Audit for Tender in Supply of Scanners for a Large Grocery Chain

Task

To audit competition, assess results, study procurement process, and propose improvements. To provide recommendations on how to get a lower cost without a decrease in quality and increase in implementation time.

Client

Major Russian food retailer. The company operates several retail chains, including ‘corner stores’, supermarkets, and hypermarkets. Over 5,000 stores in total.

Type of service

Procurement function support

Period

April 2015

Case

In order to comply with the Russian Federation laws, the purchase of special scanners for the new excise label was required. IT-department initiated an open competition at a tender platform, received offers from potential suppliers, made a comparison and provided the decision to the tender committee. The tender committee head (CFO) was not sure that the solution recommended was in the interests of the company.

Purchase of special scanners was required
A tender for the scanners’ purchase was held and the suppliers were selected
The head of the tender committee doubted the decision

The Process

1. Data collection and analysis

We conducted a tender audit by several parameters – completeness of information provided by the suppliers, timing of data provision, delivery terms, requirements to suppliers. We assessed the scanners’ manufacturers and suppliers’ market in Russia and China. We verified calculations in the comparative table based on tender results.

We conducted the tender audit by several parameters
Performed assessment of scanners’ manufacturers and suppliers’ market
2. Works performed

We found some violations in the tender procedure – there was no transparency, there was a conflict of interests and the competition was limited. We noticed that the IT-department did not calculate the Total Cost of Ownership. We showed that the company would spend a lot of money and would not get the service of the desired level. We provided the recommendations to finalize technical specs and the competition.

Outcomes

Upon recommendations, the tender committee requested that the procurement department would perform the follow-up.

 

Other achievements on the project:

  • Transparent supplier selection process was developed
  • TCO approach was followed
  • The methodology for choosing an IT-supplier was developed

The savings amounted to 46% or 46 mln rubles

Customer Feedback

Head of the retail company tender committee

“Despite the fact that the tender committees are formed from the departments’ personnel, it is rather difficult to assess procurement efficiency in complex technical projects due to the lack of expertise. Our colleagues from PrECA helped us to look at procurement from a different angle, asked the initiators and procurement department the right questions and save mlns of rubles.”

Tools

Skills

  • Tasks and project management
  • Communications to stakeholders and suppliers
  • Strategic thinking
  • Handling procurement documentation
  • Collection, structuring and data analysis

Insights in market, category and functional area

  • Knowledge of the “IT equipment” category specifics
  • Own database of market rates by region
  • Knowledge of the suppliers’ market structure and the specifics of their work
  • Own database of more than 5,000 suppliers
  • Public supplier databases: 2GIS, SPARK

Procurement Methodology and Best Practices

  • Procurement optimization methodology by category: regulations, procedures, instructions
  • Document templates: RFI, RFP, technical specifications, contracts, surveys
  • Best practices applied at transnational companies
  • Consolidation of procurement volumes

IT tools

  • Sourcing automation software
  • Project management software
  • Macros and tables for data processing and analysis

Project stakeholders

Zelimkhan Suleymanov

Project Manager

Anatoliy Tsypkaikin

Business Process Consultant

Stakeholders about the project

Anatoliy Tsypkaikin

Business Process Consultant

“In our work, we often see that the companies compensate for the low competencies of procurement personnel by strict regulations and numerous levels of control, instead of working on the human potential development. However, in the long run, this approach does not work. If you want to have transparent procurement and prices in the market, then you will have to invest in the development of procurement function, or transfer procurement process to outsourcing."

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