Question

The nature of the source selection process, the techniques for getting information, the procedures used in evaluation, and the decision-making methods vary from procurement to procurement, buyer to buyer, and industry to industry. Briefly describe the steps in the source selection from the buyer's perspective? Provide an example of how the source selection process may vary?

Answer 1

The steps involved in source selection from a buyer’s perspective are:

1. Procurement planning- The buyer needs to first decide what goods needs to be procured. The buyer needs to first assess which goods or services needs to be performed or produced in-house or that needs to be outsourced. Market research helps the buyer to decide on the procurement planning.
2. Solicitation planning- In the process of planning, the buyer should perform the following activities:

          -Market research

          -Define requirements or deliverables

          - Identify potential sources to deliver the required products

          - Identify purchase risks such as uncertainty

          - Develop standards for performance

          - Develop incentives and reward programs

          - Choose appropriate method for source evaluation, selection and negotiation to form contracts.

3. Solicitation Preparation- Buyer now prepares himself to request for solicitations from the sellers. Such solicitations are Request for Proposals (RFP), Request for Quotations (RFQ), Request for tenders (RFT), offering to bid, etc.
4. Planning for source selection- Once the proposals have been received, the buyer selects the procedures and criteria to evaluate the seller (sourcing) which is a highly important decision for the business. The success of a business purely lies in source selection planning.
5. Evaluation of the selected source- Sources are evaluated based on their RFQ, RFP, bidding, etc based on the procedures as decided in step 4. The selection committee selects by providing weightage to the potential sources.
6. Negotiation- Once the potential sources have been selected, they are negotiated for the terms and conditions and the contracts are formed.
7. Administration of contracts- once the contracts have been formed, the next step is to evaluate them to ensure that the terms and conditions are followed.
8. Closeout/Termination- Once the contractual terms have been performed, they must be evaluated for the final legal adherence to closeout the contract so that the final details are closed out.

Source selection process vary based on the business requirements. For example, the publishing company (my workplace) outsourced majority of its administrative tasks to their suppliers who print the journals. This was done with the prime aim that the Managerial position is more of a supervisory position rather than doing the Journal work. However, the competitors had made an in-house administrative team to ensure that their administrative tasks are performed as their requirement, cut cost and ensure that the managers supervise them to comply with the SLA (service level agreements).