Aung Kyaw Moe / Task 2 Procurement

Memo To: From: Date: RE: Francois Damba Aung Kyaw Moe
29 May 2013

TASK 2 PROCUREMENT

Current Relationship of procurement with Ralem Company I have learnt from the Handover Report of Jake Mulryan, the previous Logistics Officer before me, that there is not much procurement works here whereas we used petty cash to buy some small items. For our food ration, UNFA provides us rice, beans and oil and we add salt and sugar. We have a purchase Contract of Salt and Sugar from a local supplier called Ralem Co. Ltd that resided in Mugla. The amount of supplies and other terms and conditions of our purchase contract are as follows: Supplies: 20 MT of Sugar, value of 632,258.00 Beta Dollars 6 MT of Iodized Salt, value of 81,300.00 Beta Dollars Payment: 30 days after confirmed delivery of goods in good order, subject to the issuance of satisfactory Packing list, Certificate of Origin, Phytosanitary Certificate, Fumigation Certificate, Satisfactory Independent Inspection Certificate (confirming weight, quality and packing) Delivery Type: DDU (Delivery Duty Unpaid - Incoterms 2000) to SCILaid Warehouse, 12 Calgary Street, Mugla by truck Actually this purchase contract is near to end and we are in the process of re-tendering in conformity with the standard in-house rules and regulation of procurement in SCILaid. The main problem area is that of the procurement of food since our supplier gives us in 1 Kg package that creates a lot of problem for us in storage, transportation and distribution. And according to the Handover Report, we have little contact with the supplier. According to the previous Comparative Bids Analysis (CBA) Table, we can see the following things: Sugarland is the lowest bidder at the price of US$ 20832 but this company demanded 30% prepayment which is against the SCILaid financial regulations. AYOCO Limited is the second lowest bidder at the quote of US$ 21400 but that company can only receive in US$, not in Betaland Dollars. Betafood is the highest bidder with the wrong specifications of supplies

Ralem Co. Ltd is the third lowest bidder at the quoted price of US$ 22120 but it was awarded the purchase contract because of its capability to supply the required specified supplies to SCILaid

The Appropriate Relationship between SCILaid and Ralem Co Ltd and How to build it Since suppliers are the ones who control and manage the supplies in need, they play a key role in any humanitarian aid supply chain and they can have power to determine the

effectiveness and efficiency of the process. In our case, Ralem Co Ltd is supplying the major goods (Sugar and Salt) we need for our project and its performance is significantly affected by our relationship with this company. According to our learning material, there are 3 basic types of relationship between a supplier and a humanitarian organization: (1) Distant Relationships In that kind of relationship, we do not need to spend time to have good relationship with our supplier. We just placed an order and supplier supplies the purchased items. There will be only pure self-interest. If a commodity has many competing suppliers in the market, this kind of relationship is most suitable one. (2) Co-operative Relationships When there are a few numbers of suppliers available for a given commodity, we have to build up close relationships and share information for the benefit of both parties. In this context, the role the Suppliers are playing is important and communication is more than simply placing orders. Sometimes there can be longterm contracts or Frame agreements with the suppliers and it is necessary to monitor and review this framework of agreement including prices, quality and lead times. (3) Collaborative/Partnership Relationships We need a very close relationship when there is a single source supplier and one where a long term relationship is needed. In these relationships the supplier is willing to put time and money into developing specific goods or services for an organization because they know the relationship is a long term relationship and they will not suddenly be dropped as a supplier. Since Ralem Co Ltd is not a single supplier but we need to have a long-term agreement for the supply of salt and sugar, the second type of relationship is the most appropriate one we should build up between Ralem and us. Now we have not enough involvement with our supplier. We need to set up scheduled contacts with Ralem that can enable correct and quick decisions and actions to solve problems collaboratively. For example, we need to change the size of packing from 1 Kg to 25 Kg bags for more efficient distribution and we need to relate more with the Ralem people to reach our desired goal.
Best Regards, Aung Kyaw Moe Logistics Officer Sub-Office (SCILaid Betaland)