Procurement

Advanced Project Logistics and
Procurement Management
Course Outline
Chapter one: Introduction to logistics and contract management

1) What is and why logistics?
2) Logistics systems and supply chain
3) Understanding contract and contract management

Course Outline
• Chapter two: Project procurement management

1.Plan procurements
2.Conduct procurements
3.Administer procurements
4.Close procurements
Course Outline
•Chapter three: Identifying and evaluating suppliers

1) Sourcing strategies for goods and services
2) Key project sourcing structures
3) Evaluating & selecting potential suppliers
Course Outline
Chapter four: Bid management

1) Subcontracting procurement
2) Types of bid
3) Bid management process
4) Negotiation, its types, and approaches
Course Outline
Chapter four: Bid management

1) Subcontracting procurement
2) Types of bid
3) Bid management process
4) Negotiation, its types, and approaches
Course Outline
Chapter four: Management of materials

1) Transportation of goods
2) Warehouse and inventory management
Course Objectives
 Understand the concept of logistics and contract in line with their activities,
 Demonstrate the process and elements embedded in project procurement

management,
 Identify and evaluate suppliers,
 Design appropriate strategy to manage materials, and
 Contrast the project logistics and contract management with overall

organizational policy and procedures.
Mode Of Delivery
• Lectures,
• seminars,
• case studies,
• debates and discussions,
• case analysis, and presentation.

Assessment Scheme
• Quiz and/or class activities 10%
• Individual Assignment 20%
• Group Assignment 20%
• Final examination 50%
• TOTAL 100%
Required References
• Burrows, R. P. (2012). The Market-Driven Supply Chain: A Revolutionary Model for Sales and
Operations Planning in the New On-Demand Economy. New York:AMACOM.
• CIPS. (2019). Contract Management Guide.
• Gattorna, J. (2016). Gower Handbook of Supply Chain Management. New York: Gower Publishing.
• Kildow, B.A. (2011). A Supply Chain Management Guide to Business Continuity. New York:
AMACOM.
• Mitchell, J.S. (2014). Operational Excellence: Journey to Creating Sustainable Value. New Jersey:
Wiley & Sons, Inc.
Required References
• Musiolik, T. (2012). The Global Player: How to Become the Logistics Company for the World.
Hamburg: Diplomica Verlag GmbH.
• O’Brien, J. (2015). Supplier Relationship Management: Unlocking the Hidden Value in Your Supply
Base. Great Britain and United Sates of America: Kogan Page Limited.
• Presutti, W.D., & Mawhinney, J. (2013). Understanding the Dynamics of the Value Chain. New York:
Business Expert Press, LLC.
• Temesgen, B., & Dargie, A. (2016). Project Logistics and Contract Administration. Addis Ababa:
Addis Ababa University School of Commerce.
• USAID. (2011). The Logistics Handbook: A Practical Guide for the Supply Chain Management of
Health Commodities.Arlington: USAID.
Chapter One: Introduction to Project Logistics
• Logistic is the function that enables the flow of materials from suppliers
into an organization through different operations
• It is derived from the Greek word “logistikos’ which means ‘to reason
logically’ .
• It is basically consists of all operations required for goods(both tangible

and intangible) to be made available in markets or at specific
destinations.
Logistics …
• According to Council of Logistic Management (USA) “Logistics is the
process of planning, implementing and controlling the efficient, effective
flow and storage of goods, services and related information from the
point of origin to the point of consumption for the purpose of
conforming the customer requirements”.
• Therefore, the essence of logistics is the flow of material goods and

services from their place of origin to the final customer
(consumer).
Logistics …
• Definition of logistics is not unified, although it might be indeed, in current

environment, a commonly acknowledged one.
The American Council of Logistics Management;
• Logistics management is the process of planning, implementing, and

controlling the efficient, & effective flow and storage of goods,
services, and related information from point of origin to point of
consumption for the purpose of conforming to customer requirements.
Logistics …
The European Logistics Association has adopted the definition that Logistics is a
concept involving the organization, planning, control and execution of the flow of
goods form their places of manufacturing (purchase), through the sphere of
production and distribution, to the final consumer, which aims to satisfy the demands of the
market with minimal commitment and capital.
 H. Ch. Pohl define that logistics management comprises all the steps leading to
planning, supervision, execution and control of the time-and-space transformation of goods
and the related transformation in quantity and range of assortment, the manipulation
properties and the degree of logistics determination of goods.
Logistics Activities
• Logistics is responsible for the movement and storage of material as they
move through the supply chain.
• When the material moving through an organization one can see the following
activities are normally included in logistics.
Activities
• Transportation
• Inventory Management
• Information flows and order processing
• Warehousing
• Material Handling 17
Project Logistics
• A project logistics can be defined as a complex, special and unique sets
of activities which can be described by technical and economic
parameters and is determined by cost, time, and scope .
• Project logistics is a very complex field and covers a great many

aspects.
• It involves making sure that the hundreds of thousands of different

items are available when required.
Project Logistics …
• Controlling of the project logistics is process of measuring progress
toward an objective, evaluating what remains to be done, and taking
the necessary corrective tasks to achieve or exceed the objectives of
the project logistics.
Logistic Management
• Is a process of physical flow of goods/services and accompanying
information;
• Is a concept of integrated management of goods/services and

information flow;
• Manage resources include physical items, such as materials, equipment,

and liquids, as well as abstract items, such as time, information, particles,
and energy
Project Logistics …
• An efficient and effective implementation of logistics are focusing on the
following activities :
• Transport; (air, road, sea, rail , pipeline)
• Warehousing : (where materials received, stored, and shipping)
• Packaging;
• Material handling ;
• Inventory ;
Elements of logistics
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Logistics Strategic Decisions
• Depending on the type of business, logistics decision groupings are
diverse.
• However, all of these decision categorizations comprise the following

three basic types of strategic decisions:
1. Customer service
2. Logistics network design
3. Outsourcing versus vertical integration

1.Customer service
• Customer service is the first and foremost class of logistics strategic
decisions.
• As defined earlier, logistics involves delivering the right product to the right
customer at the right place, at the right time, and with the right cost and
quality.
• Identifying the customer’s need is the primary step in establishing a logistics
system.
• The purpose of customer service decision is to provide service need on time,
in full, and error free.
2.Logistics network design
• To achieve corporate strategies, a company must ensure that its structure and
flow of materials and information are appropriate.
• Therefore, logistics network (or, in some references, logistics channel) design

is divided into two groups:
• The physical facility network and the communication and information

network
• These decisions are critical because the largest part of invested capital
belongs to them
3.Outsourcing versus vertical integration
• Decisions related to outsourcing bring greater flexibility, lower

investment risk, improved cash flow, and lower potential labor costs.
• Outsourcing decisions determine which functions should be outsourced,

as well as the nature and extent of outsourcing agreements.
• Decisions on vertical integration (also known as insourcing) have

higher control over inputs, higher visibility over the process, and so on.
Supply Chain Management
Fundamental Concepts
A supply chain is a dynamic concept that involves the constant flow of
resources (products, information, funds) amongst all the participants
along the chain
It is essentially a system of interconnecting chains i.e. a supply network

or a supply web
Supply Chain …
The supply chain is a network of manufacturers and service providers
who cooperate with one another in order to process and relocate
goods ‒ from the raw material stage to the end-user level.
All these entities are linked by the flow of goods, information and cash
Supply chain ‒ a process ‒ a sequence of events in the relocation of
goods that increases their value.
Supply Chain …
Supply chain is a network of connected and interdependent
organizations that cooperate and mutually control, manage and improve
the flow of goods and information from suppliers to the end users.
Supply chain is a physical network, which starts with the supplier and
ends with the final customer.
It involves aspects associated with product development, purchasing,
production, real distribution and after-sales services, as well as, deliveries
carried out by external bidders.
Supply Chain …
SC - Two or more parties linked by a flow of resources – typically material,

information, and money – that ultimately fulfill a customer request.
The Four Interrelated Flows in SCM
1. Product & Service Flows:

• The value-adding flow, as products & services progress along the supply
chain from point of origin to point of final use or consumption.
2. Information Flows:
• The bi-directional flows of information throughout the chain –
particularly on customer demand which “pulls” the supply chain, but also
on supply conditions & eventual disruptions
Interrelated Flows in SCM …
3. Funds Flows:
• The flows of funds, mainly upstream (payments for goods & services
received) but also in some cases downstream.
• 4. Expertise & Technology Flows:

• Sharing in areas such as IT systems, SCM expertise, product design,
marketing, developing joint SC performance indicators, etc
Decision areas in supply chain management
• Effective SC management requires good decision making in a wide

variety of areas.
• In supply chain management there are four decision areas:
1. Location decision
• The location of production facilities, stocking points, and sourcing points
is the first step in creating a supply chain
• A facility location ( location to raw material, location to customers….)
Decision areas in SCM …
2. production decision:
The strategic decision in choosing what products to produce and which
plants to produce
It also decision on how product flow among plants, operation of all
production, like quality, cost, time and etc.
3. Inventory decision :
• Decision on how inventories are managed: raw material, semi finished
good, and finished goods .
4. Distribution decision
• Decision regards how produced materials are distributed to the users

- Mode of transportation, (safety, fastest….)
 Effective supply chain management strategic decision have many
potential benefits:
 Improved customer service

 Lower inventory & higher inventory turnover
 Higher productivity
 Improved ROI and Increased market share

Green Logistics and Supply Chain
Green logistics refers to a logistics form which plans and implements
green transport, green storage, green packaging, green circulation
processing, green recovery, and other activities via advanced logistics
technology.
It aims to reduce environmental pollution and resource consumption
arising from logistics activity so as to realize a “win-win” consequence in
logistics development and eco-environmental conservation.
Green Logistics
• A typical field in green logistics and supply chain management is reverse
logistics, sometimes called closed-loop supply chains, in which there are
reverse flows of used products (postconsumer) back to manufacturers.
The Reprocessing Flow

• The Reprocessing Flow is a critical part of “Greening the Supply Chain”
• The US Environmental Protection Agency (EPA) originally came up with the
concept of the “4Rs of waste management”: Reduce, Reuse, Reallocate &
Recycle. However, recently remanufacturing is added.
Greening the Supply Chain:
The 5 R’s of Reprocessing
REDUCE: The Reduction in use of materials,
e.g. reduce solid waste, reduce packaging, etc.
REUSE: The Re-use of materials,

e.g. returnable boxes, reusable packaging
RE-ALLOCATE: Extending the use of waste,

e.g. by - products used for another purpose
RECYCLE: Collection and separation of material,

e.g. waste paper, plastics, aluminum beverage cans
REMANUFACTURE: Resource regeneration, reusing

e.g. reconditioning single-use cameras, printer cartridges
Supply chain challenges
Potential lack of transparency. Having transparency enables stakeholders
to understand the status of the supply chain.
Waste due to inadequate production cycle. Businesses that, inaccurately

gauge their supply demand or capabilities may end up with an overstocked
inventory.
Lost or delayed goods. Goods that go missing at any point in the chain
ultimately delay the whole process and can impact customers negatively.
Supply chain challenges …
Increasing customer expectations. New technology and businesses
raise customer expectations, which can be difficult to manage, and
impossible to meet if not properly managed.
Sudden changes in the supply chain. External factors can cause

unforeseen changes in a supply chain, so best practice is to prepare for
the unexpected and be able to pivot if need be.
Contract Management
• A contract is a mutually binding legal relationship obligating the seller to
furnish the supplies or services and the buyer to pay for them.
The contract is the mechanism by which:
The project organization is created;
Project managers are employed;
Goods and services are procured;
The commercial nature of the project process is defined.

Contract Management
• Contract Management: refers to actions taken to ensure that both the client and the
Contractor comply with the requirements of the Contract.
Contract Management includes :
 Contract development and close‐out,
 Contract Monitoring, evaluation of deliverables, invoice review, payment approval,
progress tracking, regular status meetings, dispute resolution and “day to day”
management.
Contents of a contract
• Name and address of both the parties,
• Subject of the agreement,
• Deadlines for the different stages of fulfillment of the agreement,
• Financial aspects and other necessary conditions such as violation of

contract etc.
Approaches to contracting
• Contracting total responsibility for one contractor
• Dividing the project and contracting it to suitable suppliers and

contractors.
• Accomplish a portion of the work yourself and contract out

the balance to one or more agencies.
Group Assignment (40%)
General Instruction
• Assignment due date:August, 30/2023
• Writing style: 12 font size font style:Times Roman,1.5 spacing
• Assignment submission format: Soft copy
Visit two organization working on different projects and write an assessment report not less than 10
and more than 20 pages on :
 Type of project contact
 Type of contract price
 Their Procurement management
 Their Inventory management
 How to mange dispute resolution
 Main challenges encountered and your advice on how to cope up with the challenges .
CHAPTER- TWO
THE PROJECT PROCUREMENT

PROCESS
1
Introduction
Project Procurement Process [Project Procurement Management Process] is
;
 a method for establishing relationships between a project’s purchasing

department and external suppliers to order, receive, review and approve all
the procurement items necessary for project implementation.
 The supplier relationships are managed on a contractual basis.
 The process aims to ensure timely delivery of the purchased items which are
selected and acquired according to the specifications and requirements set
up by the purchasing department and approved by the project manager.
2
Project Procurement Management Processes
 Project procurement management: Acquiring goods
and services for a project from outside the performing
organization
 Processes include:
 Planning procurement management
 Conducting procurements
 Contract administration
 Closing procurements
3
Purchasing/procurement
 the next step in material planning and management system is
the process of procurement of the planned materials.
 Should be done economically and on time to maintain material
supplies and increase final profits by lowering expenses.
 Most of the states and other organization have laid down
detailed set of rules and regulations regarding the procedure of
ordering materials.
 Organization like “directorate general of supplies and disposals
“( DGSD) play a crucial role in purchase which involves in
4
5
What Is Project Procurement Management?
•Project procurement includes the processes required to
acquire goods and services to attain project scope from out
side the performing organization.
•It is the act of obtaining goods, supplies, and/or services.
•Project procurement management includes three primary
processes. These are:
1. Plan procurements
2. Conduct procurements
3. Administer (or control) procurements
6
PROCUREMENT CYCLE
Review
selection
Receipt and Determine needed
inspection quantities
Monitor order Reconcile needs and

status funds
Specify contract Choose procurement

terms method
Select
suppliers
7
OBJECTIVES OF PROCUREMENT SYSTEM:
• Acquire needed supplies as inexpensively as possible
• Obtain high quality supplies
• Assure prompt and dependable delivery
• Distribute the procurement workload to avoid period of

idleness and overwork
• Optimize inventory management through scientific

procurement procedures.
9
Project procurement categories
Not all project procurements are created equal.
Different project procurement needs different management based on their
generic categories
 Managing project procurements differently according to their complexity,
their risks, their unique characteristics.
 In order to properly manage the procurements items some firms have
found it beneficial to categorize their project procurement into different.
 This helps management better focus their attention on the unique
problems and issue peculiar to each categories of procurement.
 Project procurements would create three generic categories and two
special relationships as follows:
10
1. Major (high -risks ) complexity procurements
 the purchase of something which does not exist, and unique specification.
 Their nature always represent high risk to any project technical, quality, costs
and schedule.
 Such purchases are for newly developed items, something that doesn’t already
exist.
 Such procurements will often result in long term relationships being created
between buyer and suppliers
Examples
The development of an new software package, new computer
The architectural design of a new commercial center
Information technology service ,
A development of new airplane
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2. Minor (low-risks) complexity procurement
 Represent large monetary values, but the commodities exist and
will conform to the seller’s existing product speciation.
 Early Identification of these items is important in order to properly

schedule lead-times for each item and to budget the necessary
funds for them.
Some examples
Purchase of existing automobiles / radar system / high value
software / computers
large electrical generators
12
3. Routine buy of commercial off the self (COTS) commodities or
purchased services.
 Consider as routine but nevertheless must arrive in the time to
support the project schedule
 It involves the purchase of substantial amounts of materials that are
often commercially available as “off-the-shelf” articles, or routine
services.
 The early identification of these procurement is typically not vital to
the success of the project.
Some examples are:
 Office supplies and equipment: existing computers, printers, scanners
 Outsourced services, such as cafeteria, security, and accounting
13
Special procurements:
I. done under corporate teaming arrangements.
Team agreement between the top management of the
companies.
II. to other segments of the project’s company, typically called
interdivisional work
• Inter divisional works are the procurements made within
single company by one operating unit with another operating
unity
This type of procurement sometimes result from having a unique capacity.
These both special categories have been found to represent unique
management challenges in the successful competition of any project
14
Project Procurement Management Processes
15
1. Procurement planning ;
I keep six Honest serving men (they taught me all I knew) Their names are What , Why ,
When, How, Where and Who (Rudyard Kipling, 1902)
Plans are worthless, but planning is every thing (D.Eisenhower, 1957
Without an adequate plan…. Success will be a matter of luck (Russel D. Archibald, 1992)
Project procurements planning are too critical to the success of the project
It is a simple single page Bill of materials, describing:
the items to be bought,
the quantities, required and the need dates to support the project master
schedule.
There are three dimensions of the critical to successful project management;
these three dimensions are;
 The scope,
 the schedule and
 the budget.
16
a. The definition of scope: deciding the “what” the project
will be procure
The definition of ‘what ‘will be procured by the project, and then
preparing plan of execution for these items can be one of the most
important of management a project.
17
The project fully defined typically with use of a work Breakdown Structure (WBS)
a determination must then be made as to who will perform the work.
A work breakdown structure (WBS) is a project management tool that

takes a step-by-step approach to complete large projects with several
moving pieces. By breaking down the project into smaller components, a WBS
can integrate scope, cost and deliverables into a single tool.
 Under this phase what types of project procurement categories should buy
will be decided (major complexity, minor complexity and routine
procurement, two special procurement (Corporate teaming and
interdivisional purchasing) .
18
.
 Identify the responsible buyer, procurement manager, or contract officer by

name to start preparation of the model containing all the appropriate terms
and conditions and special provisions.
 WBS will identified who are the potential sellers of these products or
services,
 What type of contractual arrangement would best for the project and
minimizing its risk?
19
b. Scheduling; deciding “when” each procurement must happe
 The other critical issue for any procurement plan is to decide “when” each
procurement must happen
 A project master schedule should list the delivery date of each procurement.
(like A,B,C )
 The identification of contract award dates is critical to start the management
of the procurements.
 Each procurement should be award at a time, should clearly define the award
process on the master schedule
 Determine the late delivery and it impact on the success of the project
 The sellers required performance lead time for each procurement and the
contract award dates.
 Legal terms and conditions
20
Scheduling: deciding when each buy must be Awarded
21
c. Budgeting :estimating how much each procurement
will cost
•At the start of each new project every task, every

major component, every purchased item will get a
budget
•Cost items are typically budgeted in broad, bulk

categories.
22
Budgeting :estimating how much each procurement will cost
Five methods of budgeting procurement
23
2. Conducting Procurements (Excuting)
 Deciding whom to ask to do the work

 Sending appropriate documentation to potential sellers
 Obtaining proposals or bids
 Selecting a seller
 Awarding a contract
 Project procurement managers may also make
payments for products and services at this time.
24
 Revised the procurement negotiations that will the final
contracts to meet the project needs
 a purchase order to document the price, quantity,
delivery window and terms of payment of the
goods/services you order.
 Selecting bidders based on d/t criteria:
 project can advertise to procure goods and
services in several ways:
 Approaching the preferred vendor
 Approaching several potential vendors
 Advertising to anyone interested
25
Selecting bidders
Projects often do an initial evaluation of all proposals and

bids and then develop a short list of potential sellers for
further evaluation.
26
3. Controlling procurement (Monitoring and
controlling)
Once contracts become active,
procurement control and management are important parts of
maintaining partnerships with vendors and ensuring the services.
 Controlling procurement often includes:

 Evaluating regular internal status updates
 Reviewing agreements
 Reviewing progress and performance updates from sellers
 Conducting inspections and audits
 Assessing work orders
 Issuing additional payment as necessary
27
Suggestions for Change Control in Contracts
• Evaluation of any change should include an impact

analysis. How will the change affect the scope, time, cost,
and quality of the goods or services being provided?
• Changes must be documented in writing.

• Project team members should also document all
important meetings and telephone phone calls
28
4. Closing procurement
Closing procurement involves all necessary steps in
ending a partnership or contract.
The procurement team:
determine if all work was completed correctly and
satisfactorily
 Update records to reflect final results
 Confirms vendor has fulfilled the terms of the original
contract
 Archive information for future use
29
 Procurement audits identify lessons learned in the
procurement process
 Negotiated settlements help close contracts more

smoothly
 A records management system provides the ability to

easily organize, find, and archive procurement-related
documents
30
E-procurement of Project types and their procurement needs
What is e-procurement?
Electronic procurement, also known as e-procurement or supplier
exchange,
It is the process of requisitioning, ordering and purchasing goods and
services online.
e-procurement utilizes a supplier's closed system and is only available
to registered users.
It facilitates interactions between preferred suppliers and customers
through bids, purchase orders and invoices.
Today, e-procurement involves everything from supplier evaluation and
selection to contract management, electronic orders and payments.
E-procurement uses a web interface or some other kind of networked
system that connects suppliers and customers.
31
E-procurement software
 E-procurement software facilitates the e-procurement process.
 It also enables procurement staff to automate various activities,
functions and procedures, including policies, contracts and vendor
relationships.
 Although available functions and features vary among vendors, the
software's biggest advantage is that it streamlines the procurement
process and eliminates manual or paper-based activities.
32
E-procurement software
 systems provide tools that allow procurement managers to customize
the procurement experience.
 They can also:
 determine which items will be available to which users;
 control who can view the budget information;
 control who can approve purchase requisitions; and
 control who can view and pay invoices.
 Many e-procurement platforms can be accessed over mobile devices
like smartphones and tablets.
33
What are the benefits of e-procurement?
 E-procurement helps automate the procurement process.
 Centralized transaction tracking, simplified reporting and contract compliance ,
reduce delivery times and shorten procurement cycles.
 Reduce the overhead cost for procurement teams, optimize performance,
increase process efficiency and achieve cost savings.
 Access to a larger selection of products and services to meet their specific
needs.
 Increases process transparency and accountability and enables better control
over the procurement function.
34
35
Chapter Three
Identifying and
evaluating suppliers
Sourcing strategies for goods and services
Procurement policy
 The term policy includes all the directives, both explicit and
implied, that designate the aims and ends of an organization and
the appropriate means used in their accomplishment.
 Policy refers to the set of purposes, principles, and rules of action
that guide an organization.
 Rules of action refer to standard operating procedures along with
any rules and regulations.
 Although, policies are usually documented in writing, unwritten
or informal policies can also exist.
 Informal policies are understood over time and eventually
become part of an organization’s culture.
23-Oct-23 2
Cont.…
• Understanding policies and procedures is essential for

understanding how organizations operate and work.
• Policy is based on the idea that guidelines are
documented and applicable to all the internal and
external relations of an organization.
• A policy prescribes methods of accomplishment in
terms broad enough for decision makers to exercise
option while allowing employees to render judgment
on an issue.
• Well formulated policies and procedures support
efficient, effective, and consistent project procurement
operations.
23-Oct-23 3
Con…
• On the other hand, policies and procedures that are
out of date, require unnecessary actions, or do not
address current issues or topics will not support
effective purchasing operations.
• As projects become expand their global sourcing
activity, they are increasingly revisiting their
procurement policies and procedures, to ensure that
they are keeping up with the rapid set of changes
their professional associates are facing in their work
lives.
23-Oct-23 4
Cont.…
Roles for a purchasing manager that relate to
the development of policy are:
• Generating alternative solutions to procurement
problems,
• Protecting the cost structure of the organization,
• Minimizing purchasing costs,
• Assuring long-range sources of supply, and
• Maintaining good relationships with suppliers.
23-Oct-23 6
Strategic Sourcing
• Sourcing decisions and purchasing activities serve to link
a company with its supply chain partners.
• Sourcing decisions- High level, often strategic decisions
regarding which products or services will be provided
internally and which will be provided by external supply-
chain partners.
• It determine what will be provided by supply chain
partners.
– In-sourcing: the use of resources within the firm to provide
products or services.
– Outsourcing: The use of supply chain partners to provide
products or services.
23-Oct-23 7
Con….
• The definition of sourcing strategy (Weele, 2009:
10):
“Identifies for a certain category from how many
suppliers to buy, what type of relationship to follow,
contract duration, type of contract to negotiate for, and
whether to source locally, regionally or globally.”
23-Oct-23 8
Con….
• According to (Baily and Farmer, 1982 in Hines, 1995:19):
“If a buyer gives all his business to one supplier,
Does he get a better and more economic service than when he
splits the order between two or more?
Does he lose his competitive position by, in effect, creating a
monopolistic source?
If, on the other hand, he uses more than one supplier is he
dissipating his purchasing power, or is he protecting himself against
shortage, fire, and strike?”
23-Oct-23 9
Con…
Strategic Sourcing Primary Objectives
• Reduce the costs of goods and services / Capture
resulting savings
• Create contractual alliances with suppliers to
support the long-term goals of the organization.
• Maintain and improve product quality
• Improve business functions
• Optimize the total purchasing process
23-Oct-23 11
Key project Sourcing structure
• There are four primary sourcing structures that can
be used (with some amount of variation): single,
multiple, delegated and parallel.
1.Single sourcing: This structure characterizes a buyer
with only one source of supply for a particular good or
service.
23-Oct-23 12
Con..
2.Multiple sourcing: Multiple sourcing describes securing

multiple supply sources to supply the product or service. In
this model competition is based on price, with many
suppliers guaranteeing a market price for the good or
service.
23-Oct-23 13
Con..
3. Delegated sourcing strategy: This sourcing configuration
involves making one supplier responsible for the delivery of an entire
sub-assembly as opposed to an individual part.
 The customer delegates authority to a key supplier who becomes
known as a first-tier supplier.
 The customer’s objective is to work with one supplier and the
supplier in turn works with all other suppliers that provide parts to
complete the product.
23-Oct-23 14
The Strategic Sourcing Plan
• Strategic souring plan consists of how to:
–discover,
–evaluate,
–select,
–develop and
–manage a viable supplier base.
23-Oct-23 15
A. Discover :
• Finding Information sources that are
helpful to a supply manager in
establishing potential suppliers.
Supplier Web Sites
Supplier Catalogs:
Trade Journals:
Professional Organizations
23-Oct-23 16
B. Evaluating Potential Suppliers
Approach to Evaluate Suppliers:
Supplier Surveys: A survey should provide sufficient
knowledge of the supplier to make a decision to include
or exclude the firm from further considerations.
Financial condition Analysis: preliminary investigation
of a potential supplier’s financial condition often can
avoid the expense of further study. A qualified supply
manager or professional from the finance department
conduct these investigation.
Third Party Evaluators: Independent third-party firms
can be hired to conduct many of the analyses given in
this section.
23-Oct-23 17
Con…
Evaluation Conference: For an extremely critical purchase, a
supplier evaluation conference is frequently held at the supply
manager’s plant to discuss the purchase.
Facility Visits: By visiting a supplier’s facility, the sourcing
team can obtain first-hand information concerning the
adequacy of the firm’s technological capabilities,
manufacturing or distribution capabilities, and its
management’s technical know-how and orientation.
Quality Capability Analysis: The firm’s quality capability is a
critical factor to examine. If the prospective supplier’s process
capability is less than the buying firm’s incoming quality
requirements, the supplier typically is not worthy of further
investigation
23-Oct-23 18
C. Selecting Suppliers
After one or more potential suppliers have passed the
evaluation process, the selection process must begin. The
supply manager or the souring team will now invite
potential suppliers to submit bids or proposals.
A decision must be made as to whether to use competitive
bidding or negotiation (or combination of the two) as the
basis for source selection.
Strategic supplier selection involves four main stages:
1. Initial supplier qualification;
2. Agree measurement criteria;
3. Obtain relevant information;
4. Make selection
23-Oct-23 19
4.Developing Suppliers
 Not all suppliers need development, but to reach the
lofty (proud) status of a world-class collaborative
relationship, development is needed.
 Even suppliers recognized as the “best of the best”
require investment on the part of the buying firm to
realize the full benefit of the collaborative
relationship.
23-Oct-23 20
4.Developing Suppliers
Process map for deploying a supplier development
initiative.
• Identify Critical Commodities for Development
• Identify Critical Suppliers for Development
• Form Cross-Functional Development Team
• Meet with Supplier’s Top Management Team
• Identify Opportunities and Probability for Improvement
• Define Key Metrics and Cost-Sharing Mechanisms
• Reach Agreement on Key Projects and Joint Resource
Requirements
• Monitor Status of Projects and Modify Strategies as
Appropriate
23-Oct-23 21
Con..
• Exercise
Discuss the similarity and differences of the
concepts of Procurement , Purchasing and
sourcing
23-Oct-23 22
CHAPTER FOUR
TRENDER AND CONTRACT

MANAGEMENT
23-Oct-23 by Tolossa Fufa (PhD) 1

Introduction
• Tender Management- Introduction
– What is tendering?
– The functions of tender and what tender specialists do?
– Types of tender
– Tender notice and record management
• Contract Management- Introduction
– Contract management
– Contract types
– Contract Risk
– Tender Vs contract
– Procurement team arrangement

Tender Management- introduction
 What is tendering ?
 Tendering is the process by which a project (who is in
need of goods/services) invites other parties to
submit a proposal or bid to provide these
goods/services.
 This invitation is formally referred to as a Request for
Tender (RFT).

Tender ….
• The tender documents contains
 the bill of quantities (BOQ),
 specifications of the works to be carried out,
 time frame for the completion of the work,
 conditions of the contract and plans and drawings.

Types of tender
1. Open (public) tender:
 Open to any suppliers who fulfill the requirement
 to select a seller to the works on the basis of price and
quality.
 It is main tendering procedures employed by privet and
government
 Allow any one to submit a tender
 Allow for greater competitions among suppliers

2. Selective tender
 Only allows suppliers to submit tenders by invitation.
 is a pre-selected list of possible suppliers and is
prepared based on a known track record in delivering
projects of a particular scope.
 Select tendering may be appropriate for specialist or
complex procurement.
 This type of tendering client / buyer greater confidence

3. Sole/single tender
 is with a single supplier and may be appropriate for
highly specialist /complex material where there is only
one supplier available.
 It is Tender without undertaking a competitive exercise.

Tender process
1. Tender advertisement/ Notice
A tender notice should be advertised in newspapers(
national or international).
A tender notice should include:
 title of the project
 description of the scope of works
 location, date, and time to obtain the tender documents
 location, date and time for submission of tender

Tender Opening And Evaluation Process
• There are a number of bases upon which a preferred
bidder can be identified to ensure value for money is
obtained such as:
– lowest price
– Quality
– experience and best understanding of the requirements of
the work involved.
Usually a decision will be based on some combination of the
above.

Award Tender
An evaluation team will look over each tender
and suggest which tender offers the most
value for money.
The tendering authority will contact successful
the winner purchaser.
• Following the award of the contract the
unsuccessful tenderers must be notified in
writing.

what tender specialists do?
• The tender specialist will ensure contract
compliance for procurement and supplier
contracts. Responsibilities include:
• Monitors the tender submission process for
formatting, completeness, consistency, and
compliance.
• Assists in the management of data related to
the tendering process

Contract
• A contract is a mutually binding agreement that
obligates the seller to provide the specified products or
services and obligates the buyer to pay for them
– Contracts can clarify responsibilities and sharpen focus on
key deliverables of a project
– Because contracts are legally binding, there is more
accountability for delivering the work as stated in the
contract

Contract Management
• Contract management or contract lifecycle management
(CLM) is the process of managing contracts, from the creation
through to execution, and eventually termination or renewal
of the contract.
• Key activities involved in contract management include
contract drafting and clause negotiation, performance analysis
to maximize operational and financial performance and risk
mitigation, both financial and reputational.

Types of Contracts:
– Fixed Price (or lump sum)
– Cost Reimbursable
– Time and Material
– Unit Price

1. Fixed price contract
• A contract under which
a principal (customer or owner) agrees
to pay a contractor a pacified amount for
completing work without requiring a cost
breakdown.
• In such cases, the buyer provides a detailed
description of the final outcome, including product
dimensions, expected timeframes, material
specifications, and more.

Fixed price contract
• This type of contract appropriate in situations where
the buyer:
clearly defined scope of work.
know exactly what want to buy
describe it in precise detail and
not to later change the requirements.
• Both parties to the contract must have equal
understanding as to what is procured.
• So this type of contract needs less administration and
management involvement

2. Cost Reimbursable (cost-plus) Contract
• Buyers pay for the cost of the work plus a fixed percentage
charged by the seller for providing the goods and services.
• Sellers charge the buyers for the actual cost of any materials,
equipment, labor, and overhead involved in running the
project.
• To make a profit, sellers tack on an extra fee based on the

terms of the contract.
• Some sellers prefer an incentive payment option over a fixed

percentage.

3. Time and Material
• A time and materials contract is great for buyers who
don't necessarily know what they want and when
they begin their project.
• Sellers use time and materials contracts when it's
difficult to determine the amount of time they need
to spend on the project and the types of materials
required to complete the project.

Cont’d….
• With this type of contract, sellers charge for the cost
of any materials they end up using plus an hourly or
daily wage.
• All rates, including any markup charges on materials
and wages, are included in the terms of the contract.
• Once the contract is finalized and accepted, these
rates stay in place for the duration of the contract

4. Unit Price Contract
• Is Contract establishes the basis for payment as a Cost
per unit.
• Unit Price Contracts are normally Bid based upon an
estimated quantity of work or units for each specified
Bid item.
• Each unit price includes all labor, material, equipment,
overhead, and profit attributable to that scope of work.

Tender Vs contract
• What is the difference between a tender and a contract?
• A tender is an offer in writing to execute the some specified

works or to supply specified materials within a fixed time
frame.
• While Contract documents are the legal agreement

between the owner or the party and the seller or supplier
to execute the works as specified in the tender documents.

Tender Vs Contract
• Tender document can not bind the seller/supplier to
do the work, while a contract document binds the
seller to complete the work as per the agreement.
• Tender documents can not be submitted as Letter of
Acceptance (LOA).
• Contract document more detail than tender
document, contains; obligations/duities of the
parties, risk mitigation techniques, payment
mechanisms, etc

Contract Vs tender
• The major distinction is that the tender is the appropriate
title for the document before signing the contract and it is
being used to select a suitable supplier to execute the
works.
• While the contract is the appropriate title for the documents
after signing the contract and it is used to execute the works.
• In other words, before the awarding the contract, the set of
documents issued are called tender documents and after
award of the contract the documents issued becomes
contract documents.

Termination of procurement contractual relationship
 Supplier/seller fails to perform any provision of the contract
including:
 Failure to deliver by scheduled date,
 Failure to make progress (endangers performance of the

contract).
 Termination occurs when action is taken by one or more parties

to the agreement to end a contract before its full performance
 It may caused by the fault of buyer, seller or by agreement of

the two parties.

Notice of a contract Termination
• Important issue in contract law deals with
NOTICE by the parties involved.
• Notice is particularly import when dealing

with the issue of terminating a contractual
relationship.

Settlement of dispute
• If the termination of the contract between the parties
where not properly managed, various claims
/disagreements will be raised, that need to resolution.
• Based on the degree of the disputes there are different
types of dispute settlement methods:
 Negotiation
 Mediation
 Arbitration
 Litigation in a court

…cont’d
• The best way and desirable way to settle any claim is to
sit down and negotiate a fair and equitable
agreement.
• By the contrast , the least desirable approach is for the
two parties to stand firm in their position to initiate a
lawsuit and then settle their dispute in a court of law

Cont’d

Mediation
• Is third party facilitated negotiation and settlement between the
parties.
• If the buyer and seller cannot reach a negotiated settlement by
themselves
• The role of the mediator is only to bring them together
• The final results and settlement values are controlled by the
buyer and seller.
• The mediator will often prepare a settlement memorandum for
both parties to execute.
• More fast and less cost than arbitration and litigation

Arbitration
• Is the third party that can negotiate by providing resolution
between the two parties.
• Arbitrators should be professional
• Each parties should by their agreement brings in professional
arbitrator/referee
• Both parties have an opportunities to present evidences
• The selected arbitrator investigate the case and provides the
findings (The final results and settlement values are controlled
Arbitrator)
• is more costly than mediation and less costly than litigation.

Contract Risk
• What is Contract Risk Management?
• Contracts are at the heart of every business.
• They are the documents that define how your business will
mitigate (alleviate) risk and increase growth.
• The purpose of contract risk management is to define the
contract's maximum value through compliance tracking by
identifying, managing, and minimizing the potential risks
throughout the contract lifecycle

Why is Contract Risk Management Important?
• Contracts differ between company and to company , i.e. they
can’t be treated in the same way.
• Managing contract risk throughout the lifecycle is crucial for
the contract mismanagement process.
• It helps to define and govern the rights and duties of any
relationship or agreement.
• Minimize unethical practices
• To minimize the parties complaints
• Minimizing risks and maximize returns.

Procurement team arrangement
• Team arrangement is an agreement of two or more
firms to form a partnership or joint venture to act as a
potential prime contractor/ supplier;
• An agreement by potential prime contractor to act as a
subcontractor under specified acquisition program or an
agreement for a joint proposal resulting from a normal
prime contractor –subcontractor, licensee-licensor, or
leader-company relationship

• Partnership: An ordinary partnership occurs when two
or more parties combine capital and/or services to carry
on a business for profit
• It is a group of separate organization (seller –buyer
partnership)
• Joint venture: is a combination of enterprise owned
and operated by two or more businesses or individuals
as a separate entity for the mutual benefit of the
members of the group.

• Joint ventures possess the characteristics of
joint control, e.g. joint property, joint liability
for loss and expenses, joint for profits

CHAPTER FIVE
MANAGEMENT OF
MATERIALS

Section I: Transportation of goods
• Transport is clearly a critical function within the overall
logistics discipline.
• When we think of methods to manage the flow of goods,
we immediately think of transportation and how we can
best move the equipment and materials we need for
operations into our facilities, and how we can move the
products we make to the consumer.
• The selection of the very best transportation service has an
important impact on successful project strategy.
• The decisions we make are likely based on trade-offs
between reliability, cost and time; air freight, for example, is
faster than ocean vessels but proportionally more
expensive.
23-Oct-23 2
Transport Principle
23-Oct-23 3
Con…
23-Oct-23 4
Transport Function
23-Oct-23 5
Con…
• Transportation management is a subset of supply
management chain concerning transportation
operations.
• Transportation Management reduces transportation
cost and increases delivery reliability through
collaboration across all modes and providers.
• An effective transportation management helps
companies move freight from origin to destination
efficiently, reliably, and cost effectively
23-Oct-23 6
Modes of Transportation
• Transport modes are the means by which people and
freight achieve mobility.
• They fall into one of three basic types, depending on
over what surface they travel as:
• land (road, rail and pipelines),
• water (shipping/Maritime), and
• air.
23-Oct-23 7
Road/Truck transportation
• Road infrastructures are large consumers of space
• Road transportation has an average operational
flexibility as vehicles can serve several purposes but
are rarely able to move outside roads.
• Road transport systems have high maintenance costs,
both for the vehicles and infrastructures.
• They are mainly linked to light industries where rapid
movements of freight in small batches are the norm.
23-Oct-23 8
Rail transportation
• Railways are composed of a traced path on which wheeled vehicles are
bound.
• Heavy industries are traditionally linked with rail transport systems,

although containerization has improved the flexibility of rail
transportation by linking it with road and maritime modes.
Pipelines
• Pipeline routes are practically unlimited as they can be laid on land or
under water.
• Pipeline construction costs vary according to the diameter and increase

proportionally with the distance and with the viscosity of fluids (from
gas, low viscosity, to oil, high viscosity)
23-Oct-23 9
Maritime transportation
• Because of the physical properties of water and limited friction,
maritime transportation is the most effective mode to move large
quantities of cargo over long distances.
• Main maritime routes are composed of oceans, coasts, seas, lakes,

rivers and channels.
• Maritime transportation has high terminal costs, since port

infrastructures are among the most expensive to build, maintain and
improve.
• High inventory costs also characterize maritime transportation.
• More than any other mode, maritime transportation is linked to heavy

industries, such as steel and petrochemical facilities adjacent to port
sites.
23-Oct-23 10
Air transportation
Air routes are practically unlimited, but they are denser over
the North Atlantic, inside North America and Europe and over
the North Pacific.
Air transport constraints are multidimensional and include the

site (a commercial plane needs about 3,300 meters of runway
for landing and takeoff), the climate, fog and aerial currents.
Air activities are linked to the tertiary issues
More recently, air transportation has been accommodating
growing quantities of high value freight and is playing a
growing role in global logistics.
23-Oct-23 11
Advantage and disadvantage of five modes
of transportation
12
Project Transportation Modal
choices
• The choice of transport mode is probably one of the most important
classic models in transport management.
• The different transport mode characteristics need to be understood

and assessed.
• Clearly, some transport modes are more suitable to certain types of

operational requirements than are others.
• Different factors also need to be addressed to ensure that the

particular choice of mode is appropriate.
• For example, an urgent order or consignment should be moved via a

fast transport mode.
• There is the ever-present and important logistics trade-off between

cost and service that needs to be included in the selection process.
23-Oct-23 13
Con…
Operational factors that need to be considered as a
part of the modal selection process.
External factors to the direct distribution operation
Customer characteristics that need to be taken into
account,
Physical product characteristic and other logistic
component
23-Oct-23 14
1. External factors
Encompassing the many operational factors that may need to
be considered are those that are external to direct
distribution related factors.
These are particularly relevant when contemplating the
international context of modal choice, because from country
to country these factors can vary significantly.
External factors includes:
• The basic infrastructure in the country: Trade barriers:
these might include, for example, customs duty, import
tariffs or quota payments which can have a big impact on
the overall cost of a product.
• Export controls and licenses: with these, there may be
implications for the quantity of product that can be shipped
in given periods of time. Law and taxation, Financial
institutions and services, and economic conditions,
Communications systems, Culture, Climate.
23-Oct-23 15
2. Customer characteristics:
The main characteristics to take into account are:
• Service level requirements: This may occur when there is a need for delivery to be
at a certain time or on a certain date, or when a specific time delivery window is
stipulated.
• Delivery point constraints: refers particularly to the physical aspects of delivery,
including the location of the delivery point. any access constraints concerning the
size of vehicle that can make the delivery and any equipment requirements for
unloading.
• Credit rating: The credit rating of a customer may help to impose a limit on route
selection and modal choice. New customers and existing customers with a poor
credit rating mean that a company will want to be sure that payment is confirmed
before delivery is made
• Terms of sale preference: There are a number of different terms of sale that can be
used, ranging from ex works (at the supplier factory) to delivered duty paid (at the
customer’s delivery point).
• Order size preference:
• Customer importance: Most suppliers have ‘A’ rated customers who are deemed to
be their most important and who really must be given a delivery service that does
not fail.
• Product knowledge: Some products or orders may necessitate some knowledge
transfer to the customer at the time of delivery. l
23-Oct-23 16
3. Physical nature of the
product
The main factors that need to be considered include:
• Volume to weight ratio
• Substitutability (product alternatives, etc)
• Special characteristics (hazard, fragility,
perishability, time constraints, security).
23-Oct-23 17
Other logistic issues
Supply points: The location of raw material or component
suppliers will clearly impact on route and modal choice.
• Production plants: The location of manufacturing and

production plants will impact on route and modal choice.
• Warehouse and storage facilities.
• Depots: Inventory and stockholding policy will usually

determine where depots are located.
• The location of depots with respect to their supply points
(usually production or warehouse facilities) in terms of distance
and geography will have an impact on the choice of transport
mode.
23-Oct-23 18
Section II: Warehouse and Inventory Management
Inventory Management
• Inventory: is the raw materials, work-in-process goods and
completely finished goods that are considered to be the portion of
a business's assets that are ready or will be ready for sale/use.
• Anything that goes into producing the items sold by your business
is part of its inventory.
• Inventory management is primarily about specifying the size and
placement of stocked goods.
• Inventory management is required at different locations within a
facility or within multiple locations of a supply network to protect
the regular and planned course of production against the random
disturbance of running out of materials or goods.
23-Oct-23 19
Types of Inventory
Raw material inventories: are the basic inputs to the
manufacturing process.
 Work-in-process inventories: consists of partially
finished goods
 Finished – goods inventory: are the outputs of the
manufacturing process.
 Spare parts inventory
23-Oct-23 20
Major reasons for holding
inventories
 To satisfy expected demand: Companies use anticipation stock (buffer stock) to
satisfy expected demand
 To protect against stock outs: Manufacturers use safety stock to protect against
uncertainties in either the demand or supply of an item.
 To take advantage of economic order cycles: Companies use cycle stock to produce
(or buy) in quantities larger than their immediate needs. Because of the cost
involved in setting up a machine, companies usually find producing in large
quantities economical and to minimize purchasing costs companies often buy in
quantities that exceed their immediate requirements. (periodic orders, or order
cycles produce more economical overall production costs.) The quantity produced
is called the economic lot size. The quantity ordered is called the economic order
quantity (EOQ).
23-Oct-23 21
Stock control Methods
• Minimum stock level - first identifying a minimum stock level,
and reorder when stock reaches that level. This is known as the
Re-order Level.
• Stock review – if there is regular reviews of stock. At every

review, one places an order to return stocks to a
predetermined level.
• Just In Time (JIT) - this aims to reduce costs by cutting stock to
a minimum. Items are delivered when they are needed and
used immediately. There is a risk of running out of stock, so
you need to be confident that your suppliers can deliver on
demand.
23-Oct-23 22
Con…
• Economic Order Quantity (EOQ) minimize the balance of costs
between inventory holding cost and re-order cost.
Assumptions In calculating EOQ
• Demand for the product is known and constant
• Lead time (time from ordering to receipt) is constant
• Price per unit of product is constant
• Ordering or setup costs are constant
• All demands for the product will be satisfied (No shortages are
allowed)
• The order quantity is received all at once
23-Oct-23 23
con….
• EOQ formula
23-Oct-23 24
Con..
23-Oct-23 25
Con…
• Example: A computer company has annual demand of 10,000. They
want to determine EOQ for circuit boards which have an annual
holding cost (H) of $ 6/unit, and an ordering cost (S) of $ 75. They
want to calculate TC and the reorder point (R) if the purchasing lead
time is 5 days
23-Oct-23 26
Inventory Management
Summary
• Inventory quantities must be organized
and measured carefully.
• Minimum stocks must be assured to
prevent stock-outs or the lack of
product.
• At the same time, they must be
balanced against excessive inventory
because of carrying costs.
23-Oct-23 27
Con..
• Careful attention and constant review must be built
into the management system in order to avoid getting
caught short by unexpected changes in the larger
business environment.
• Caution/care and periodic review of reorder points

and quantities are a must.
• Individual market size of some products can change

suddenly and corrections should be made.
23-Oct-23 28
Warehouse management and material
handling
• Warehouse management is a key supply chain activity and involves
complex tasks.
• It requires efficiency, expert know–how, technical and operational

feasibility, cooperation and successful implementation.
• Operational Management and Performance Monitoring are some of

the key activities in warehouse management.
• Operational management is critical to manage the vast operational

activities of a warehouse. Performance Monitoring on its part is
essential to monitor process improvement.
23-Oct-23 29
Activities of warehouses
23-Oct-23 30
layout in warehousing
23-Oct-23 31
23-Oct-23 32
23-Oct-23 33
Con..
• layout
23-Oct-23 34
23-Oct-23 35
Con…
• Materials handling is the provision of the right amount of the right
material, in the right condition, at the right place, at the right time, in
the right position, in the right sequence, and for the right cost, by using
the right method(s).
• This is crucial for the success of businesses, projects and organizations

in their endeavor to achieve goals, and comply with rules and
regulations.
• The design of a warehouse and handling system involves a number of

sequentially set design processes, storages and handling systems, the
science and arts of order picking and replenishment ,materials receiving
and dispatch, packaging and overall Warehouse management and
information .
23-Oct-23 36
23-Oct-23 37
23-Oct-23 38
23-Oct-23 39
Con..
23-Oct-23 40
Warehousing productivity
• Warehouse productivity can be significantly improved using
information technology.
• Due to intense competition and customers’ demand for

accurate secure and fast information, companies need to
have the information technology tools in their warehouse
operation.
• Choosing the right system has to be done with utmost care so

as to bring effective solution.
23-Oct-23 41

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Advanced Project Logistics and

Chapter one: Introduction to logistics and contract management

2) Logistics systems and supply chain

3) Understanding contract and contract management

• Chapter two: Project procurement management

•Chapter three: Identifying and evaluating suppliers

Chapter four: Bid management

Chapter four: Bid management

Chapter four: Management of materials

 Demonstrate the process and elements embedded in project procurement

 Identify and evaluate suppliers,

 Design appropriate strategy to manage materials, and

 Contrast the project logistics and contract management with overall

• debates and discussions,

• case analysis, and presentation.

• Quiz and/or class activities 10%

• Individual Assignment 20%

• Group Assignment 20%

• Final examination 50%

• CIPS. (2019). Contract Management Guide.

• It is basically consists of all operations required for goods(both tangible

• Therefore, the essence of logistics is the flow of material goods and

• Definition of logistics is not unified, although it might be indeed, in current

The American Council of Logistics Management;

• Logistics management is the process of planning, implementing, and

• Project logistics is a very complex field and covers a great many

• It involves making sure that the hundreds of thousands of different

• Is a concept of integrated management of goods/services and

• Manage resources include physical items, such as materials, equipment,

• Transport; (air, road, sea, rail , pipeline)

• Warehousing : (where materials received, stored, and shipping)

• However, all of these decision categorizations comprise the following

2. Logistics network design

3. Outsourcing versus vertical integration

• Therefore, logistics network (or, in some references, logistics channel) design

• The physical facility network and the communication and information

• Decisions related to outsourcing bring greater flexibility, lower

• Outsourcing decisions determine which functions should be outsourced,

• Decisions on vertical integration (also known as insourcing) have

It is essentially a system of interconnecting chains i.e. a supply network

SC - Two or more parties linked by a flow of resources – typically material,

1. Product & Service Flows:

• 4. Expertise & Technology Flows:

• Effective SC management requires good decision making in a wide

• Decision regards how produced materials are distributed to the users

 Improved customer service

 Improved ROI and Increased market share

The Reprocessing Flow

REUSE: The Re-use of materials,

RE-ALLOCATE: Extending the use of waste,

RECYCLE: Collection and separation of material,

REMANUFACTURE: Resource regeneration, reusing

Waste due to inadequate production cycle. Businesses that, inaccurately

Sudden changes in the supply chain. External factors can cause

The contract is the mechanism by which:

The project organization is created;

Project managers are employed;

Goods and services are procured;

The commercial nature of the project process is defined.