Procurement & Supply Cycle Podcast

I talk to Chukwudi R. Uche, a Procurement and Supply Management Expert, to tell us more about the procurement and supply cycle and how it works.

If you would prefer to review the transcript of the podcast see below.

Mo
Welcome to Health procurement Africa and the knowledge hub. Our mission is to explain how procurement and supply can be harnessed to help millions of Africans have access to the best care and treatment available. Our insights and advice can help your businesses thrive by connecting with people, products and services you need on your procurement journey. My name is Mo. Today, I'm delighted to be joined by Chukwudi, who is an expert in procurement and supply and will be sharing his insights and experiences with us. We're talking about the procurement and supply cycle from identifying your company's requirements to finding out if you have met all your targets, Chukwudi, welcome,

Chukwudi
Thank you more.

Mo
Chukwudi the procurement and supply cycle it sounds so complicated and expensive!

Chukwudi
it doesn't really have to be complicated, it's not complicated and it's not expensive. So, on a longer on, you see that it helps to save money for an organization if it's understood, as simple as it is and followed.

Mo
So, where do we begin?

Chukwudi
So, it starts from identification of a need or needs by an organization and from here it starts towards getting into other stages, which is from the need, there are some other things that we need to follow up towards meeting that need and I could just generally tell you how it goes. So, once a need is identified, there is need for the planning that goes into it and that helps to really research the market to really see how best to get the best suppliers that will help meet the needs of the organization. At that level of planning also is when the aspects of thinking through the procurement method that will be used. Apart from that also after the planning stage there is need to go through the bidding process. So, generally what I said before from identification of needs to the planning comes within what we call the "pre-bidding stage". Now at the bidding stage is when the bid is prepared, sent out for solicitation and after that there is evaluation of submissions that are received based on that solicitation. Now, there is the stage where the contract award needs to happen after which contract management comes in. And at the end there is need to monitor the entire process and review are necessary for the purpose of improvement in future.

Mo
So that's very interesting Chukwudi. How do we go about this identifying the need and up until when we go about looking for our potential suppliers?

Chukwudi
So, the identification of need happens more internally. So if I'm the procurement entity or working with other stakeholders within the organization, the need is identified and after that there are different processes that can be used. When it comes to identifying the suppliers of the organization who have a supplier database in place, but beyond that, peradventure it's not in place or even when is in place. For when is in place there is need to continue to build it. What that means is with review, more suppliers could be added or removed. But if it's not in place, there are processes that can be followed to bring in more suppliers. Some organizations go through an advert process where they give opportunity for suppliers to indicate interest depending on the different categories that they are looking at, after which they will do a kind of evaluation and use that to enlist suppliers into the database. Beyond that, also, some organizations could go through internet to search for suppliers. There are others that could be partner organizations or other stakeholders they work closely with for referrals. And the essence of this is to get reputable suppliers into the database over time.

Mo
A very important word that you use that is reputable. How do you know that your suppliers can be trusted?

Chukwudi
There are different things that could happen. Due diligence is very key. Like from my experience, in the organization I work for we make sure that we go through a due diligence process. So what that means is, we could check the organization, through some of the searches: that could be through internet, it could be through checking the organizations they have worked with in the past, there is due diligence that comes from visiting them to confirm that what they have given us, the information concerning them is genuine. So when you go to an organization, like for instance, we are in "so so address", this is what we do. Maybe they have said, they do printing, this is their office, and you visit them and you discover that that office is not what they said they're doing. So the essence of all this is to make sure that you are getting an organization or a supplier that is reputable, because you don't want a situation whereby you run into challenges which one of them could be reputational issues by associating with such a supplier or they don't have capacity to deliver.

Mo
Some of the phrases that I've been hearing a lot throughout this process have been RFQS, so request for quotation, and RFPs, request for proposals, what exactly do they mean Chukwudi?

Chukwudi
Now for RFQs and the RFPs if you look at where we started, identification of niche, looking at the suppliers, and in this case, let's say we have suppliers in the database, request for quotation is when the suppliers are requested to send costs for an item that is being procured. And in that case is more items that are standardized that are not complex with clear specification. So, that goes to them for them to give quotes, stating prices to supply such and also have an opportunity to commit to timelines for delivery. So, for things that are not complex, RFQ becomes applicable. Now, in a situation whereby is a complex procurement, which could be like complex services, it means that RFP becomes more applicable because that gives an opportunity for the supplier to make a proposal detailing the technical aspects of what they are coming to provide in terms of service and once that is done side by side with the prices that go with it, it becomes a better way of getting suppliers with the right capacity to deliver on such a service.

Mo
So, Chukwudi, what information should be included in the RFQs Or RFPs?

Chukwudi
Very good question. So for RFQs, this discussion is very important because as a procuring entity, you wouldn't want to run into miss-procurement because of wrong specification. So, specification has to be very clear. The delivery timeline as needed has to be very clear also issues around making sure that the pricing is not complicated like the unit of what is being procured needs to be very, very clear. And also the deadline for submission has to be there. How is to be submitted, is it going to be electronic or electronically or as hard copy submission, it has to be very clear in the RFQ. And even when it comes to RFP, it has to also be clear when it comes to how the submission is, the deadline. In the case of RFP for services, there are things that we need to be very clear. Like, for instance, the evaluation criteria has to be very clear in the request for proposal, the different things that are needed around experience, the methodology, the staff that will be used for the services, all those things need to be very clear in the document.

Mo
So Chukwudi, our RFQs have gone out, the bids have started coming in, how do you choose the best offer for your needs?

Chukwudi
So I talked about the deadline for submission. So based on the deadline, the next thing would be to go ahead to open the base, and with the opening of the base, evaluation needs to be carried out. Now, evaluation is based on set criteria. And that criteria will have to rank the bidders. So that's the best, in this case now we look at the the most responsive bidder would be the one that will be selected from that process. And now if I use a request for proposal, for instance, it has the technical aspects, it has the financial aspects. At the time of sending out the request for proposal, the evaluation criteria up to the weighting criteria is made very clear. Like in the case of request for proposal, many times it ranges across like 80% for technical, 20%, for financial, it could be 70% for technical 30 for financial. Now, during evaluation, all these things are applied to make sure that the evaluation is done in line with the set criteria as put in the document, so that in a very transparent way a bidder can match.

Mo
So at this point, we now have a winner?

Chukwudi
Yes

Mo
But there's still work to be done. The process still continues?

Chukwudi
Absolutely. You recall when I talked about the procurement cycle, I mentioned with the evaluation, contracts award is the next. And once that is done, we continue with contract management. Now, with a winner coming out of the evaluation process, there is need to do a contract with the supplier that is the winner in this case. And drafting of contracts, like in the case of request for proposal, the document goes with a standard contract. Like if we look at most of the standard bidding documents. At that stage, you'll see that there is the aspect that speaks to contract, but once a winner is selected, it becomes the time to draft that contract using the template making sure all the conditions are captured. At that point it's sent to the winning supplier for them to review. If everything is fine between the parties, the person that has the responsibility to authorize from their supplier goes ahead to sign off the document. And he has to be someone that has not been involved in any way as far as the bidding and evaluation process is concerned to make sure that there is integrity of the entire process.

Mo
Chukwudi there are several words I've been picking up from what you've been telling us so far. You've mentioned integrity, evaluation, and due process. It's becoming clear to me that process and transparency are essential through the procurement and supply cycle.

Chukwudi
Yes, you're correct. And I was talking about how critical it is because there is need for everybody to understand that a supplier has not just been picked from somewhere, but such a supplier has been selected in line with set criteria, like issues around quality that such a supplier has been able to compete with others and has met that requirement, issues around our ability to deliver. Because this is very important. Like, I want to get a supplier to deliver goods for me in one week. And one is committing to the one week, another is saying, "Oh, I'm going to do it in two weeks". If I go and take the one of two weeks, whoever that that is looking at the process, we need to check to see whether is aligned with what we have made clear in the solicitation document. So that is why transparency is very important, because it helps the one that is procuring, knowing that whatever decision that is made, when there is a review, there is a check that will come in to, you know, make sure that everything has been done in line with set criteria, which like I mentioned before issues around price, quality, ability to deliver. So transparency is very important. And that helps.

Mo
So we've now done our due diligence, we've picked our supplier, is the procurement and supply cycle now complete?

Chukwudi
Not at all, not yet. Now, contract management is very critical. In fact, from experience, what I ensure is that for every contracts, KPIs, that's key performance indicators, are captured. Now that helps to manage the contract. So at that point, the KPIs are being used to check whether the supplier is performing as agreed or not, which will also help in future as far as improving the procurement process is concerned. Beyond contract management, monitoring and review is also very critical as far as the cycle is concerned. Because, you know, from the beginning, in identifying the need, there is a plan what we call the procurement plan. And all these other stages follow. So coming to monitor the process, we have to check whether everything is in line as they're supposed to be and the review, we have to improve the procurement process in future. So that is why, at the level of contracts, is important to note that that is just not the end. But some other things need to come in contract management, monitoring and review.

Mo
Chukwudi, I'm a bit confused. You talk about key performance indicators. How do you monitor the performance of the supplier once the contract is in his hand, and you've told him to go away and bring you what it is that you're asking him for?

Chukwudi
So the supplier doesn't just need to go away and that is why I said that, at a time of contracting, these key performance indicators are put in place. I could give you a few examples. Now, it could be a KPI around the delivery time. So I've put a KPI that you need to deliver in two weeks. Now, at a time of delivery, which there will be evidence to that effect, like the sign of delivery documents with date, that has to know whether the supplier has been able to deliver as agreed. So, any deviation means that there is a challenge as far as that performance indicator is concerned. The other one could be delivery in full. So, like I have procured a lot of health products in the past. So we have done a process to procure 1 million treatment courses of one particular medicine, and during delivery, with the proofs of delivery, we are seeing that instead of 1 million, 800,000 has been delivered, it means that that KPI has not been met. Again, one other thing we ensure is quality standards. For instance, again, using the example of health products, we have agreed that this product is going to come from a manufacturer with maybe WHO prequalification. And at the time of delivery, we are discovering that it's coming from a supplier without that, it means that that KPI is not met. So it's very important to put KPIs in contracts, because that would be a very good basis of contract management, because there is not supposed to be any ambiguity in the process.

Mo
Okay, so all our KPIs have been done, supplier has met all our needs, and has supplied all the goods that we requested for, next, I think we should talk about payment to suppliers, because this is very important, isn't it Chukwudi?

Chukwudi
It is very important. And I can tell you this is one aspect that is neglected by some procurement professionals. Payment instrument is very critical. Because if not managed well, a lot of challenges can come through it, there could be disruption in supply of goods and services. And making sure that suppliers are paid on time has a lot of benefits. For instance, such supplier who have confidence that this procurement entity pays on time, and based on that will be ready to give the best of prices over time. And also that has a way of impacting on the quality of what the supplier is going to deliver over time. But when there are delays, like most of these suppliers, they could take loans from banks to supply and when they encounter delays, you will discover that over time, they will move their prices up. But the most dangerous is this, it might get to a point that even when you solicit from them, they will not respond because they don't trust the procurement entity. And that is a big issue because it brings about disruption.

Mo
And of course it leads to reputational damage as well for your own company.

Chukwudi
Absolutely. And that is why my experience is this like I have worked for a government entity in the past, before working for international NGOs. Now, suppliers know that international NGOs before they go ahead to procure anything, they have fund for that, they pay on time. And you see there are some suppliers that will tell you that "Look, I can't do any business with government. But when it comes to international NGOs, for instance, UN agencies or corporate organizations, we are ready to do business with them because not only they are going to pay, they are going to pay in a very timely manner, which is very helpful."

Mo
So what can Health Procurement Africa do to help?

Chukwudi
Very good question. Now, looking at Health Procurements, Africa, there are a lot of things. One is helping by providing the needed information that will lead to having the right processes in place to drive procurement efficiencies. The aspects of also making sure that the right people are there to drive procurement to make sure that when we talk about processes, there are a lot of tools that are used for procurements when procuring entities have access to such it goes a long way to bring about efficiencies. And let me say this, I've had also seen instances where just a bidding process to get a supplier for health products took months to conclude and you can imagine how that will affect the delivery of such health products and the beneficiaries or patients that are supposed to get such health products. So meaning that if we have an opportunity to provide support that we need to, having the right processes in place to drive efficiency procurements by the right people and eliminate these delays, at the end of the day we will have health products in place, health products that meet the quality that is desired that will eventually impact the lives of the beneficiaries or patients positively.

Mo
Thank you very much Chukwudi.

Chukwudi
Thank you Mo!

Mo
Thank you, Mr. Chukwudi, for sharing your fascinating knowledge on the procurement and supply cycle with us all. I hope you all have enjoyed listening and you gained as much as I did from it. Join us again to hear more unique insights from our growing community here on Health Procurement Africa.