Procurement Process Analysis
Comprehensive analysis of traditional procurement challenges and performance metrics
Root Cause Analysis
| Original Challenge | Process Stage | Root Cause | Frequency |
|---|---|---|---|
| Lack of standardized maintenance schedules | Need Identification | Reactive approach, poor asset management | Very High (90%+) |
| Insufficient product knowledge | Requirement Definition | Limited market research, outdated specifications | High (70-80%) |
| Consolidate requirements into categories | Vendor Research | Manual categorization, limited taxonomy | High (70-80%) |
| Identify vendors into each category | Vendor Research | Outdated databases, limited search capabilities | Very High (85%+) |
| Identify vendors into different selective brands | Quote Evaluation | Limited vendor qualification, brand bias | Medium (50-60%) |
| To and fro talks with vendor | Vendor Response | Manual communication, unclear specifications | Very High (90%+) |
| Three different quotes | Quote Evaluation | Manual process, limited vendor pool | High (75%) |
| Negotiate | Negotiation | Weak position, limited alternatives | High (80%) |
| Give a PO and make a prepayment | Contract Award | Risk mitigation, cash flow issues | Medium (40-50%) |
| No assistance post sales | Post-Contract Support | Transactional relationships, poor contracts | High (70%) |
| Multiple follow up for warranty | Performance Review | Poor vendor management, unclear terms | Very High (85%) |
Traditional Procurement Process
Need Identification
Method: Reactive approach - Equipment failure detected or routine inspection reveals issue
Time Required: 1-3 days
Key Challenges:Limited asset data, difficulty assessing scope
Impact: Equipment downtime continues, emergency costs increase
Requirement Definition
Method: Manual documentation of specifications based on immediate need
Time Required: 2-5 days
Key Challenges:Insufficient product knowledge, ambiguous requirements, legacy system complications
Impact: Potential for wrong specifications, rework costs and delays
Vendor Research
Method: Search through outdated databases, contact historical suppliers
Time Required: 3-7 days
Key Challenges:Limited vendor pool, time-consuming searches, outdated contact information
Impact: Delayed procurement start, missed opportunities for better vendors
RFQ/RFP Creation
Method: Manual creation and distribution via email/phone
Time Required: 1-3 days
Key Challenges:Inconsistent specifications, manual distribution, limited reach
Impact: Administrative burden, higher administrative costs
Vendor Response
Method: Wait for quotes via email/fax, follow up manually
Time Required: 5-14 days
Key Challenges:Non-responsive vendors, incomplete quotes, communication delays
Impact: Extended downtime, lost productivity costs
Quote Evaluation
Method: Manual comparison, spreadsheet analysis
Time Required: 2-4 days
Key Challenges:Limited evaluation criteria, subjective assessment, focus on price only
Impact: Poor vendor selection, hidden costs emerge later
Negotiation
Method: Phone/email negotiations with limited leverage
Time Required: 1-3 days
Key Challenges:Weak negotiation position, limited alternatives, time pressure
Impact: Unfavorable terms, higher costs, poor service levels
Contract Award
Method: Manual PO creation and processing
Time Required: 1-2 days
Key Challenges:Basic contract terms, limited tracking, poor documentation
Impact: Weak vendor accountability, risk of disputes
Work Execution
Method: Basic oversight, minimal documentation
Time Required: Varies
Key Challenges:Limited visibility, poor quality control, minimal performance tracking
Impact: Quality issues, rework and warranty costs
Payment Processing
Method: Manual invoice processing and approval
Time Required: 3-7 days
Key Challenges:Manual verification, limited audit trail, processing delays
Impact: Vendor relationship strain, late payment penalties
Post-Contract Support
Method: Ad-hoc support requests, warranty claims
Time Required: Ongoing
Key Challenges:No single point of contact, multiple follow-ups required, limited vendor responsiveness
Impact: Ongoing operational issues, extended support costs
Performance Review
Method: Minimal or no formal review process
Time Required: Rarely done
Key Challenges:No vendor rating system, limited feedback mechanism, missed improvement opportunities
Impact: Repeated poor performance, accumulated inefficiency costs
Key Performance Indicators
Financial Impact Analysis
Direct Procurement Costs
of Total Cost
Improvement: 15-25% savings potential
Higher unit prices due to limited negotiation
Administrative Costs
of Total Cost
Improvement: 50-70% reduction potential
High manual processing costs
Downtime Costs
of Total Cost
Improvement: 40-60% reduction potential
Extended equipment unavailability
Quality/Rework Costs
of Total Cost
Improvement: 70-80% reduction potential
Poor vendor selection and oversight
Compliance Costs
of Total Cost
Improvement: 60-80% reduction potential
Manual documentation and audit issues
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