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CHAPTER 2
THE PROCUREMENT PROCESS
2.3.2 IDENTIFY AND EVALUATE POTENTIAL SUPPLIERS
Once a user’s or users’ need has been identified it then becomes necessary
to identify a qualified supplier or suppliers. Approved suppliers for a product or
service may already exist as could, for example, be the case for a repetitive
purchase. For items where a supplier does not currently exist, or where the
organisation wishes to re-evaluate the supply base, this activity involves the
identification of all possible suppliers that might be able to satisfy the user’s
needs.
It is important at this stage to include, where appropriate, possible suppliers that
have not previously been used. Identifying all possible suppliers, especially in
today’s global business and supply environment, can be a challenge and often
requires extensive research.
Once potential suppliers have been identified (and these could include current
suppliers to fulfil a current contract or a new user requirement from these
suppliers) it is then necessary to evaluate them. An important step here is to pre-
screen possible sources of supply to identify those suppliers that meet a minimum
set of criteria. Pre-screening reduces the number of potential suppliers to those
that can satisfy the user’s demands. In some instances, and for some goods
or services, pre-screening can be a relatively simple task. In other instances,
items of a complex nature will require more time and effort.
With the potential pool of suppliers reduced to those that can meet the user’s
requirements, the next step is to determine which supplier or suppliers can best
meet the user’s requirements. This could be accomplished through the use of
competitive bidding if the procurement item or items are fairly simple or standard
and there are a sufficient number of potential vendors. If these conditions do
not exist, a more elaborate evaluation may be necessary, using for example,
engineering tests.
Procurement professionals, when evaluating potential suppliers, use various
performance criteria. These criteria would include suppliers’ past performance,
quality performance or capabilities, technical performance or capabilities, cost
and price, delivery performance or capability and other key metrics [1].
2.3.3 BIDDING, NEGOTIATION AND SUPPLIER SELECTION
Supplier selection starts once a shortlist of qualified suppliers has been
developed. Identifying qualified suppliers is different from reaching a contract
agreement with a supplier or suppliers. Two methods for making a supplier
selection decision are competitive bidding and negotiation (covered in more
detail in Chapter 6). Competitive bidding involves requesting bids from suppliers
with whom the buyer is prepared to do business. The process typically begins
with the buyer sending a request for quotation to a supplier or suppliers.