18 Must-Have Negotiation Skills For Procurement Professionals
Procurement Strategy Case Studies — 5 Insightful Examples
Setting the appropriate strategy in procurement is the first step to improving control and effectiveness of the overall procurement and sourcing activities. However, not everyone knows where to start in their strategy.
In this article, we will check five procurement strategy case studies that can give you insight into strategies that they have done to streamline their processes. We will explore the problems that arise and how they have conquered them with their strategy.
After reading this article, you will gain enough knowledge on tackling the problems in your procurement by formulating your very own strategy. Thus, making your procurement process more effective than before.
Click on a case to jump straight to it:
Example 1 — InDemand, Co-creation Model Helping to Procure Innovation in Public Organizations
InDemand brought together procurers from three different European Regions namely: Murcia, Oulu, and Paris to test a new co-creation model which is said to be a model that is faster, leaner, and requires fewer resources and overheads. Thus, being more suited to ever-changing technologies, such as digital solutions.
InDemand aims to help promote innovation by combining what the clients need (health professionals of the Murician Health Service), and the development of the solutions in the process of co-creation (a collaboration of health professionals together with tech companies).
The Murician Health Service (EPICO), used the InDemand model to know the challenges of enhancing accessibility for and follow-up epileptic patients. Thus, a call to companies to co-create an innovative solution alongside clinicians commenced.
After a tender process was launched, Oxiframe (renamed Aircrum IT) was selected to work together with neurologists and patients. After the engagement process, Servicio Murciano de Salud (SMS) prepared an open tender for a solution. Thus, a bigger company named PULSO won the bid and collaborated with Oxiframe to make an innovative solution.
The InDemand model has been leveraged to more than 50 procurement innovation projects. It is estimated that more than 200 organizations submitted a bid for the different calls based on the InDemand model from the numerous procurement organizations.
Additionally, there was a 100% acceptance of the tool which was found to truly help improve communication between doctors and their patients affected by epilepsy. It has heightened patient satisfaction by up to 50% and led to a quality of life improvement for direct communication between doctors and their patients.
After the success, it was then tested on 54 patients at the Hospital of Cartagena for 2 months and eventually tested on a wider group. Thus, it is a great example of how to use a co-creation model with companies together with clinicians and their patients.
What Can We Learn From It?
We can learn here that a demand-driven co-creation works, at least in the healthcare sector, to address the problems perceived by parties involved in the creation of a solution.
Together with the clinicians and the patients, the collaboration worked well. The exchange of ideas, needs, solutions, standard practices, and legal limitations has become a valuable component to co-create an innovative solution.
Example 2 — The City of Copenhagen Supplying Seasonal and Diverse Organic Fruit and Vegetables
Copenhagen, the most populous city of Denmark, has set a target for 90% of the food served in municipal facilities to be organic. It has also ensured that it was buying seasonal produce to support efforts of strengthening biodiversity in agricultural production in both Danish and foreign producers.
It is important to note that “seasonality” is not meant to be the seasons in Denmark. Rather, it defines the season somewhere in the world helping to ensure fairness and transparency.
Furthermore, an extensive market engagement was conducted to ensure the requirements were ambitious and also achievable. The bidders were also asked to complete the “seasonal wheels’ to demonstrate the varieties of the typically used products available throughout the year.
The first contract was issued in January 2014. However, the tender was abandoned due to multiple errors seen in the bids. The contract was reissued in April 2014. Seven tenders were then submitted and only two of those met the requirements. After that, the contract was awarded in July 2014.
The innovation in the supply and delivery of products, improved relationships with the suppliers, and greater sustainability initiatives in sourcing food were all positive results of the extensive market dialogue.
Additionally, the organic food market in Denmark has remarkably grown in recent years and the organic food service market increased up to 33% between the years 2013 and 2014.
What Can We Learn From It?
We should take note that there is a risk in carrying out the innovation procurement process that is susceptible to being abandoned due to a lack of competition. The extensive market engagement Copenhagen has done can be time-consuming.
However, by building a strong knowledge of the market, it is achievable to produce realistic yet innovative specifications or requirements to attract necessary competition.
Example 3 — Catalonia’s Aim to Clean Air through Clean Vehicle Procurement
Catalonia is an autonomous region in Spain. Its government has passed the responsibility for certain legislative and policy areas, including the environment. The Ministry of Territory and Sustainability is the expert body for environmental policies and leads the promotion of Green Public Procurement in Catalonia.
The Catalonia government uses GPP to support numerous strategic policies such as reducing negative impacts of consumption and production, promoting eco-innovation and transformation, and supporting other policies that pursue sustainable objectives.
The government of Catalonia focuses on low-carbon vehicles that align with wider environmental priorities within the region. Air pollution is a specific concern within the wider urban area of Barcelona where nitrogen oxide exceeds the annual limit.
An Air Quality Plan of the Metropolitan Area of Barcelona has brought 40 municipalities together in order to solve the air pollution problem. Catalonia’s Government approach to combat air pollution is to provide guidelines on the GPP vehicles, government agreements regarding GPP, eco-labeling to identify low-carbon vehicles, and the LIVE platform which is a public-private platform promoting sustainable mobility.
The GPP guidelines laid out clear and simple criteria which public procurers procurement can follow to buy low-emission vehicles, as well as consider the use of vehicle fleets in the delivery of service contracts. It also includes the maximum energy consumption and technical specifications of the award criteria.
Additionally, the Catalonia government supports the Catalan Ecolabelling. It is a regional voluntary ecolabel awarded to products and services that fulfills specific environmental quality requirements beyond what is compulsory under the current regulations.
The result of vehicle-related tenders in the Catalonia region has produced positive impacts on the environment. It is estimated that through its procurement strategy, it has produced energy savings of 2,120 Tons of Oil Equivalent (TOE) and a reduction of 7,166.7 tons of carbon emissions compared to benchmark levels.
What Can We Learn From It?
Catalonia’s government approach demonstrates that procurement can play a significant role in contributing to wider environmental policies and public health goals.
Additionally, by aligning the EU national and regional policies, it is achievable to send a clear message to markets and the citizens of Catalonia about the importance of the environment through sustainable activities.
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Example 4 — The Ministry of Defense of the Kingdom of The Netherlands Procuring textiles Made From Recycled Fibers
The Ministry of Defense of the Kingdom of the Netherlands (MODNL) is a large public sector buyer that employs around 58,000 people across the army, military police, air force, and other supporting roles.
It is also one of the 45 public sectors and private parties brought together by the Dutch Government’s Circular Procurement Green Deal, tasking participants in carrying out two circular procurement initiatives between the years 2014 and 2016 to increase knowledge and accelerate the transition to a circular economy.
One of the areas of focus of MODNL was textiles due to the fact that it needs to equip its large numbers of personnel with uniforms and other textile products. However, textile production is linked with numerous environmental and social problems. Ultimately, the energy to transform raw materials and manufacture new fibers in the production of textiles has great carbon emissions.
Therefore, the MODNL began exploring the market for recycled textiles in January 2014 by publishing a request for information and conducting an open meeting with the textile suppliers. The aim of this market engagement was to know if it is possible for requiring recycled fibers to be used in the production of certain items.
Through its market research, it identified that manufacturers were able to meet the requirements around the use of recycled content. However, MODNL must focus on the items’ ability to perform their use rather than the technical values such as the tensile strength.
The contracts awarded in June 2016 are worth approximately $455,000 for towels and washcloths and $1.46 million for overalls. Only six suppliers submitted their bids and only four of them met the tender requirements.
Now, two Belgian companies supply the MODNL with towels and washcloths, and overalls. The parties will innovate during the four-year term which could result in a higher percentage of recycled materials later on in the execution of the contract.
Subsequently, a separate eight-year contract was also signed for reuse services where a third party was contracted to sort items of clothing for reuse and resale with income being returned to MODNL. Thus, it results in considerable savings for the MODNL.
What Can We Learn From It?
Circular procurement needs suppliers to find alternative inputs and new ways of working. Thus, to assist innovation, the market engagement conducted by the MODNL found that functional rather than technical specifications provided suppliers with more space to innovate and find new ways to meet the MODNL’s material needs.
We can learn here that when asking the market to work with new materials or in an innovative way, it is necessary to give them more lead-in and response time to consider and prepare non-traditional offers.
Moreover, it is important to take note that you should not introduce price ceilings based on existing prices, and costs, as expected on a pilot test, can constrain the development potential of new areas.
Example 5 — Combining Procurement Model For Sustainable Buildings
The South Moravian Region has over a million inhabitants and is the fourth-largest region in the Czech Republic. The landscape of the region is distinguished by its highlands as well as the Moravian Karst. The abundance of caves and gorges provides ideal conditions to treat respiratory diseases.
The regional government aims to build a new treatment facility for respiratory diseases near the town of Ostrov u Macochy. The procurement approach was set up to give the market the chance to show the best they can offer to create the building as aesthetically pleasing, energy-efficient, and a comfortable place for patients.
The process includes preliminary consultation and market dialogue to test the feasibility of the procedure and to provide a detailed description of the planned procurement process and requirements of the tenders.
Furthermore, the procurement procedure combined various methods to filter the bids. The tender itself was awarded using a combination of a competitive procedure with negotiation and an architectural design contest.
The preparation of the tender process started in April 2018 and the procurement commenced in April 2019 with a total contract value of $6 million.
Seven suppliers submitted their bids which were to be assessed by an expert independent evaluation committee that recommended the exclusion of one supplier due to flaws in its bid.
The remaining were then evaluated according to set criteria which are based on the reports of the expert examiners who examined in detail the values offered in the quality of technological and energy solution criteria.
The contract was awarded to the selected contractor in April 2020. Since then, the construction started in June 2021 and is expected to be done by the end of 2022.
The winning bidder offered numerous sustainable solutions including reusable components of the main construction and interior design layout that enables simple layout adjustments that may be done in the future. The successful bidder also committed to achieving a reduction in the annual consumption of non-renewable primary energy.
What Can We Learn From It?
We can learn here that preliminary market consultations are crucial when the contracting authority undertakes a new approach to procurement. Additionally, it is important to present the intentions and goals to potential suppliers, get feedback from the market, and find other information significant to prepare the procurement process.
All parties involved in the preparation of the actual procurement process were sent a request to identify the strengths and weaknesses of the procurement process they utilized.
The use of the BIM method leads to better execution and more efficient operation of the building. Furthermore, as the tender used numerous methods, it is significant to see the effectiveness of the DB approach as it can be an interesting and legitimate way for contractors to implement large-scale projects.
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