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Select a category of spend from your organisation. Develop and discuss a plan using the knowledge gained from this programme which could form the basis of a formal commercial negotiation

Practitioner Corporate Award

Assessment Code: PIN

This assessment tests the learning outcomes and module content of the following modules:

Module: Driving Value through Procurement and Supply Module: Managing Expenditure with Suppliers

Module: Developing Contracts in Procurement and Supply Module: Sourcing Essentials

Module: Effective Negotiation in Procurement and Supply

Task

Select a category of spend from your organisation. Develop and discuss a plan using the knowledge gained from this programme which could form the basis of a formal commercial negotiation. Your assignment should include an explanation of the key facts, data and approaches that you will use in the negotiation.

Remember, the negotiation does not have to be just about price. Other considerations could include quality, delivery schedules, timing and amendments/variations etc.

Guidance for candidates

Your work should consist of 5,000 words. The integrative assessment requires candidates to use their knowledge gained from the previous four modules therefore, candidates will need to refer to the syllabus coverage in the following modules:

• Driving value through procurement and supply
• Managing expenditures with suppliers
• Developing contracts in procurement and supply
• Sourcing essentials
• Effective negotiation in procurement and supply

Your assignment should include the assignment title, your candidate number and word count on the front cover, followed by contents page, executive summary, conclusions, recommendations, references and a bibliography. Any source materials such as web sites, company reports, indices, market data, articles, journals or texts should be listed in your references or bibliography in accordance with a recognised referencing system. Your assignment submission should be word processed with a minimum font size 12pt and 1.5 or double line spacing. Refer to the Assignment Guidance document for more information.

Example Answer

1. Executive Summary

This report outlines a formal commercial negotiation plan for a selected category of spend within the organisation. Using knowledge from the modules covered in the Practitioner Corporate Award programme, the plan addresses multiple aspects of procurement, including cost, quality, delivery, and supplier relationship management. The aim is to drive value through effective negotiation strategies, maintaining a balance between cost-efficiency and sustainable supplier relationships.

2. Introduction

Procurement is a strategic function within any organisation, playing a crucial role in managing expenditures and securing value from suppliers. This assignment focuses on developing a commercial negotiation plan for a specific category of spend. The plan will draw from the principles and strategies taught in the modules and will cover not only price considerations but also other key factors such as quality, delivery schedules, and contract amendments.

3. Category of Spend Selection

The category selected for this negotiation is [Select a category, e.g., office supplies, IT services, raw materials, etc.]. This category represents a significant portion of the organisation’s procurement budget, making it a prime target for value optimisation through negotiation. The current spend on this category is approximately [insert value], with [insert number] suppliers involved.

4. Key Facts and Data Relevant to the Negotiation

To prepare for the negotiation, it is essential to gather and analyse key data, including:

• Historical Spend Data: Analysis of the last three years of expenditure in this category.
• Supplier Performance Metrics: Quality ratings, delivery reliability, and lead times.
• Market Data: Current market conditions, price trends, and competitor pricing.
• Supplier Financial Health: Creditworthiness and financial stability of key suppliers.
• Internal Stakeholder Input: Feedback from departments that rely on the supplies/services.

5. Strategic Approaches in Negotiation

A strategic approach to negotiation requires balancing several factors:

• Cost Savings: The primary goal is to achieve cost reductions without compromising quality.
• Supplier Relationship Management: Maintain positive relationships with suppliers to ensure long-term cooperation.
• Risk Management: Identify and mitigate potential risks, such as supply chain disruptions or quality issues.
• Value-Added Services: Explore opportunities for additional services or improvements in delivery schedules.

6. Procurement and Supply Considerations

Driving Value through Procurement

To drive value, the negotiation will focus on total cost of ownership (TCO), not just the purchase price. By examining lifecycle costs, including maintenance, repairs, and disposal, the organisation can make more informed decisions. Supplier performance incentives, such as bonuses for early delivery or penalties for late delivery, will also be introduced.

Managing Expenditures with Suppliers

Cost control is vital for financial sustainability. The negotiation will aim to fix prices for a longer-term contract, thereby reducing exposure to market price volatility. Additionally, leveraging volume discounts for bulk purchasing will be discussed.

Continued....