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Identifying Organizational Needs and Criteria

Chapter 6 focuses on identifying and specifying organizational needs, addressing key questions on how to determine and communicate these needs to suppliers. It outlines various need identification criteria, including strategic, traditional supply, and additional current criteria, as well as categorizing needs into resale, raw materials, parts, MRO, capital assets, services, and others. The chapter also discusses methods of describing needs, such as by brand, specification, or engineering drawing.

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9 views8 pages

Identifying Organizational Needs and Criteria

Chapter 6 focuses on identifying and specifying organizational needs, addressing key questions on how to determine and communicate these needs to suppliers. It outlines various need identification criteria, including strategic, traditional supply, and additional current criteria, as well as categorizing needs into resale, raw materials, parts, MRO, capital assets, services, and others. The chapter also discusses methods of describing needs, such as by brand, specification, or engineering drawing.

Uploaded by

Chung Huỳnh Phát
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 6

Need Identification and Specification

©McGraw-Hill Education. All rights reserved.


Key Questions
Addressed in Chapter 6
• How do we determine organizational needs?

• How do we translate and communicate these needs to (potential) suppliers?


Need Identification Criteria

• Strategic
• e.g., mission critical, total spend, risk reduction, access to new technology or new markets, assurance of supply in
tight markets, etc.

• Traditional supply criteria


• quality, quantity, delivery, price and service

• Additional current criteria


• financial, risk, environmental, innovation, regulatory compliance and transparency, social and political factors

©McGraw-Hill Education. All rights reserved. 3


Categories of Needs
Category Description

Resale Resellers comprise retailers, wholesalers,


distributors, agents, brokers and traders. What
they can resell covers the full range of the
remaining categories.
Raw and Semi- Most users of materials are converters, such as
Processed Materials factories, and this category includes
commodities, agricultural and industrial.
Parts, Components Assemblers use parts and components
and Packaging produced by their suppliers to create a finished
product. Parts and components may be
standard or special depending on the decision of
the designer of the finished product.

©McGraw-Hill Education. All rights reserved. 4


Categories of Needs
Category Description
MRO and SVP Every organization has MRO requirements and
SVP’s. The availability of MRO suppliers is critical to
maintain continued uninterrupted operation of the
office, factory, facility, etc. Because many MRO
requirements are relatively small in dollar value,
SVP’s are also included in this category. For SVP’s
assuring availability at minimum acquisition cost is a
challenge.
Capital Assets Any requirement that accountants classify as capital,
and, therefore, an investment, becomes a capital
item. Equipment, IT, real estate and construction are
included in this category. Capital items can be
depreciated, are often bought under a separate
budgetary allocation and may require special
financing arrangements.

©McGraw-Hill Education. All rights reserved. 5


Categories of Needs

Category Description
Services Services are intangible and nonmanufactured.
Every organization acquires a variety of services.
Other Anything not covered by the above categories
falls into this last one. Major requirements could
be energy and water. This category would also
include unusual and infrequent requirements,
probably better dealt with on an ad hoc or project
basis.

©McGraw-Hill Education. All rights reserved. 6


Opportunity to Affect Value

High

Opportunity
to affect
value

Low
1. 2. 3. 4. 5.
Need Description Potential Selection Receipt
recognition suppliers
Acquisition Process Steps
©McGraw-Hill Education. All rights reserved. 7
Methods of Description

• By brand
• “Or Equal”
• By specification
• Physical or chemical characteristics
• Material or method of manufacture
• Performance
• By engineering drawing
• By miscellaneous methods
• Market grades
• Sample
• By a combination of two or more methods

©McGraw-Hill Education. All rights reserved. 8

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