Answer 1.

Types of purchases:

 Raw material:
The raw materials purchase group includes timber, oil, gas, coal, and metals such as zinc and
copper. It may also include agricultural basic items such as cotton and beans. A critical
component of raw material is the supplier's inability to convert the raw material in to a
newly created product. After any processing, the raw material gets marketable. Copper, for
example, must be refined to remove impurities. Another crucial trait is that raw resources
are not all of equal quality. For example, the amount of sulphur in various types of coal may
differ. Raw materials are regularly graded to show their degree of quality. This allows for the
purchase of raw materials of the desired grade.

 Semi-finished Products and Components:

Semi-finished products and components include all of the supplies received from vendors to
support an organization's final manufacturing. There are parts, sub-assemblies, assemblies,
subsystems, and systems having only one part number. Semi-finished items and parts that an
automobile manufacturer might buy include tyres, seat parts, wheel bearings, and
automobile frames. Because components influence product quality and cost, monitoring the
buying process of semi-finished items is an important purchasing responsibility. Outsourcing
product requirements makes selecting trustworthy vendors for complex assemblies and
systems, as well as simple components, more challenging.

 Finished products:
All firms purchase finished goods from external suppliers for internal use. This category also
includes purchased commodities that require just modest processing before being supplied
to ultimate consumers. A company may sell a product manufactured by another company
under its own trademarked name. But why would a company purchase finished things to
resell? To address your question, some organisations have incredible design ability but have
outsourced every part of their manufacturing capabilities. Furthermore, purchasing finished
goods allows a company to offer a whole line of products. To develop material standards,
purchasing (in this example, engineering) must work closely with the maker of a finished
product. The purchasing business has to guarantee that the product satisfies its technical and
quality criteria of engineering and manufacturing.

 Maintenance, Repair, and Operating Items:

Maintenance, repair, and operation (MRO) items are everything that does not immediately
go into a company's product. However, these elements are required for running a firm.
Cleaning supplies, office and computer equipment, and spare equipment parts are all
included. Monitoring the supply of MRO items is difficult due to the widespread distribution
of these products inside the organisation. Most purchasing departments just discover when
to order MRO inventory if an end-user forwards a purchase requisition. As MRO items are
used by every division and locations, a typical purchasing division can receive numerous
small-volume purchase requisitions.
 Production Support Items:
Pallets, containers, master containers for shipping, tape, bags, wraps, inserts as well, and
other packaging materials required for exporting finished goods are classified as production
support items. The primary contrast between production support and maintenance and
repair items is that manufacturing support supplies directly support an organization's
manufacturing operation.

 Services:
For specialised jobs or services, all organisations rely on independent contractors. An
organisation may hire a heating and cooling expert or a lawn care agency for servicing the
greenery surrounding a business or to tackle issues that the maintenance team is unable to
handle. Additional services include machine repair, entry of data, consulting, and canteen
service management. Service acquisition, like MRO product acquisition, occurs throughout
an organisation. As a result, there has been a tendency to ignore them and handle service
purchasing at the organisation or department level. As with any purchase, paying close
attention and specialising can result in having the most effective service for the smallest
amount of money total. Companies are starting to establishing contracts with longer terms
with service providers, just like they do with other high-priced buy categories.

 Capital Equipment:
Purchasing capital equipment implies investing in products that will be used for a longer
period of time. Capital equipment procurement can be divided into several categories. The
first is made up of standard equipment that does not require any unique design standards.
Examples include furnishings, laptops, and general-purpose material-handling equipment. A
second category includes capital equipment designed specifically to meet the requirements
of the buyer. Advanced factories, sophisticated machinery, and power generation machines
are examples. In order to be acquired, these latter items necessitate precise technological
communication between both the purchaser and the seller.
Answer 2.

Strategic Sourcing:

Strategic sourcing is a method of defining an organization's expense profile and supplier base in
order to ensure that the procurement demands of the organisation are addressed effectively and
economically. To achieve optimal corporate success, it entails linking data, spending analysis,
market research, negotiation, and contracting.

Strategic sourcing requires developing an anticipatory, comprehensive, and ongoing examination

and review of a company's sourcing efforts. In strategic sourcing, suppliers are viewed as
important value partners, with the goal of developing long-term, collaborative relationships. Each
phase of the customer-supplier lifecycle is examined to ensure that the needs of the organisation
are consistently and efficiently satisfied.

Process of Strategic Sourcing:

1. Spend Analysis
The process of collecting, cleaning, categorising, and analysing spending data in order to
minimise procurement costs, increase productivity, and monitor controls and the compliance
is known as spend analysis. is one of the most important tools that procurement teams use
to uncover savings opportunities, mitigate risks, and enhance their organization's purchasing
power.

Identify and categorise the expenditure areas that exist throughout all business areas in the
organisation based upon their criticality/non-criticality. Categorization will assist in
prioritising sourcing activities according to each spend category. Analysing your spending can
also assist you in determining which providers are the most expensive and which are
supplying you with value at a reasonable price.

Once you've identified the important suppliers, you can look for ways to simplify their
processes and save money for your company. For example, after conducting a spend analysis,
you may discover that you are spending money on two separate vendors who provide
related items or services. By purchasing many items or services from such providers, you can
aggregate them and negotiate better discounts.

2. Market Research
After conducting a full spending analysis of your present supplier network and determining
which are vital to the success of your company, you can now perform market research in
order to either discover leverages in current agreements or seek new suppliers, if necessary.

A thorough examination of your current and prospective suppliers will assist you in
comprehending and evaluating critical supplier profiles. Examining suppliers' revenue or
market share to analyse their place in the market and industrial effectiveness, in addition to
the risks and opportunities related to the supplier market, is part of this process.

Knowing your suppliers' market position allows you to seek for possibilities such as
negotiations or risk mitigation by onboarding reliable suppliers.
3. The RFP Process
Following the completion of the supplier market research, the following stage is to request
RFP (Request for Proposal) from suppliers. This step aids in the identification of suppliers and
the development of a bargaining strategy. It is vital to communicate the business's explicit
requirements, as well as the end-goals and performance objectives, so that suppliers
understand what the organisation requires. This is required in order to present a sufficient
proposal and build strategies to satisfy your company's objectives.

The information provided will be useful, such as pricing structure, shipment and warranty
circumstances, product/service specifications, and so on. Following the compilation of the
given data, you can now construct criteria for selecting suppliers based on where you can
source vendors.

4. Negotiation
You are now prepared to negotiate the pricing of the goods with your suppliers using the
information provided by your spend analysis, market research, and various proposals. For
example, you might have to purchase goods for the new Product B, and you may be able to
bargain the price of goods for Product A by obtaining goods for Product B using the same
source. Your bargaining tactic may also be influenced by your expenditure statistics, the
supplier's market credibility, and the roadmap outlined in previous or future offers.

5. Contracting
It is time to write a full contract after you have developed a mutually beneficial approach
with the supplier that gives you with the most reduced expenses and quality standard while
also fulfilling the supplier's criteria.

A robust contract which specifies all of the deal's terms and conditions will help business
establish a healthy relationship while mitigating any price and delivery issues. Furthermore,
you can analyse your supplier's performance and gain the maximum value from the
connection depending on the contract.

One could, for example, address it while contracting. "If the vendor fails to provide the goods
within two weeks of placing the order, the buyer will be entitled for a 2% delivery rebate."
This provision ensures that the provider meets the due date, and the time frame can be used
to evaluate the supplier's performance.

6. Supplier Registration
During the supplier registration process, you collect all the details and data required to
establish an organisation as a certified supplier or vendor. This approach attempts to make it
simpler for the organisation to do business, buy products and services, and paying vendors in
the future. Supplier registration also involves screening and verification to guarantee
compliance with every relevant regulation, law, and corporate rules.

7. Monitor Performance

The strategic sourcing strategy does not end with the supplier selection and registration. The
final and most important phase is to accurately evaluate how suppliers perform in respect to
the goals and objectives of the organisation. Based on the conditions and contract, you may
assess their performance.

It is critical to monitor the performance of suppliers on a regular basis and find areas for
improvement. This can greatly help organisations identify supplier risks and build strategies
to avoid supply chain interruptions.

Strategic sourcing is a continuous activity rather than a one-time event. Market conditions
change quickly in today's dynamic business climate. So, before the agreement expires, re-
evaluate all processes such as expenditure statistics, market research, and look for additional
negotiation if applicable, as well as follow the entire strategic sourcing process once again.
Answer 3a.

Online catalogues enable the purchasing of goods and other resources over the internet.
These catalogues feature products available for purchase online from established suppliers.
Online catalogues also include pricing information and any applicable volume discounts.

These catalogues may be available for purchase through the buying organization's
procurement intranet from approved suppliers. Based on provider catalogues and an internal
inventory management system, the buying organisation can create, manage, and update
these catalogues for E-procurement procedures.

Types of Catalogues:

 Simple Catalogues
These catalogues contain a list of fundamental things, such as stationery, along with specific
details and prices. 60% of the total E-marketplace purchases are conducted through these
catalogues.

 Goods and Service Catalogues

In these catalogues items such as laptop computers require thorough and complex
explanations. These catalogues account for 30% of all online marketplace transactions.

 Contract-driven Catalogues
These catalogues contain items derived from agreements with suppliers that have already
been formed through procurement processes. This catalogue accounts for 10% of the total E-
marketplace transactions.

Answer 3b.

As mention in given scenario, PQR Inc. is procuring various products for their consumption. For E-
Sourcing they can opt for reverse auction. A single buyer hosts reverse auctions, which comprise
multiple suppliers bidding for business. Organisations frequently use such auctions tactically to
meet sourcing goals. It is known as reverse because the price is predicted to fall during the event
owing to competition. We usually utilise reverse auctions in procurement. However, in some
circumstances, we also handle forward auctions when the purchaser is seeking for purchasers.
This can occur if the purchasing division wishes to sell scrap, for example.

The following procedures may be helpful to ensure that auctions go smoothly:

 Determine the spend amounts and parameters for each category: It is always beneficial to
collect detailed data on annual intake, pricing patterns, commercial terms, and so on, so that
the buyer can comfortably float the auction document.

 Determine suppliers and obtain an initial quote: Before the auction, an RFI/RFP or RFQ
process, as appropriate, is usually carried out. This gives the buyer a good sense of the
market price.
  Establish the auction approach and guidelines before creating the event: As previously
stated, obtain information via RFQ/market research.

 Suppliers should be trained: It is an excellent plan to spend in web-based training to get

bidders acquainted with the auction instrument. This reduces problems during the auction.

 Hold a live auction: It is advised that bidders have access to a buyer hotline. This should be
in addition to any buyer chat capability, if present.

 Business of awards: The award should not be postponed for too long. Except under
exceptional circumstances, awarding should be completed. Otherwise, the buyer's credibility
suffers, and it may be harder to draw in bidders for the following event.

 Capture Savings: Savings should be documented and shared with other purchasers and
stakeholders to promote adaptability.

Benefit of auctions

Benefits to buyers

 Removes the human element from price bargaining

 Not every buyer is a skilled negotiator.
 increased effectiveness
 Previously, the bidding process could take months, whereas auctions can be completed in
weeks.
 A clear purchasing procedure
 Internal stakeholders can have access to all auction data. This contributes significantly to
gaining the trust of stakeholders and is also useful for auditing purposes.
 Bidders deserve transparency.
 Bidders can see exactly where they are in the competition.
 Supplier expansion
 Important in establishing bidder trust in a fair process. Because the bidder understands
where he ranks in the competition, he is driven to participate again with better pricing the
next time.

Benefits to bidders

 Environment that is fair and competitive

 Bidders appreciate that a level competition is provided.
 Environment for collaborative bidding
 It enables bidders to ask and receive replies in real time during bidding Market intelligence
 Despite the fact that they lose, businesses gain valuable insight into competition price
knowledge.
 Bidders deserve transparency.
 Bidders can see where they rank in the competition.
 Adaptability to rival pricing
 They can respond to competitor bids instantly, which is not feasible in traditional discussions.
 Time management
 Because the decision is practically rapid, the supplier can devote more time to other RFQs.