM helps to create the right relationship and environment in which to work on new innovative developments, create sustainable businesses, reduce risk and streamline processes.
• Having the right relationship with a supplier may be the difference between achieving goals and targets, being first to market with a new concept or ensuring continuity of supply.

See CIPS Innovation Cycle

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13. Asset

Asset Management

Over time, assessments should be carried out to determine if business requirements have changed, whether the agreement is still required and fit for purpose, what can be learnt from the process and how improvements can be incorporated next time.

• The end-of-life considerations need to be carefully assessed and managed to ensure safe, responsible, and compliant disposal. Disposal should be a last resort, and wherever possible, organisations should seek to decommission, dismantle, reprocess, recycle, or reuse materials wherever possible.
• Remember to calculate and account for end-of-life costs, including decommissioning, removal and compliant and safe disposal of assets.
• This takes us back to the start of cycle, which begins again.

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