Quali 2 - Aula 22 (24-11)

Introduction to Supplier Management

Overview of Strategic Suppliers

• The session begins with a recap of the previous class, focusing on defining strategic suppliers.

• A strategic supplier is one that is essential for achieving business objectives and often takes on a partnership role rather than just providing goods.

Key Processes in Supply Management

• Discussion shifts to the four processes involved in supply management, emphasizing boundary conditions necessary for mapping suppliers.

• Important factors include project characteristics, economic conditions, and market dynamics which influence supplier selection.

Current Economic Context

Challenges in Material Availability

• The speaker highlights a unique situation in Brazil where there is a significant shortage of steel, impacting construction projects.

• This scarcity is exacerbated by external factors such as European steel mills being inactive since early 2023.

Diligence Planning

Understanding Diligence Plans

• The term "diligence plan" is introduced as a concept primarily used in engineering firms but lacks an official Portuguese equivalent.

• After assessing the market context, it’s crucial to create a long list of potential suppliers based on specific needs.

Differentiating Types of Purchases

Consumption vs. Raw Materials

• It’s important to distinguish between consumable materials (like office supplies) and raw materials critical for production.

• Buying from multiple suppliers can lead to higher transaction costs compared to sourcing from a single supplier.

Importance of Quality Standards

ISO 9001 Procedures Related to Suppliers

• The discussion references ISO 9001 standards which mandate certain procedures related to supplier management.

• Two key mandatory procedures involve traceability and the evaluation/homologation process for suppliers' quality assurance.

Evaluating Supplier Performance

• Homologation ensures that suppliers meet quality requirements while ongoing evaluations assess their performance post-delivery.

Supplier Evaluation and Best Practices

Importance of Supplier Assessment

• Understanding the quality of supply is crucial; ongoing evaluation is necessary for both new and existing suppliers.

• When homologating a client or supplier, it’s essential to gather comprehensive information about them to ensure reliability.

Financial and Historical Evaluation

• Just like financing a car or house, evaluating a supplier involves checking their historical performance and payment records.

• Buyers must investigate suppliers' backgrounds, including any legal issues related to non-payment or defaults.

Technical Capacity Verification

• Technical evaluations are vital; Petrobras sets an industry standard by requiring technical capacity certificates from service providers.

• At the end of engineering projects, companies should request proof of technical capability to demonstrate successful project completion.

Economic Stability Considerations

• Assessing a supplier's economic situation is critical; purchasing from potentially unstable suppliers can jeopardize long-term projects.

• It’s common practice to request financial documents such as balance sheets and cash flow statements under confidentiality agreements.

Political Affiliations and Risks

• Suppliers’ political affiliations can impact your business; it's important to check if they have ties with controversial parties or scandals that could affect your reputation.

Supplier Diversity and Specialization

• Engaging with both established suppliers and specialized ones ensures access to unique resources needed for specific projects.

• Some projects may require highly specialized suppliers who can innovate or self-finance new developments.

Strategic Management of Supplier Relationships

• Understanding the economic landscape allows businesses to manage relationships strategically, especially regarding penalties for contract breaches.

Local Sourcing Initiatives

• Governments often encourage local sourcing through contractual obligations that promote regional economic development.

Supplier Qualification Process

Challenges in Supplier Selection

• The process of compiling a list of potential suppliers is challenging, requiring careful pre-qualification and classification to determine which suppliers are suitable.

• Historical performance and similar supply attestations are critical for evaluating potential suppliers; this may involve conducting second-party audits where clients assess the supplier's capabilities directly.

Conducting Audits

• Second-party audits can be performed personally or through specialized firms to evaluate the supplier’s technology, installations, and workforce.

• Benchmarking projects can reveal insights by comparing processes across different industries, such as examining cable manufacturing alongside pencil production.

Understanding Production Processes

• Recognizing similarities in production processes can lead to innovative supplier relationships; for example, both cables and pencils have comparable manufacturing steps.

• Manufacturers from different sectors may share common suppliers, highlighting the need for creativity in sourcing materials and services.

Evaluating Suppliers

• It’s essential to classify suppliers based on their qualifications; initial impressions during factory visits play a significant role in determining suitability.

• The concept of "moment of truth" emphasizes that first impressions during site visits can decisively influence supplier selection.

Importance of Transparency

• Maintaining transparency with suppliers about evaluation criteria fosters improvement; sharing scores allows them to understand areas needing enhancement.

Reevaluating Contracts and Supplier Management

Importance of Reevaluation in Contracting

• Reevaluating contracts is a normal part of the process, emphasizing its significance in project management.

• Official documents are crucial before hiring suppliers; various items must be requested to ensure compliance and readiness.

Developing Products and Supplier Engagement

• During product development, identifying potential suppliers can be challenging, but having a preliminary list helps streamline the process.

• A Request for Information (RFI) is often sent to suppliers to gauge their ability to deliver products that are still under development.

Budgeting and Cost Estimation

• Companies often send out Invitations for Bids (IFB) to gather cost estimates for future purchases, aiding in budget planning for upcoming projects.

• Public sector entities frequently utilize this method as part of their procurement strategy, ensuring they have accurate financial forecasts.

Differentiating Procurement Documents

• The type of document used varies based on what is being purchased: Requests for Proposals (RFP), Requests for Quotations (RFQ), etc., each serving specific purposes.

• RFPs are typically used for unique projects requiring detailed specifications, while RFQs apply to standardized items with multiple suppliers.

Challenges in Public Sector Procurement

• New legislation is changing public procurement processes, replacing older laws that governed bidding practices.

• Complex projects pose challenges in specifying requirements accurately within procurement documents, leading to potential issues during execution.

Supplier Strategy and Economic Factors

Characteristics of Strategic Suppliers

• Strategic suppliers are those upon whom companies heavily rely; they often become partners rather than just vendors.

Mapping Supplier Relationships

• Understanding economic conditions is vital when mapping supplier relationships; current market situations can significantly impact availability and pricing.

Current Market Conditions Impacting Supply Chains

• The Brazilian market currently faces severe shortages in materials like steel, complicating construction efforts.

Impact of European Steel Mills on Supply Chain

Current State of European Steel Mills

• More than half of the steel mills in Europe have had their furnaces inactive since February or March, indicating a significant impact on supply chains.

• The situation is influenced by various social and political factors, alongside technical considerations regarding products and business operations.

Understanding Diligenciamento Plans

• A term derived from English, "diligenciamento," is primarily used in engineering companies but lacks an official Portuguese equivalent.

• The concept revolves around creating a structured plan for managing suppliers and resources effectively.

Supplier Mapping Process

• After assessing the overall market conditions, it's crucial to create a comprehensive list of potential suppliers for necessary materials.

• Differentiating between consumable materials (like office supplies) and essential raw materials is vital for effective procurement strategies.

Cost Considerations in Procurement

• It's important to evaluate transaction costs when sourcing items from multiple suppliers versus consolidating purchases with one supplier.

• Understanding the distinction between consumables and critical raw materials can prevent costly mistakes in procurement processes.

Quality Assurance Standards

• The ISO 9001 structure emphasizes mandatory procedures related to supplier management, including traceability and evaluation processes.

• Two key procedures involve tracking product quality from customer back to supplier and establishing criteria for supplier approval.

Evaluating Suppliers: Best Practices

• Establishing a process for homologation ensures that suppliers meet quality standards before they are approved for production.

• Continuous evaluation post-supply is essential; it involves assessing performance based on established metrics like CPK (Process Capability Index).

Importance of Historical Data in Supplier Evaluation

• When evaluating new suppliers, historical data plays a crucial role; higher scrutiny is applied compared to established suppliers due to unknown reliability.

• Similar to financial assessments where credit history is checked, buyers must gather technical evaluations about potential suppliers' past performances.

Best Practices in Supplier Selection for Engineering Projects

Importance of Technical Capacity Certificates

• It is a market best practice to request a technical capacity certificate at the end of all projects, which can be shown to potential clients.

• This practice has become standard in Brazil's engineering sector, largely influenced by Petrobras, which only purchases from suppliers with such certificates.

Economic Viability of Suppliers

• Assessing the economic stability of suppliers is crucial; purchasing from a supplier that may go bankrupt within six months poses risks for long-term projects.

• For example, if a supplier fails to deliver critical components like steering wheels due to financial issues, it can severely impact project timelines and outcomes.

Political Considerations in Supplier Relationships

• It's important to evaluate whether suppliers are involved with political parties or have negative media associations that could affect your business reputation.

• A supplier's political affiliations or scandals (e.g., involvement in corruption cases like "Lava Jato") can reflect poorly on their clients.

Supplier Qualification Process

• The process involves identifying both registered and new specialized suppliers capable of meeting specific project needs.

• Suppliers should also have access to financing options for developing innovative technologies necessary for the project.

Local Content Requirements and Strategies

• Governments often impose local content requirements, mandating that a percentage of supplies come from local sources to support the economy.

• While sourcing from abroad is allowed, higher taxes (e.g., ICMS rates) make local procurement more financially attractive.

Logistics and Historical Performance Evaluation

• Sourcing from suppliers who already serve competitors in the same region can enhance logistical efficiency and ensure quality standards are met.

• Creating a list of potential vendors requires careful qualification based on historical performance and similar supply attestations.

Auditing Suppliers for Quality Assurance

• Conducting second-party audits allows clients to assess suppliers' facilities, technology, and workforce capabilities directly.

Product Similarities and Supplier Evaluation

Understanding Product Processes

• Discussion on identifying products with similar production processes, emphasizing the importance of recognizing competition across different sectors.

• Examples provided include mobile phones and pencils, highlighting diverse industries that may share manufacturing techniques.

Supplier Collaboration

• Manufacturers in related fields (e.g., pencil makers and cable manufacturers) can benefit from collaboration and shared supplier insights.

• Importance of creativity in sourcing suppliers; companies should explore connections between seemingly unrelated industries to find common suppliers.

Supplier Assessment Process

• The significance of initial impressions during factory visits; these visits help determine if a supplier is suitable for partnership.

• The concept of "moment of truth" when evaluating potential suppliers based on firsthand experiences during site visits.

Evaluating Financial Health

• Regular assessment of a supplier's financial health is crucial to avoid risks associated with supplier bankruptcy or service disruption.

• Classification system for suppliers based on performance ratings (A, B, C), which aids in decision-making regarding partnerships.

Transparency in Supplier Relationships

• Emphasizing the importance of transparency when evaluating suppliers; sharing evaluation criteria helps improve supplier quality.

• Suppliers should be informed about their ratings compared to competitors, fostering an environment for improvement and accountability.

Contracting and Information Requests

Preparing for Contracts

• Overview of necessary documentation before finalizing contracts with selected suppliers; thorough preparation is essential.

Request for Information (RFI)

• Use of RFIs to gather information from potential suppliers while developing new products; this process helps assess capabilities early on.

Budgeting Considerations

Understanding Procurement Processes

Types of Procurement Documents

• The distinction in procurement documents is crucial; for projects, a Request for Proposal (RFP) is sent, while for standard items, a Request for Quotation (RFQ) is used.

• RFPs are typically utilized when the purchase involves unique or complex projects that require detailed specifications.

• RFQs are appropriate when dealing with standardized items from multiple suppliers, allowing for quicker price comparisons.

Changes in Public Procurement Laws

• New legislation is replacing older laws governing public procurement, impacting how public entities conduct purchases.

• Complex projects often lead to incomplete documentation during procurement processes, which can result in significant issues later on.

• There are instances where opting for the lowest bid can lead to higher costs due to project failures or contractor insolvency.

Pricing and Bidding Procedures

• For purchases under R$ 8,000, direct invitations can be made without formal bidding processes.

• Competitive bidding often involves reverse auctions where initial bids start high and decrease as competitors submit lower offers.

Contracting and Proposal Evaluation

• The process of hiring personnel through competitive exams ensures qualified candidates fill positions within public institutions.

• Proposals must include critical elements such as payment terms and validity periods to ensure clarity and enforceability in contracts.

Importance of Team Collaboration in Procurement

Understanding the Interplay Between Production and Financial Departments

The Relationship Between Production and Finance

• The production system is closely linked to the financial department, which often prioritizes cost over quality. This can lead to conflicts since the cheapest option isn't always the best.

• A recommended approach begins with a technical analysis to identify suitable suppliers based on their ability to meet technical requirements.

Supplier Selection Process

• After identifying potential suppliers, the economic team evaluates pricing, payment terms, and guarantees. This process ensures that quality is not compromised for cost.

• Proposals are first assessed for qualification criteria; if a supplier lacks technical or financial capacity, they are disqualified from consideration.

Evaluation Criteria for Proposals

• Key indicators such as profit margins and liquidity are used in financial assessments. Suppliers must meet specific thresholds to remain in contention.

• Following qualification, proposals undergo a technical evaluation focusing on manufacturing processes, human resources involved, and delivery timelines.

Collaboration Between Departments

• Both production and finance teams must collaborate during evaluations. Each group brings unique insights—production focuses on technical aspects while finance addresses commercial concerns like payment schedules.

• Effective collaboration between these departments typically leads to better outcomes; however, many companies struggle with interdepartmental rivalry instead of teamwork.

Transparency in Procurement Processes

• Establishing transparent procurement criteria allows suppliers to prepare better proposals. Clear evaluation standards encourage competitive bidding.

• Commonly evaluated items include price competitiveness, understanding of client needs, total lifecycle costs (including acquisition and operational expenses), and storage considerations.

Comprehensive Cost Analysis

• It's crucial to consider all associated costs beyond just purchase price—this includes handling, storage, and internal movement costs when evaluating supplier offers.

• Additional factors such as administrative capabilities (pre-sale support, post-sale maintenance), response times for inquiries or documentation requests also play significant roles in supplier assessment.

Final Evaluation Methodology

• A scoring matrix can be employed where different criteria (price weightage, total cost implications, technical capability ratings) are assigned scores leading to an overall ranking of suppliers.

Supplier Policies and Contract Types in Brazil

National Supplier Preferences

• Companies often have policies favoring national suppliers, which can lead to a bias towards local procurement.

• Multinational companies may prefer to source from their home country suppliers, such as German firms opting for German partners.

Minimum Order Quantities

• An example is Metal Leve, which has a minimum order policy that restricts sales to large quantities only.

• This creates opportunities for smaller manufacturers who can produce smaller lots and cater to different markets.

Pricing Dynamics

• Smaller orders may come at higher prices due to the cost of production setup being significant for larger companies.

• Quality standards are crucial; smaller suppliers might offer competitive quality despite higher costs.

Certification Requirements

• Some companies enforce strict supplier certification requirements (e.g., ISO 9001, ISO 14000).

• Such policies can limit the pool of available suppliers but ensure compliance with quality and environmental standards.

Contractual Framework in Brazil

Types of Contracts

• Various contract types exist in Brazil, influenced by legal constraints, particularly labor laws.

Fixed Price Contracts

• Fixed price contracts are common for projects where total costs are agreed upon upfront.

Labor Subcontracting Issues

• Many companies face risks related to labor subcontracting, leading to potential legal challenges if workers claim rights against the primary employer.

Hybrid Contracts

• Hybrid contracts combine fixed payments with variable components based on resource usage or additional services required.

Cost Reimbursement Models

Contract Essentials and Management

Key Components of a Good Contract

• Essential clauses in a contract include identifying the parties involved, typically by their CNPJ (National Registry of Legal Entities).

• A clear description of the object or scope of the contract is crucial, along with technical specifications detailing what will be delivered.

• Payment conditions must be outlined, including responsibilities, guarantees, and adjustment indices applicable after a certain period.

• Rights and obligations should be clearly defined, including delivery methods and acceptance criteria for partial deliveries.

• Conditions for termination or suspension of the contract are necessary to allow both parties an exit strategy if needed.

Dispute Resolution Mechanisms

• Due to judicial delays in Brazil, many contracts now include mediation clauses as an alternative dispute resolution method.

• Contracts may specify that disputes between clients and suppliers will not go to court but instead involve arbitration through designated organizations.

• The appointed third party for arbitration is usually compensated by the contracted parties but offers a faster and cheaper resolution than traditional legal proceedings.

• This trend is increasingly common among companies seeking to avoid lengthy judicial processes.

Contract Administration Post-Signing

• After signing a contract, it’s essential to manage its execution effectively by monitoring specific performance indicators throughout its duration.

• Financial oversight includes tracking compliance with payment schedules and ensuring adherence to technical specifications over time.

• Regular checks on legal compliance are vital; suppliers may need to provide proof of tax payments like INSS (National Institute of Social Security).

• Monitoring human resources aspects is also important; changes in staffing can indicate potential issues affecting contract performance.

Finalizing Deliverables

• Upon completion of contractual obligations, clear criteria for receiving goods or services must be established so that suppliers understand evaluation metrics.

• Delivery conditions should cover packaging standards and transportation requirements to prevent damage during transit.

• Testing protocols may need to be included before final acceptance; items often require laboratory testing upon delivery.

Evaluation Criteria for Supplier Selection

Key Components of Supplier Evaluation

• The evaluation process requires defining criteria that include technical, global, cost-related, and strategic factors. A final assessment checklist is essential for this purpose.

• Common evaluation criteria encompass price, quality, delivery time, reliability, total cost, supplier capacity regarding their processes, warranty issues, human resources capabilities, management systems, negotiation flexibility, and adaptability to changes.

• Transparency in the evaluation process is crucial; suppliers must receive a completed and signed document. They should have the opportunity to discuss or question any aspects they disagree with.

Importance of Supplier Relationships

• The significance of supplier relationships cannot be overstated; it is a critical component of documented procedures as per ISO 9001 standards.

• Suppliers are integral to business operations and should be treated as true partners within the client-supplier chain. This relationship can shift based on performance—supportive when things go well but potentially adversarial during challenges.