Whatsyouridea1996 您說呢?!: #BusinessManagement #PolicyDesign ; Group Central Procurement Policy

Thursday, October 26, 2023

#BusinessManagement #PolicyDesign ; Group Central Procurement Policy

This policy is the attachment of [How to [write/build]]?

This is for your reference of management policies’ format and the centralized procurement policy content, please do required adjustment according to your company and group internal needs. Thank you!

2023/10/26 Other management points of view

They are listed in the replay promoting images, please click and view: 20231026社群媒體重播圖檔-集團集中採購管理制度| Replay Promoting Images On Social Media –Group Central Procurement Policy. Thank you!

2023/09/19 [Created Content] sources explanation

In this page, there are [Benefit Report], ［Central Procurement Management Mechanism］and［Management Policies Framework］: I learned these when I worked for Taikoo Motors, Arcoa Inc and PWC Taiwan, it’s long time ago.

I’m grateful for those I’ve learned in this work scope in above mentioned firms I worked for; policies design is a team work, I hope this explanation is much more clearer about the sources I used and share. Thank you!

2023/09/11 Below lists frequently asked questions for your reference; you are welcome to comment or contribute your idea via [ExpertsSay] to share your management mechanism in procurement:

(1)[Projects or Urgent Procurement]: Though, in this article, it is discussing about centralizing or decentralizing procurement work roles and responsibilities to have the best interest in the overall situation in a work organization, however, in the demand of procurement, it also needs to consider the timing and frequency of demand as the requirements. For example: [Projects Procurement], such as plant establishment project outsourcing or contract bidding, a purchase for a sudden big demand from a client and demand for new business establishment, furthermore, things which are foreseeable but the timing of occurrence is not predictable as the [Urgent Procurement], things like urgent recovery demand after work places being attacked by disasters caused by flood or storm or destruction by thieves; the work roles and responsibilities may differ from situation meet all kinds of needs.

(2)The ownership of purchasing work roles and responsibilities can be adjusted: In some companies, their business operating is stable, and, in the commercial and advertising service providers work field, they change the work ownership from Marketing to Central Procurement for suppliers selecting and signing the work contracts, they are doing it in a way of annual purchasing, inviting users departments to join the selecting and voting procedures( including Marketing, Sales, HR/talents search and Administration or Plant Affairs/uniforms).

(3) Internal control-to examine transparently and fairly: After kinds of procurement work roles and responsibilities are confirms, it is advised to established [Suppliers Selecting and Management Procedures], [Suppliers Service and Supplying Results Assessment Policy] transparently. For example: regarding suppliers’ requirements, related work experiences and its recognition, previous co-working records and selecting procedures….etc., it is more appropriate to have a written description for not only the purpose of work compliance of procurement department but also as a work standard for other department to recommend their preferred vendors.

To implement the [Suppliers Service and Supplying Results Assessment Policy], sometimes, it is an internal motivated management model, which may result in the procurement department (performing too well) to become an independent professional procurement company, or, the group's centralized manufacturing center (performing too well or unable to improve) to improve the quality to respond the external competition or to be disbanded or management be replaced due to unable to respond external competitiveness.

(4) Internal control-to avoid the KPI becomes the root cause of fraud: The KPI of procurement department is not necessarily containing the amount of cost saved they need to achieve, because, sometimes, the company needs to pay more in order to enhance products or service quality, accordingly, they need to choose other suppliers and pay the relatively cost. You get what you pay for.

The starting point of cost saving, it is, the purchasing original price, it is easily manipulated and not easy to be verified its appropriateness; in some companies, the amount of cost saving is prohibited to be contained in work KPI to avoid internal fraud happening.

(5) Internal control and flexibility-Weighting the benefit and advoiding it: In business interactions with others, it cannot be denied that sometimes, we need to receive or give gifts to external parties, to accept an invited feast, and, we need to do similar things in return, or, to support each other at business etc.; in some companies, it seems unfair that they allow these kind of things happen, however, only procurement is not allowed to receive or send gifts to suppliers.

In this kind of situation, some company build up a [ Benefit Report] management mechanism to monitor this kind of thing, all the employees, including CEO, people who are included in their work organization chart need to follow this rule; that is, in some specific amount or occasion, between employees or between employees and customers or suppliers, if employees need to report in the form of [Benefit Report] (click to view the advised content) within defined days after or before they get something beneficial to themselves from others, they need to report this to their managers and internal work discipline management unit or some specific committee. Relatively, the company also lists things which are [not] allowed to happen in any kind of situation, otherwise, the employees who were doing it will be legally dismissed.

Above information is for your reference. Please comment or leave message in my social media platforms. Thank you!

What I’m personally most curious about is the advertising company behind your TV commercial content, what is your decision making procedure?! And, what is the decision making procedure about the content?! Especially those products endorsed by celebrities; as a TV commercial audience, a consumer and a learner, I hope could know how you define the most appropriate content and your product image will impress your viewers in only minutes, not only the image of celebrities or any famous persons? Does this advertising company need to achieve some kind of work KPIs? Or, you are the advertising company?! Please share your opinion. Thank you!

Moreover, regarding central procurement management mechanism, is it beneficial to Sourcing, Merchandizing or Trading companies?! Otherwise, which is the better way to do procurement in this kind of business?!

Please share your idea via ExpertsSay. Thank you!

2023/09/06 revision:

Some people would ask: how big is the demand when we need to build up the central procurement?!

This is a good question; however, in other words, it is like the first paragraph of policy development, (1) it depends on its “purpose”, and, (2)we need to consider whether the products or service suppliers in the industry are able to meet the requirements of the demand or not.

(1) Purpose: The purpose of central procurement, usually, it is to integrate the overall demand volume in order to increase internal bargain power when selecting suppliers and negotiating purchasing price, work efficiency of purchasing ordering, and, relatively, there is less companies only doing it for purchasing work efficiency enhancement.

(2) Suppliers’ situation: It means industry peculiarities, materials, products or services of some industries, their sales price or service charge is impossible to be negotiable; for example: the medical service charge when people going to see a doctor, however, it is possible to define the price based on demand volume or quantity in health examination service, or, if the hospital and health examination center are under the same business group, then, it is possible. For example: All OOO hospital patients are able to have additional OOO service or beneficial service fees if they do health examination in OOO centers.

It is a long-term management work model to establish a central procurement work funciton, it is not suitable to make a hasty decision for building up this kind of work mechanism; unless, in the work environment, it is obviously the purchasing work is scattered and existing multiple people doing the same job needing to immediately centralise the work on a specific unit or a person, otherwise, it is not advised to define all the procurements works belong to only one work department without appropriate assessment. Thus, I would like to suggest the companies start to set up this central procurement work function and related management policies when they have already gathered enough facts and found both of above 2 items can be achieved at the same time, more than that, they are satisfied with the result of (1), and if assessing from 1 to 21 about the satisfaction, they will define 17 at least( I subjectively define the significance of 17 in 21, and, it will change by its operating work environment accordingly).

- What else?!

- Regarding 17, in your company, how you would like to define the significant impact on the number in your finance statements and business work operation efficiency?! How big is big enough to take action for building up the required things?!

- How many facts are enough for the gathering works?! In my point of view: 100% of the qualified suppliers are capable of doing it, and the rest of the issues are their willingness and monetary definition things only. What’s your idea about this topic?!

- Is the industry you involved allowing your customers doing group negotiating the price?!

- Asking you this question sincerely: Is green energy charge negotiable?!

Green energy business and all kinds of works are welcome to share your professional knowledge and promote yourself via [Experts Say]. Thank you!

2022/12/31 remark: there are 11 outlines mentioned in this article:

1.Purpose, 2. Scope, 3. Role and responsibilities, 4.Level of approval、5. Related work process and reference, 6.Work KPI, 7.Exception management, 8. Operational risk and internal control, 9. Related work documents, Footer. Proposer and Approver.

I learnt this idea from the work experience I built when I worked for #PwC, related information came from our internal work knowledge and templates in clients side. More than that, the result of my discussion related issue with peers are included. Regarding 6.KPI and Proposer and Approver came from my feedback to the concern raised in policy implementation meetings in companies.

If viewers get any work benefit in this sharing, please forward this content to more people in need. Thank you.

[ Policy starts here ]

What’s Your Idea Co., Ltd.	Document Template：WYI00001
	PoilcyOwner：HQCentralProcurement
	Policy／DOC No.：PO-PRC0001V01
	Q&A meeting minute：POQAM20220001
	NewHiredTraining：●Group●Company●Department
	DateofAnnouncement：２０２２０２０９
Group Central Procurement Policy	Extension No.：９８９８
Group Central Procurement Policy	P. 1 of 6 Pages

1. Purpose：In order to reinforce group procurement bargain power in centralizing purchase request and manage procurement work efficiency and internal control effectiveness at the same time, this policy is established specially for its been compliance.

2. Scope:

2.1. This policy applies for work role and responsibilities among purchase requisition, purchase ordering and receiving and acceptance work procedures in What’s Your Idea Co., Ltd.( This Company or Parent Company) and its investee companies; this list of investee companies is based on the 「Subsidiaries Supervisor List」announced by Finance Department.

2.2. 「Suppliers」 include those who provide goods or service to companies in this group.

3. Role and responsibilities：

3.1.Selecting Group Suppliers：below suppliers need to be centrally selected by Parent company and referred to as Group Supplier, such as「brand」 advertisers, correspondent banks, external auditors, computer hardware and software providers, property insurance firms, law firms, commodities and material suppliers, office and plant builders, recruiting firms and international freight service providers.

Each subsidiary is allowed to select the resting kind of suppliers and define its own related work role and responsibility. Please contact 「HQ Central Procurement 」 via above extension number or email once there is a need of group purchasing negotiation discussion.

3.2. Parent company and subsidiaries work role and responsibilities chart in signing contracts, purchase requisition, purchase ordering and receiving and acceptance in Group Suppliers management:

[Parent company and subsidiaries work role and responsibilities in Group Suppliers management]

P = Parent company; D = Demand company; W = Other explanation

	Signing contracts	Purchase requisition	Purchase Ordering	Receiving and acceptance	Payment request	Payment processing	Other explanation(W)
Commodities and material suppliers	P	W	W	W	W	W	Demand company purchases from the Group manufacturing center; Group manufacturing center purchases from the contract manufacturers externally, and performs the payment request internally.
Brand advertisers, Correspondent banks, External auditors, Computer hardware and software providers, Property insurance firms	P	D	D	D	D	D
Law firms, Office and plant builders, Recruiting firms, International freight service providers	D	D	D	D	D	D

3.3. Central Procurement Suppliers: suppliers of centralized procurement in This Company, including Group Suppliers in 3.1, related work role and responsibilities of departments is listed in below chart:

[Departments work role and responsibilities in Central Procurements Suppliers management]

Departments: AC=Accounting; AD=Admin; PD=Product; MK=Marketing; GP=Group Central Procurement;

IT=Information Technology; HR=Human Resources; LE=Legal; LG=Logistics; GM=Group Manufacturing Center; US=User(s)

Work Process Suppliers ; Work Owners	Suppliers selecting	Signing contracts	Purchase requisition	Purchase Ordering	Receiving and acceptance	Payment request	Payment processing
Correspondent banks, External auditors	AC	AC	AC	AC	AC	AC	Finance
Commodities and material suppliers	PD	PD	PD	GM	PD	PD
Brand advertisers, Products advertisers	MK	MK	MK	MK	MK	MK
Computer hardware and software providers	GP	IT	AD	IT	IT	AD
Machinery equipment providers, Transportation equipment providers, Office and plant builders, Maintenance and renovation service providers		AD	AD	GP	AD	AD
Domestic logistics service providers, International freight service providers		LG	LG	LG	LG	LG
Supplies, Stationery, Courier firms		AD	AD	AD	AD	AD
Recruiting firms		HR	HR	HR	HR	HR
Property insurance firms		LE	AD	LE	LE	LE
Group insurance firms		LE	HR	LE	LE	LE
Law firms		LE	LE	LE	LE	LE
Travel agency		HR	User(s)	HR	User(s)	HR

3.4. User departments are allowed to select suppliers excluded in above 3.2 and 3.3 work scope and perform related work process.

3.5. Accounting Department:

3.5.1. Accounting needs to reject payment request for payable work process once the central procured items payment is requested for non -central procurement suppliers, otherwise, any exceptional situation needs to comply for 7.Exception Management.

3.5.2. All departments and subsidiaries’ 「Non-Centralized Procured」 items annual accumulated purchased amount reaches NT$5,000,000, Accounting needs to summarize its information as 「Year XXXX Non-Centralized Procured items annual purchased amount reaches NT$5,000,000 and its suppliers」 or 「Case not found in this 12 months - Year XXXX Non-Centralized Procured items annual purchased amount reaches NT$5,000,000 and its suppliers」 and send to 「HQ Central Procurement」 by 3/31 every year.

3.6.HQ Central Procurement: every year, HQ Central Procurement needs to hold meetings to discuss Group/Central Procurement Suppliers related issues by 6/30, and update the list of Group Suppliers( including central procurement suppliers of This Company) and announce the latest information by 7/5 every year.

4. Level of approval：please refer to 「Level of Authorization Chart-Procurement and Payment Work Cycle」.

5.Related work process and reference：

5.1. Work process of this policy：N/A

5.2. PO-PRC0002V01 Suppliers Selection Rule

5.3. PO-LGC0001V01 Contract Signing Process

5.4. PO-PRC0003V01 PR and PO Work Management

5.5. PO-ACP0001V01 Payment Request Work Process

5.6. PO-FNP0001V01 Payment Terms Management

5.7. PO-PRC0004V01 Supplying and Service Quality Assessment Work Procedures

6.Work KPI：

6.1.HQ Central Procurement: to announce updated 「List of Group Suppliers」 and 「List of Central Procurement Suppliers」 by 7/5 every year.(Need to remark the updated items.)

6.2.Accounting：according to 3.5.2, summarize and send out response related to 「Year XXXX Non-Centralized Procured items annual purchased amount reaches NT$5,000,000 and its suppliers」 or 「Case not found in this 12 months - Year XXXX Non-Centralized Procured items annual purchased amount reaches NT$5,000,000 and its suppliers」 by 3/31 every year.

7.Exception management:due to any specific situation causing Group Suppliers or Central Procurement Suppliers are skipped for central procured items, the payment request department needs to prepare 「Explanation for Central Procurement Skipped」 and get approval by department managers and HQ Central Procurement. Skipped central procurement payment request is acceptable only when this approved document is attached.

8.Operational risk and internal control:

8.1. Benefit avoidance and work independence in suppliers selection.

8.2. Work compliance of suppliers assessment procedures.

8.3. Work efficiency and effectiveness assessment of central procurement.

8.4. Assessment the appropriateness of the reasons of skipped central procurement and its amount significance.

8.5. Above 6. Work KPI assessment.

9.Related work documents:

9.1.ID-FINSB20220001Subsidiaries Supervisor List

9.2.ID-PRGCPO20220001Group Suppliers List

9.3.ID-PRCCPO20220001Central Procurement Suppliers List

9.4.LOA20220001 Level of Authorization Chart

9.5.POQAM20220001 Policy Q&A Meeting Minutes