Increasing BATB Procurement Efficiency

Executive Summery:

 

This report is on the efficiency of BATB Procurement department.

British American Tobacco, better known as BATB, is the mother-company of, at present, around 56 companies worldwide. British American Tobacco (BATB) is the world’s most international tobacco group. With a market share of 15 per cent, they make the cigarette chosen by one in seven of the world’s one billion adult smokers and make nearly two billion cigarette world wide everyday.

 

Procurement of BATB is all about getting the best for BATB across expenditure making sure it is Sourcing what stakeholders really need, Undertaking thorough market, product, supplier & cost analysis, Selecting the right supplier, Leveraging BATB’s scale & negotiating effectively, Contracting & managing risk appropriately and Managing BATB’s supplier relationships effectively.

 

Efficiency means doing the things in the shortest possible time at a lower cost. The efficiency of any department depends on some variables. Efficiency is very important BATB Procurement team but at present this department is having some problems with its efficiency. The objective of my report is to find out those factors which are responsible for the hamper of efficiency and then finally suggesting for some possible ways overcoming.

 

The variables that I have considered are:

v Suppliers

v System

v Department policy and structure

v Internal stakeholders like the department employees

v External stakeholders who are directly involved with Procurement operation.

Worldwide these are the most standard variables to measure the efficiency of any Procurement department.

 

 

In this regard I have divided the entire report into three parts. In the first part I have taken the opinion of BATB stakeholders regarding the efficiency of this department because BATB Procurement has been established to serve these stakeholders. In the second part of the report I have considered the opinion of Procurement team because for my analysis I need to know the difficulties faced by this department. If I don’t know these difficulties cannot identify the proper reason of inefficiency. Finally I have also included my own observation result after working with BATB Procurement.

 

After analyzing all the three parts I have prepared my recommendation about the solution. From this report BATB will understand some very crucial issues for the lacking of efficiency of their Procurement and before me none did this type of analysis on Procurement. So that will be the most significance of this report.


Introduction:

 

Statement of the problem:

Supporting for increasing BATB Procurement efficiency

 

Objective of the study:

General objective:

Finding out the factors which are hampering current efficiency level of BATB Procurement and finally suggesting for a guideline for improving the current situation.

 

Specific objective:

 

  1. Finding out a proper job description of each and every one of Procurement.
  2. Identifying the limitations and reasons of job dissatisfaction working with this department.
  3. Identifying the possible reasons of dissatisfaction of respective stakeholders and recommending suggestions for improving the situation.
  4. Identifying the impact of Procurement efficiency over the business operation of other departments.

 

Significance of the study:

Procurement efficiency is very important for a proper and smooth business operation in BATB. Procurement has a good impact over the inbound logistics support. As it has already been said that two major responsibilities of Procurement is approving quotations after negotiation with the suppliers and then approving purchase orders (PO) against the approved quotations. Efficiency represents how quickly the quotations and Pos will be approved and the final purchase will be ensured. If the approval of Pos and quotations are delayed the entire procuring process will be delayed which will create a significant impact over the smooth business operation.

 

An example will make it clear the significance of this study. Farness oil is a very important material for the production plant of BATB. The POs of Farness oil is approved by Procurement. If it is delayed to be approved the entire production process will be suffered.

 

So now it is clear that efficiency of Procurement is very important. At present the BATB Procurement is not fully efficient. It has some problems. My project will identify those problems and will suggest for some possible solutions. So this study is undoubtly very important for Procurement of BATB.

 

Methodology:

(a) Types of data: Both primary and secondary data. I will make two surveys. One for the BATB stakeholders and the other one is for Procurement team. Basically I need to take direct feedback from the stakeholders about the procurement efficiency. Because it is only the stakeholders who can give real picture of procurement efficiency. Moreover, I also need to know the limitations of working in BATB Procurement because without knowing these limitations we cannot go to the root of the problems. That’s why I will provide another survey question for the Procurement team. For my analysis purpose, I need to know the procurement policy and guidelines so I require the primary data on Procurement policy and guidelines.

 

(b) Sources of data:  Secondary data will be collected from different vendors, stakeholders of BATB, website and company policy. Primary data will be collected form a survey based on a questionnaires.

 

(c) Data Collection method: For primary data a close ended questionnaire will be used. For secondary data I will directly consult with different vendors and stakeholders.

(d) Data Analysis method: I will use M.S. Excel for the data analysis purpose.

 

(e) Population: BATB stakeholders who are directly or indirectly involved with the operation of indirect procurement and all Procurement employees will be my population.

 

(4)     Reporting:

The report will be submitted after the end of the research. I will present all of my findings and recommendations with a hard copy and on audio-video presentation.

 

(5) Requirements for the projects:

(a) Relevant information: For this project the detail list of all suppliers (both preferred and potential) will be required. Besides a proper job description of the procurement team, relevant stakeholders information will be required. A detail list of Green purchase order and red purchase orders will be required. Moreover I will be required for the detail of BATB procurement policy.

(b) Time: 15-20 days will be sufficient for this project after getting the approval.

(c) Budget:

Transportation = 1000/-

Printing Cost = 1000/-

Binding cost = 200/-

Miscellaneous = 500/-

This is an approximate budget required for the project the amount could be deviated from this amount.

(d) Proper Supervision: To conduct this project I will be required supervision from you and also from my BATB reporting manager.

 

Limitations:

  1. Time and budget constraints.
  2. Lack of proper research skill.
  3. Indifferent attitudes of some respondents.

 

British American Tobacco Group

The British American Tobacco Group is one of the world’s leading international manufacturers of cigarettes, marketing its products in almost every country worldwide. It is clear leader in a competitive and fast moving business. The group consists of four tobacco subsidiaries and they are:

British American Tobacco Company Limited, which produces cigarettes in over 45 countries for domestic and export markets in Europe, Australasia, Latin America, Asia and Africa.

Brown & Williamson Tobacco Corporation is the third largest tobacco company in the US. Recently it has marched with RJR to form the second largest tobacco group in USA and has been renamed as Reynold’s American.

British American Tobacco (Germany) GMBH is a leading cigarette company in Germany.

Souza Cruz S.A. is the market leader in Brazil and a world leader in tobacco leaf export.

BAT subsidiaries operate in more than 90 countries employing around 173,000 people. Multi-national, multi-cultural and multi-disciplined, British American Tobacco Group, a world-class group of tobacco companies, BAT offers a brand for every taste and preference.

 

British American Tobacco Co. Ltd.

British American Tobacco Company Limited produces cigarettes in over 64 countries for domestic and export markets in Europe, Australasia, Latin America, Asia and Africa. It is not only the second largest Tobacco Company in the world but also the world’s most global tobacco company. Based in London, UK, it operates in more than 90 countries with the strength of around 173,000 employees and sells more than 300 brands in more than 180 markets worldwide.

Extent of operation of British American Tobacco Company is given below:

America-Pacific (USA, Japan, South Korea)

Asia-Pacific (China, Indo-China, Taiwan, South-East Asia, Australasia)

Europe (50 countries including Russia)

Latin America (Central & South America, Mexico, Caribbean)

Africa (More than 50 countries)

MESCA (Middle East, South & Central Asia)

 

BATB’s Vision

 

The Vision that motivates the people and drives the operations is the desire to extend the market leadership through world class performance across all areas of business. To achieve the vision, four Guiding Principles promote BATB ahead.

 

  • Strength from Diversity

BATB strongly believes in the active utilization of diversity. The diversity of people, culture, viewpoints, brands, markets and ideas leads to creating opportunities and strengthening performance.

 

  • Open Minded

Being an active listener, the people of BATB genuinely consider others’ viewpoints. BATB always believes in sharing thoughts and attitudes.

 

  • Freedom through Responsibility

The freedom to take decisions and act obliges BATB to accept personal responsibility for the way to affect the stakeholders.

 

  • Enterprising Spirit

The confidence to seek out opportunities for success, to strive for innovation, and to accept the considered risk-taking that comes with it.

 

BATB’S BRANDS

 

CMB  (Centrally Managed Brands) B&H and B&H Lights
RB     (Regional Brands) SE555 and JPGL
LFK   (Local Filter Kings) Star, Scissors and Capstan

 

CMB is the class of cigarettes that are known world wide for their standards and superiority. B&H and B&H Lights are the only CMB brand marketed in Bangladeshi market. The RB consists of State Express 555 (SE555) and John Player Gold Leaf (JPGL) which are operated mainly in the Asia-Pacific region. Whereas the LFK are the local brands circulating only within the Bangladeshi market, namely Star, Scissors, Capstan etc. BATB does not operate in the lower level Biri Market.

Following are the brief description of the CMB and RB brands for different consumer segments:

Originally launched in 1873, Benson & Hedges is now available in more than 80 countries. This premium brand is popular in Australia, South Africa, Malaysia and New Zealand.

Launched in 1895, State Express 555 is now sold in more than 55 countries and is popular with smokers in China, Taiwan, Bangladesh and Vietnam.

Launched in 1892, John Player Gold Leaf is now sold in more than 20 countries. It is particularly successful in Pakistan, Bangladesh, Sri Lanka and Saudi Arabia.

National Brands – Star family and Scissors family are also members of the portfolio.

 

BATB’S PEOPLE

British American Tobacco Bangladesh is a company of great strengths – especially in people. Significant investment in people development through local and international training and embedding the corporate values has fostered a culture that encourages global interaction of talent. Currently BATB has 8 managers like other British American Tobacco group companies, while 3 expatriates are based here. Management Director is the operational head and appointed by the British American Tobacco. Head of every department carries out their functions with the help of line managers. Different departments have different structure according to their function and responsibility.

 

MARKETING STANDARDS

 

As a responsible market leader in a controversial industry British American Tobacco Bangladesh has proactively introduced a Code of Conduct regarding the marketing of tobacco products. BATB has always conducted business responsibly and BATB is committed to demonstrating that sensible self-regulation is appropriate for BATB’s products, which carry health risks and should be consumed by adults only.

 

The Code of Conduct is a set of provisions and principles, which clarifies BATB’s position on and guides all aspects of BATB’s marketing activities. BATB aim for this clarification to be established as the industry standard for responsible and reasonable tobacco marketing activities in Bangladesh. Key features of BATB’s Code of Conduct are:

 

Tobacco products should be marketed in a responsible manner and reasonable measures should be taken to ensure that the promotion and distribution of tobacco products is:

– Directed at adult smokers and not at youth, and

–      Consistent with the principle of informed adult choice.

–      These Standards should be observed in both their letter and intent.

BATB also encourages that

–      All others who manufacture or market tobacco products to join them as Participants; and

–      All others who are associated with the manufacture, sale, distribution or marketing of tobacco products to embrace the principles of these Standards.

–      The practices of those involved in tobacco business should not be less restrictive than these Standards unless required by law, but any more restrictive legal requirement or voluntary undertaking shall take precedence over these Standards.

–      The tobacco businesses should incorporate these Standards into their own internal codes.

–      These Standards should be comprehensively incorporated into national laws.

 

GROWTH AND DEVELOPMENT PROFILE

Growth in Sales Volume

With a very efficient and aggressive sales force and a good backup from every other department, BATB has achieved almost a linear rate of increase in sales through the years. In 1999 the sales volume was 10.8 billion cigarettes, whereas in 2002 the sales volume stood at 16.46 billion cigarettes. Around 18.50 billion sticks of cigarettes are expected to sell in 2003.

 

CORPORATE CULTURE

 

The Vision that motivates BATB people and drives their operations is the desire to extend the market leadership through world class performance across all areas of BATB business.

Smoking – BATB view

As a key player of this highly controversial market, BATB put their own line of thought in marketing cigarettes. They believe in the following mottos regarding cigarettes:

 

An adult choice

 

British American Tobacco companies produce superior quality products that provide pleasure to many millions of adult smokers around the world. Along with the pleasures of cigarette smoking come real risks of serious diseases such as lung cancer, respiratory disease and heart disease. BATB also recognize that, for many people, smoking is difficult to quit.
It is for these reasons that BATB have long considered that the choice to smoke or not is one exclusively for adults. BATB do not want children to smoke and BATB actively support programs to prevent and reduce under-age smoking.
Public health authorities have been successful over decades in publicizing their conclusions that smoking is a cause of disease and encouraging smokers to quit. Every pack of cigarettes BATB manufacture worldwide carries a health warning.

High awareness of risks

 

Some argue that smoking, whilst lawful, must be the result of a lack of information about the risks, an “addiction” or the power of cigarette advertising. However, there are ample surveys from around the world that demonstrate a remarkably high awareness of smoking risks, and there is nothing so powerful about the pleasure of smoking that prevents a smoker from reaching and carrying out a decision to quit, as hundreds of millions of former smokers demonstrate. Moreover, the cigarette market is mature, so advertising promotes a choice between brands for those who have already decided to smoke. Social factors, not cigarette advertising are the principal reasons why people start smoking. Public health authorities have been successful over decades in publicizing their conclusions that smoking is a cause of disease and encouraging smokers to quit. Every pack of cigarettes BATB manufacture worldwide carries a health warning. The statistics that demonstrate the real increased risks of smoking also show that these risks are lower in groups of people who smoke less – start smoking later, quit earlier and smoke fewer cigarettes. The statistics have not demonstrated a risk free level of smoking, nor that will a particular individual smoker avoid an associated disease by smoking less. Statistics are unable to predict what will happen to an individual and science is still to determine which smokers will get a smoking related disease and which will not. BATB continue to support relevant research.

Social issues

 

There are some people who will argue that leaving the choice to individuals ignores the claimed health risks to others posed by environmental tobacco smoke. However, statistics do not demonstrate that environmental tobacco smoke is even a risk factor associated with the development of any long-term health effects or disease. BATB agree with public health authorities that it is proper not to smoke for prolonged periods around young children, but public smoking, which BATB recognize may be an annoyance and is therefore a social issue, can be resolved by having sensible regard for other people.

 

Demonstrating Corporate Social Responsibility

 

Over the years British American Tobacco Bangladesh has made significant contributions to the socio-economic development of the country. BATB is one of the highest taxpayers in the country, contributing more than Tk 1700 crore to the government exchequer annually. Through various projects and initiatives, BATB is involved in improving the environment, supporting philanthropic organizations and promoting arts and culture and assisting with disaster relief.

The following are a few demonstrations of BATB’s corporate social responsibility:

  1. A longstanding forestation program, planting and distributing more than 39 million trees across the country since 1980.
  2. A one of a kind bio-filter installed in BATB’s factory to reduce odor emissions is now used as an example for emulation by other industries.
  3. Support for programs like Shandhani’s posthumous eye donation, polio vaccination and blood donations.
  4. Involvement in a vegetable seed multiplication program.
  5. Assistance to tobacco farmers in crop cycle planning and optimum utilization of land.
  6. Run programs to promote farmers’ literacy, health, hygiene, education, family planning awareness and bank accounts.
  7. Provide prompt relief and generous support to affected communities in cases of natural disaster.
  8. Commitment to the principles of sustainable development through high international standards of environmental, health and safety practice.

 

For these extraordinary achievements British American Tobacco Bangladesh has been the proud recipient of a number of awards, including the National Export Trophy (2000), the Prime Minister’s 1st Prize for Tree Plantation in 1999 and 2002 and the Food & Agriculture Organization (FAO) Award for pioneering the development of the vegetable seed industry in Bangladesh in 1999 and Prime Minister’s Afforestation Award in 1993.

RELATIONSHIP WITH THE PARTNERS/ STAKEHOLDERS

 

British American Tobacco Bangladesh is widely respected among its business partners. In BATB’s journey towards continuous improvement and excellence in every area of BATB’s operations, BATB always strive to take its valued business partners with BATB – with them acquiring skills and expertise which they apply to develop their own businesses as well.

BATB’s registered farmers receive seed and advice on planting, growing and harvesting from the company. They apply their tobacco growing skills to growing other agricultural crops as well. It is through the farmers that BATB have been able to sustain such a successful afforestation program.

BATB’s distributors are fully integrated into its business, continually improving standards in partnership with the company.

BATB’s local suppliers benefit from skills transfer of modern, cost effective working practices, resulting in increased velocity and efficiency in their own internal processes.

The employees of the BATB are dynamic, self-motivated and energetic to perform any assigned job, because they are selected on the basis of excellent academic and experience. The company employs 845 permanent employees and varying number of seasonal and temporary workers as required. Each permanent employee receives remuneration in excess of Tk. 36,000 per annum. Remuneration depends on the nature and conditions of work. The workers are labeled in the following categories:

1. Permanent                                                    2. Probationer

3. Temporary (seasonal)                                  4. Badli

5. Casual

Trade union is established in the company’s following working locations:

q  Head office and Dhaka factory

q  Rangpur leaf factory

 

There is a positive relationship between the company and the trade union based on mutual trust and respect. All the employees of the company belong to the trade union. When a worker becomes a member of the union, according to his request a certain amount of his wage is deducted as the union subscription fees on a check off system. Trade union election is held after every two years and governed by their respective constitutions. The terms and conditions of services of the employee are negotiated and determined through a process of collective bargaining between the company and the union.

 

RELATIONSHIP  WITH  STOCKHOLDERS

British American Tobacco Bangladesh is listed in the “Dhaka Stock Exchange (DSE)”. It has an authorized capital of Tk. 400,000,000 of 40,000,000 ordinary shares of Tk. 10 each. British American Tobacco Bangladesh encompasses 62% of the shares of the British American Tobacco, London. The Government held 32% of its shares. Subsequently the government has gradually sold its holdings to different organizations of the country.

The composition of shareholders on December 31, 1999 was:

 

Raleigh Investment Co. Ltd. UK 65.91%
Investment Corporation of Bangladesh 26.99%
Sadharan Bima Corporation 2.86%
Bangladesh Silpa Rin Sangstha 0.84%
Government of Bangladesh 0.65%
Sena Kalyan Sangstha 0.52%
Others 2.23%

Source:      BATB

 

 

 

 

 

 

DECISION MAKING INFRASTRUCTURE

The decision making infrastructure is participatory to a very high extent. All the plans and decisions that are made are communicated from the top level of the organization and the decisions are made after discussing the issue with the related authority and the grass root level. Every possible input from every relevant level of workforce is taken before getting into any decision.

The shop floor employees are also empowered at the grass root level. For example, the senior technicians, the highest shop floor level (non- managerial) post, have the authority to order for spare parts up to a certain amount of money.  Whereas, they also have the authority to issue casual leaves to their subordinates. For issues like these, the shop floor employees do not even require to go to the relevant management level. The operators also do not require any permission to fetch any fast moving consumable spares for their machines from the designated slots.

In the HMC project itself, a cumbersome process of interviewing of a numerous senior technicians took place before the final edition of Standard Operating Procedure for each machine complex was published. It proves the management understands of the importance of inputs from the grass root level.

 

OPPORTUNITY, THREAT, CAPABILITY & COMPETITIVE ADVANTAGE

 

Opportunities:

The company is already exporting leaf to different countries after satisfying their own needs. In future they have the vision to export cigarettes to other countries and earn valuable foreign exchanges through it. BATB is also exporting IT services through ‘Project Sunrise’, where the project works as a call center for a foreign company. It receives calls regarding different matters of the organization and then redirects the message to the proper authority sitting abroad.

BATB also has taken a step to export vegetables from Bangladesh. Under this scheme, BATB has gone into agreement with the registered farmers, who grow tobacco in their lands from October to March, to grow vegetables in other times of the year. According to the agreement, the company will buy these vegetables and export it through the technical and logistical support from USAID. The whole project has been named as ATDP, Agricultural Technical Development Project.

BATB also has the plan to make campaigns inside the biri smokers to convert them to cigarette smokers, preferably to BATB brands. Normally the biri operates in lower than 1 Tk. segment and BATB’s product portfolio starts from 1.5 Tk. segment. BATB’s vision in this case would be to convert this 1.0 or less Tk. segment to a minimum of 1.5 Tk. segments. By the way, the latest tax imposition in 2002 has eliminated 0.5 Tk. segments as it will not be profitable anymore to run any brand at or below 0.5 Tk. levels.

 

Threats:

The extra 5% tax imposed in the post budget session of 2002 has taken the total tax toll on tobacco industry from 66% to a more gigantic figure of 71%. As a fairly governed company, a very rare scene in tobacco industry, BATB does not have any chance or any intention to ignore any taxes. In doing so, BATB has to give away most of the profit to the government, leaving a very tiny amount of net profit to nurture this huge business.

Again, continuous bombardment on the industry by imposing different regulations on smoking and smoking related items is making the scope of the business more and tougher now-a day. For example, in the recent FCTC (Framework Convention on Tobacco Control) organized by WHO (World Health Organization) in May, 2003 posted a few regulations for the prevention of smoke related diseases. Here are a few of them:

  1. A comprehensive ban on tobacco advertising, promotion and sponsorship within five years of ratifying the treaty.
  2. Parties are required to implement health warning labels that cover, at a minimum, 30% of the principle display areas within three years of ratifying the treaty.
  3. Countries agree to prohibit misleading or deceptive terms on tobacco product packages within three years of be-coming a party.
  4. Nonsmokers must be protected in workplaces, public transport and indoor public places.

The local and international economic situation is another big factor in BATB’s business. As many of the raw materials are imported from abroad and especially from the European countries, devaluation of Tk. always puts a negative impact on the business.

 

 

Capabilities

BATB is the leading employer in Bangladesh. BATB’s recruitment process is world class and the passed entrants are well known for their skills, management abilities and competencies among the market. it provides excellent work environment as well as extraordinary salary packages that motivates people to work for this company at the highest level.

BATB is the company with huge marketing reach. BATB has divided the whole county’s market into 43 territories and each territory is taken care of by one Territory Officer. BATB Trade Marketing Team is regarded as one of the top divisions of Bangladesh regarding efficiency and aggressiveness. Mainly for their rigorous activities, BATB has achieved supreme leadership in the tobacco industry of Bangladesh.

The relationship between BATB and its valued business partners are very much cooperative. BATB provides the seeds, pesticides and many other things for credit and equals it later from the incomes of the farmers. Lately they have also introduced schemes for exporting vegetables produced by their registered farmers. This policy of BATB has worked a long way in eradicating poverty from the locality of the cultivation area.

 

Competitive Advantages:

BATB is currently the number one tobacco company in the country by every means. There is no competition in the market except in the segment of Star where it is fighting with Navy of Dhaka Tobacco. In the late 2003, BATB faced a potential threat from the brand Thames by Imperial Tobacco. BATB took immediate and highly aggressive measures which at once broke Imperial Tobacco’s backbone. The new company had no other option but to retreat within only 7 months of entering into the Bangladeshi market. There are previous similar examples as well where BATB dealt with their international competition in a ruthless manner.

BATB owns a few premium brands of the market, namely B&H, SE 555, JPGL etc. these are very well managed and well established brands of the market. these brands have gone to such an extent that it takes a person no time to trace the color of JPGL or B&H from the streets of Dhaka or any other major cities of the country, thanks to the highly effective marketing of BATB. These brands have become prestigious to smoke and smokers feel pride to associate themselves with these brands and their brand identities.

BATB has a very good corporate reputation in the market as a fair corporate governed company. BATB is the highest corporate tax payer of the country providing over 1700 crore Tk. to the Government of Bangladesh. BATB also has earned fame as a highly socially responsible company and has been awarded many a times by the national and international authority. BATB is also an excellent employer in terms of employing skilled and efficient workforce providing an excellent compensation package.

 

 

FOUR BUILDING BLOCKS

Efficiency, quality, innovation and customer responsiveness are the generic building blocks that BATB has always tried to adopt to build the competitive advantage in the national market.

 

EFFICIENCY    ►►► BATB is highly efficient because of its intelligent skill distribution of the right persons in the right fields. The company has also invested in high-tech equipments to improve the input-output ratio. For example, in late August, 2003, BATB imported two high speed machine complexes from France spending multi million dollars. BATB also has adopted the ‘Cell’ structure to make their workforce more dynamic than ever.

QUALITY          ►►► BATB follows strict measures to maintain quality parameters. Any type of products is quarantined whenever any dissimilarity in these parameters is detected. There are even very recent examples when a group of faulty cigarettes went out to the market and later they were tracked down from all over the country and representatives went to the distant parts of the country and gathered those cigarettes and brought them back to Dhaka factory for recycling. It shows the extreme concern of BATB to comply with the quality standards.

 

INNOVATION    ►►►   There is very low scope of innovation in tobacco industry. It becomes very expensive and risky to try out a new brand or blend as the consumers are not very receptive to changes in this industry and in such cases the company may face costly loss of goodwill. Again it takes very high lead-time to try out a new blend from the laboratory to the market. So, BATB is not very much interested in innovation, rather they are interested in continuous improvement of the product regarding its packaging, quality and different variations in blends within the same the brand portfolios.

 

CUSTOMER RESPONSIVENESS    ►►►        BATB is a very high customer responsive company. The consumer base of this industry is very much involved with the products they consume and can track down slightest change in blend. As the owner of the premium brands of the country, BATB has no other option but become customer responsive organization. BATB carefully analyzes each and every customer complaints and strives to make prior adjustments so that no customer complaint arises.

 

 

 

 

 

Procurement is the process by which organizations can achieve significant, immediate and sustainable reductions in bought in costs. Strategic sourcing and procurement are systematic, cross functional and cross-enterprise process to optimise the purchase costs of both direct and indirect spend categories. The process enables an organization to choose suppliers in a deliberate, calculated fashion and to effectively leverage the spend of the entire organization.

 

World class procurement is NOT-

  • Getting quotes and taking the cheapest
  • Coming into negotiate price after a supplier has been chosen.
  • Negotiating the lowest price at the expense of quality
  • Placing orders for budget holders
  • Sorting things out when the right things don’t get delivered or when the invoices don’t get paid.

 

World class procurement IS-

  • Obtaining the right materials in right quantities.
  • Delivery at the right time at the right place
  • Sourcing from the right source
  • Providing the right service
  • Offering the right price.

 

 

Procurement in BATB:

Procurement in BATB has gone through huge change over the past 10 years. There were evolution of local, regional and global procurement initiatives on direct materials, on significant mergers, acquisitions and closures within BAT and across the suppliers base and more recently, a focus and drive on Indirect Procurement.

 

There is now recognition by the board and the senior management of the significant contribution that Procurement can make in delivering smart cost management across the business.

 

The local Indirect procurement team is split into three main work teams: general business, Marketing and Information Technology. The major functions of the BAT Indirect procurement are:

 

  • Sourcing: What stakeholders really want.
  • Undertaking: Through market, product, suppliers and cost analysis.
  • Selecting: Right suppliers
  • Leveraging: BATB’s scale and negotiating effectively
  • Contracting and managing: Risks and suppliers relationship effectively.

 

 

      

Category of the BATB Procurement:

BATB Procurement is of two types:

  1. Direct Procurement.
  2. Indirect Procurement.

 

Direct Procurement involves with:

  • Filter tows
  • Cartons boards
  • Packing cases

 

Indirect Procurement involves with all goods and services bought to support the greater business except Direct, Leafs and Salary Staffs. Indirect Procurement mainly includes the following staffs:

 

 

  • Stationary
  • Temporary and contract labour
  • Bank fees
  • Electricity
  • Marketing Agency fees
  • Asset purchase
  • Spend charged to internal orders and projects

 

 

Supplier Relationship Management (SRM) of BAT:

SRM is a major tool for the day to day transaction in BAT. Here the detail of SRM is explained.

 

The procure – to – pay process for all expenditures was decentralized with stockholders raising and managers approving as well as requisition online in SAP. As a result, procurement moved away from the traditional purchasing administration role towards one of a tragic added value function. To centralize the process, BATB needs web based software named SRM (Supplier Relationship Management), a site of procurement tools from SAP.

 

Objectives:

There are lots of reasons behind introducing Supply Relationship Management. These are given below:

 

  • Vendor Rationalization: By Supply Relationship Management, it is easy to monitor shopping chart, create PO (Purchase Order) and do web transaction regarding all vendors’ information. So, it’s a process of vendor rationalization.

 

  • Centralization: There is an integration process .So; it is easy to maintain a process.

 

  • Wrong Payment: There are listed suppliers on the process of Supply Relationship Management .So; it is difficult to pay wrong suppliers.

 

  • Emphasize on job: Previously, if any department required any products, department would give time for purchasing that products; but now department just inform the procurement team for their required products. That’s why they can give more times on their own job.

 

  • Professional Approach: Deliver a professional approach to procurement of Indirect.

 

  • Refocus: Refocus Procurement toward decision making and value adding activities.

 

  • Improve Quality: Improve the quality of services to our business.

 

  • Enhancing control: Enhancing control for all the business spends and converting this into meaningful data through management reporting.

 

Three types of catalogues:

Green:  Procurement has negotiated with the suppliers and for the particular product catalogue has fixed the items available, through suppliers and prices. Stationary is a good example of Green Catalogue.

 

Amber: Used where Procurement have selected a preferred suppliers for a product category but have not fixed the items available  or pricing .Amber categories are used where procurement have not yet negotiated a green catalogue with the suppliers or where nature of the services  offered might be inappropriate to turn into green.

 

Red: Used where no preferred supplier arrangement

 

 

Vendors’ Enlistment Criteria:

Only the unit purchase Committees hold the authority to enlist any suppliers or to back list any enlisted supplier. It is also the responsibility the unit Purchase committee to review the performance of the enlisted suppliers and to recommend the names of eligible enlisted suppliers to the purchase steering committee to enlist them as preferred suppliers.

 

The following members will form the unit purchase Committee for the respective unit:

  • Head Office and Dhaka Office
  • Kushtia Leaf Factory
  • Process Finance Manager
  • Plant Manager
  • Project Engineer
  • Leaf Finance Manager
  • Services Manager
  • Leaf Personal Manager
  • One manager from procurement
  • HR manager Production

 

Validity of enlistment

Unit [purchase Committee will enlist suppliers for the goods or services to be procured from them .Enlistment may be effective from any specific point of time on a permanent basis. Any new suitable supplier or contractors can be enlisted at any time of the year from whom the company can get better services at a competitive price compared to the existing enlisted suppliers. Any inclusion of a new supplier must go through proper and adequate formalities as set by the purchase steering Committee and by this guideline.

 

Enlistment criteria

The following criteria should be considered at the time of enlistment of suppliers/contractors:

Application Letter for Enlistment (for new vendor enlistment)

  • Detailed Company Profile
  • BATB EHS Policy Compliance Letter duly signed
  • BATB Security Policy Compliance Letter duly signed
  • Reference Letter from any financial institution
  • Copy of Trade, VAT & TIN License or any other license required by law
  • BATB Prescribed Enlistment Form
  • Copy of Certificate of Achievements
  • Other Points

 

Mode of enlistment

Enlistment should be done by the Unit purchase Committee and through any suitable method approved by the Purchase Committee. Enlistment once completed will be on a permanent basis subject to biannual review. Suppliers enlisted should be informed in writing and duly acknowledge.

 

Enlistment register

After the suppliers have been enlisted a list should be sent to the concerned Accounting location giving details of the enlisted parties such as name(s) of the enlisted parties such as names of the proprietor, partners, directors, address of the business Office with telephone number, telefax no authorised signature etc. All the enlisted suppliers should also be divided by category of items and services. Accounting department will enter these details in the purchase ledger of tetra CS/3.

Security Money

In a case of construction and fabrication job, there should be a provision for retention of 5% of the billed amount as security money from the contractors. This must be retained for the next one year after completion of the job, so that in the event any defect or fault is identified subsequently, the cost can be recovered from the money retained. Retention money will be refunded to the respective contractor after expiry of the retention period. For the jobs exceeding TK 0.5 million, the amount must be held as earnest money which should be deposited by the bidders at the presenting their bid.

 

Review of enlistment

The unit Purchase Committees will review performance of enlisted suppliers once a year. During these the enlistment criterion should be given specific importance.

 

Before the review meeting of the Unit Purchase Committee meeting concerned account will extract a list of all suppliers held on tetra CS/3 .Purchase Ledger and review whether the suppliers are still active and propose to the Purchase Committee to declare these suppliers will be deleted from the suppliers’ list by the concerned accountant after the meeting. The revised suppliers’ list will have to be duly circulated

 

Before going for quotation, suppliers need to be evaluated based on their performance review and the basic issues are:

  • Ability to supply the specified goods and services
  • Service levels
  • Quality of goods and services
  • Price competitiveness
  • Delivery performance
  • After sales services
  • Financial & manpower strength
  • Support during crisis time
  • Compliance with enlistment criteria

 

After selecting suppliers, procurement asks for quotation for the required red catalogues. The selected suppliers send the specific quotations to procurement and then procurement team decides which supplier will ultimately deliver the goods and services.

 

Enlistment not required

Enlistments are not required in the followings:

  • Purchase from the government owned industries/enterprises/sector corporations.
  • Purchase from BATB employees Cooperative for the canteen suppliers.
  • Items purchase infrequently i.e. once or twice in a year.
  • A party enlisted with one company location does not require to be enlisted with other locations for doing business transactions with that location. Hence any location is at liberty to buy goods and services from a party are enlisted with any other location. As such every location should provide each other a copy of their respective updated enlistment list.

 

Black listed Party

A party black listed by the committee at one location should not be allowed to carry out business in any other company locations. If any party is black listed for any reasons, particulars of that party must be circulated to all Unit Purchase Committees.

 

Local supplier enlistment policy and procedure:

  • The suppliers must provide the IMI (Inspection materials Inspection).
  • Delivery Challan
  • Submit vat paper
  • Bill to the finance including GRN number
  • Month end stock status
  • Any innovation.

 

International suppliers’ enlistment policy and procedures:

  • Conformance of shipment schedule.
  • Proforma invoice send to BAT
  • Inspection certificate
  • Commercial Invoice.
  • Goods of hading (about information of goods, volume, how to send the products).
  • Product Data –sheet (product details).

 

Procedure of approved supplier determination

To discuss the preferred supplier procedure, it should be known how important it is to select preferred suppliers. Its main objective is to purchase indirect materials to maximize sustainable benefits from all area of business activities. It also tries to save money, minimize cost and helps the employee’s to run the company smoothly through timely supply the indirect materials with competitive price.

The approved supplier policies:

  • At first enlisted the suppliers in SRM system through observing their physical set up, financial strength, commitment of top management, eagerness etc.
  • Secondly procurement team try to select short listed supplier or approved supplier among the enlisted suppliers. Besides, procurement team try to find out any other good suppliers whose performance is good but not enlisted .If find, offer for bid.
  • To evaluate the listed and non listed supplier through previous track record, performance of company, history, procurement team select short-listed or approved suppliers.

After selecting the approved supplier or short-listed suppliers, procurement team then find out preferred suppliers. According to the need and specification, procurement team sometimes select one or more suppliers.

 

The preferred supplier procedures are as follows:

  • Procurement team then visited the approved suppliers along with concerned stakeholders.
  • To evaluate their performance, procurement team select preferred suppliers through after sales service, capabilities etc.

 

Before going for quotation, suppliers need to be evaluated based on their performance review. The basic issues are:

  • Ability to supply the specified goods and services
  • Service levels
  • Quality of goods and services
  • Price competitiveness
  • Delivery performance
  • After sales services
  • Financial & manpower strength
  • Support during crisis time
  • Compliance with enlistment criteria

After selecting suppliers, procurement asks for quotation for the required red catalogues. The selected suppliers send the specific quotations to procurement and then procurement team decides which supplier will ultimately deliver the goods and services.

 

 

 

 

Before starting the analysis of BATB Procurement efficiency, I need to clearly define the work flow of this department because it is very important to know the workflow for the analysis of the efficiency of any department.

 

 

Process flow of BATB Procurement Department:

 

  • Realization of needs: This is actually the starting of the entire process where a stakeholders realize their needs of any goods or services. Then they inform the procurement team. Procurement team tries to manage the requirement from the enlisted suppliers or if the enlisted suppliers cannot meet the needs, procurement goes for new suppliers and start negotiating.

 

  • Negotiation: In this step procurement team requests for price quotation from different respective suppliers, starts negotiating them and finally come up with a decision by fixing the price and quantity with a preferred supplier. Procurement then informs the respective stakeholders and request them to raise Shopping Carts (SC).

 

  • Raising SC: The purchase requisition process is required to facilitate the management of customers for goods and services. A Purchase Requisition is created as the first step in an integrated business process that ultimately results in the delivery of requirements to a requester.

Each department has one or more persons to create SC. Creator must know the suppliers, items and price before raising SC. If required ,creator should contact Procurement.

 

  • Approving the SC:  The Approver will receive the notification of SC via Lotus Notes. First Approver should be the cost center owner or budget holder. If SC exceeds the authority limits, it will be sent to the next level for approval. This is the point at which the expenditure s approved.
  • Raising and Approving Purchase Orders (PO): After the approval of the SC, POs are created by the purchasing function. SC raised from Green or Amber catalogues will automatically be converted to POs and printed out. SC raised from red catalogues or for non catalogue items will be manually converted to POs Procurement.

A manual signature is required in the PO. It will be hand delivered or posted to suppliers by Procurement. For Kustia suppliers, POs will be emailed. POs can only be cancelled or altered by the Procurement Department.

 

  • Goods and Services receipting: All goods and services that are received by BATB must be receipted into SRM to enable payment. Creator will receive the foods and services and perform the confirmation in the system.

 

  • Invoicing and Payment:  Invoice verification is performed by the Finance in SAP. Payment is processed by the Corporation Finance department.

So I can make the following flowchart to clearly define the work process.

 

 

 

 

 

 

 

Figure:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Procurement functions actually start from negotiation. Efficiency is required in each and every step. At present Procurement department is having some problems with maintaining the efficiency. My project is finding out the factors affecting the efficiency levels and recommending some ways of solving those problems. I actually worked with this workflow and found out some factors in each and every step of this workflow which are actually hampering the efficiency level.

 

I have divided my entire project into three parts:

1. Stakeholders’ perspective.

2. Procurement perspective.

3. My own observation.

 

The reason is Procurement is to deal with different stakeholders. So it is the stakeholders who can say the real scenario of the procurement. So at the first part of my report I took the opinion of different BATB stakeholders who are directly involved with this department. I have done a survey and found out the possible reasons behind the efficiency crisis.

 

In the second part of the report I took the opinion from the Procurement team through another survey. The reason is, it is very natural that stakeholders will say their complaints and reasons of dissatisfaction against Procurement but I must need to know what the problems are actually being faced by the Procurement Team to meet the demands of the stakeholders. I need to know the limitations of Procurement. Otherwise I cannot come up with a proper solution.

 

During doing survey I found that many stakeholders hid some reasons of their dissatisfaction for the security and code of conduct issues. That’s why I have made another part in my project called My own observation. In this part I have actually applied my own judgments. In this part of the report I have tried to find out some problems from my own observation during working with BATB for four and half months, which are affecting the current efficiency level of this department.

 

This is the first part of the report. A questionnaire has been prepared for this part. The respective stakeholders who are directly involved with Procurement are the respondents. This questionnaire has three parts:

  1. About Procurement policy, guidelines and department structure.
  2. About SRM.
  3. About the suppliers.

 

BATB Procurement efficiency highly depends on these three variables.

 

About procurement policy, guidelines and department structure :

 

v Analysis and Interpretation

Q-1 says about the level of awareness about the procurement policy. To maintain efficiency it is very important to know the policy. Policy is nothing but the constitution or law. If in a country the citizens don’t know the basic law, miss management will always take place. Same way people who are involved with the procurement must know about the policy. Other wise the entire process will be time consuming and efficiency will be hampered.

 

From my survey I have found that 64% respondents are fully aware, 32% are little bit aware and 4% are not aware of Procurement policy. So we see that majority of the people are aware and 32% are little bit aware but this 32% actually craters the problem. Less will be this number, more will be the efficiency level.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q-2 says about the number of days taken by the budget owner to be approved the shopping cart as I already said that shopping cart approval is a major step of purchasing and if it takes longer time to be approved, the entire purchasing process will be delayed the shopping cart is approved by the budget owner not by the procurement team.

 

Here we see 48% people said that SC is approved within 2 days, 24% said it within one day, 16% within 3 days and 12% more than 3 days. So majority of the people (72%) have declared that SC is approved within one to two days.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q-3: Says about the number of days taken to be approved the quotations by the procurements team. From the flow chart we have seen that after the approval of the SC procurement department needs to approve the quotations and if it is delayed again the purchase process will be delayed.

 

From the survey I have found that 36% people are in the group of more than 3 days, 24% in three days ,28% in two days and 12% in one day, So majority of the respondents (60%) have said that procurement department takes three or more than there days to approve the quotations.

 

So if we compare it with the SC approval, will find that procurement deportment takes more time to approve the quotation.

 

 

 

 

 

 

 

 

 

 

                           

 

 

 

Q-4. and Q-5 talk about the expectation of the stakeholders to be approved the SC and quotations and this question will identify the gap between expectation and the real performance.

 

Here we see that 48% people expect the SC to be approved within one day and 44% in two days. From the real Performance we have seen that the majority have agreed SC is approved within one to two days. So the process of SC approval in on the right track.

 

Now if we see the quotation approval, 60% want or expect the quotation to be approved within one day and 20% within two days but majority of the stakeholders have declared that Procurement takes three or more than three days to approve the quotations. So here is a big miss-match between the expectation and the performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

So, I can say that BATB procurement department is suffering from the problem of maintaining efficiency level. It has obviously some reasons which have been identified in the later part of the report.

 

Now come to Q-6 which will help to find out some reasons behind the lacking of the efficiency based on some statements like:

 

–         BATB procurement policy is complex:  If the policy is complex people will take longer time or show lower interest to understand the policy. This statement has scored 3.4 which means that people do little bit agree with this statement.

 

–         Incase of confiranatory POs and cancellation of POs, Procurement team provides support: For maintaining the level of efficiency this support is very important. Procurement team has scored here 3.8 which means that people agree with this statement.

 

–         Smoothness of operation is hampered for the performance of the procurement team: Here score is 3.48 which means that stakeholders are bit agree with this.

 

–         Information is available when required: In BATB, sometimes certain situation arises when stakeholders need instant information abut suppliers during purchase. If department fails to provide it, hampers the efficiency level. There the score is 2.84 which is a clear indication that people do dis-agree with it .

 

–         Procurement has enough resource: More a department will be resourceful (both human and   material resources) more will be the efficiency. Here the score is 2.76 which means procurement has insufficient resources.

 

–         The length of time department takes to bring quotations after requistion meets the requirement of smooth operation: Score is 3.24 which means people are bit agree here.

–         Procurement team is fully compliance: It means the department is running according to its own policy and guidelines. Here score is 2.96 which means people are almost neutral here.

 

 

From the analysis of Procurement policy and guidelines I have identified the following areas which have been indicated by the stakeholders as barriers for the efficiency,

 

  1. Complex policy
  2. In availability of information about supplies.
  3. Taking longer time to approve quotations and PO
  4. Lack of resources.

 

 

 

 

 

 

 

About SRM :

 

v Analysis and Interpretation

SRM is a very important and effective tool for procurement efficiency. In this part of survey we will come to know about the status of the SRM regarding BATB procurement efficiency according to the stakeholders’ responds.

 

Q-7. Will say the additional benefits required by the stakeholders from SRM. The respective stakeholders believe that if these benefits can be incorporated with the existing SRM system, efficiency will be improved.

 

From the survey it is seen that 76% stakeholders demand the speed from SRM. If there is not sufficient speed, stakeholders need to work manually which consumes time. Again we see that 36% stakeholders want lotus note notification for the pending GR and SRM related support from admin. When any new one joins in BATB and if he or she needs to deal with procurement department, is to come frequently to procurement team to understand the SRM functionalities. It is actually very much bothering for procurement team from Q-7 we also find that 32% want auto generation of password and 40% want FAQ support from the SRM.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q-8. contains few statements about SRM like:

SRM is very user friendly: It has scored 3.68 which means people believe this statement.

 

 -SRM provides vital support to the daily transaction with procurement  department: It has scored exactly 4 which means people are fully agree with this statement.

 

–         You are satisfied with SRM: Here score is 3.68 means people are more or less agree with this.

 

–          According to you SRM is an effective tool for procurement efficiency: Score is 3.92 means respondents agree this statement.

 

After the analysis of this part it is clear that people have no doubt about the effectiveness of SRM regarding procurement efficiency. Here they are slightly dissatisfied with this system and it will be over come if the required benefit like speed. FAQ support, SRM related support etc could be incorporated with current SRM

 

 

About Suppliers :

 

v Analysis and Interpretation

Suppliers’ activities are very important factor to measure the efficiency of any procurement department. If suppliers can not provide goods in time, the ultimate blame goes to the procurement.

 

BATB stakeholders are not fully satisfied with the suppliers. They have said that Procurement performance is being hampered by the suppliers. So in this part of the survey I have tried to identify some factors regarding suppliers issues which are hampering the current efficiency level. Q-9 will talk about this.

 

Here there are few statements which will help to identify the status of BATB suppliers.

 

–         Supplier information is available in procurement department: There the score is 3.68 which means that respondents are bit agree with this.

 

–         Suppliers provide goods according to the requirement: Here BATB procurement department has achieved score 3.52 which means people moderately agree with this statement.

 

–          You are fully knowledgeable about our supplier enlistment policy: Score 3.60 says that stakeholders are knowledgeable about BATB suppliers enlistment policy.

 

–         Negotiation with suppliers against the frequent price change in the mated is effective: This is very important because as it has already been said that BATB procurement team has agreement with different suppliers to fix up the price and for some items (Red Items) price is not fixed. Incase of green items if there is huge price fluctuating or price continuously fluctuates agreement of green items is also changed. Here I have tried to know whether stakeholders are satisfied with BATB policy against price change or not. Result says stakeholders are not fully agree with this statement as the score is 3.48 here which is below 3.50

 

–         If suppliers change, procurement informs you timely: Procurement team has scrod 3.68 which means stakeholders are more or less satisfied.

 

–         Suppliers provide better quality of goods: stakeholders are bit satisfied here as the score is 3.52.

 

–         Suppliers provide necessary service: BATB procurement team is a better position here as the score is 3.76 .

 

–         Suppliers are knowledgeable about the procurement policy: Here we see that suppliers are not that much knowledgeable about the procurement policy as the score is 2.88 It must be improved because if suppliers don’t know about the department policy, guidelines and mission they cannot perform accordingly.

 

–         Negotiation with suppliers takes longer time: Here procurement team is also performing poorly as the score is 2.72. Efficiency of any procurement highly depends on how quirkily they can negotiate with suppliers If negotiation time is longer the entire purchase process will be delayed.

 

Supplier management is very important to maintain the efficiency level – Here we see that stakeholders are more or less satisfied with quality of goods and service provided by suppliers. They also have less complain against the communication process, information availability but the problems that they have indicated are listed below:

 

 

  1. Longer negotiation time with suppliers
  2. Procurement policy fails to meet the requirement in emergency purchase.
  3. Less knowledge of supplies about procurement policy.
  4. Suppliers cannot provide goods on time.

 

 

 

 

This is the second part of my report.  In this part I have taken the department peoples’ perspective in to the consideration. In this part I have tried to find out the difficulties and limitations working with this department. It is very important to know because if we don’t know the limitations of working, we cannot go to the root of the problem. Efficiency highly depends on job satisfaction. If working environment does not suit, if employees don’t get their desire benefits, can never give their best.

 

Research says that job dissatisfaction and limitations of working are two major reasons of inefficient performance.

 

Now let see how much employees are satisfied or what are their limitations of working with Procurement. In my survey question there were some statements based on which I have tried to find out some reasons of inefficiency:

 

 

–         There is lack of support from the superiors: The Procurement team has denied this issue as the acquired score is 2.2. During work, if there is no sufficient support from the superiors, it becomes really very difficult to work. BATB Procurement team people are happy with their respective superiors.

 

–         There is lack of support from the subordinates: It is also very essential to get support from the subordinates for efficient work. If subordinates don’t provide necessary support, efficient performance is never possible. Here the score 2.2 says that Procurement team is also satisfied here.

 

 

–         There is lack of support from the respective stakeholders: Procurement team is to always deal with different stakeholders. In many cases procurement requires information or other assistance from its stakeholders but if the stakeholders fail or show indifferent attitude in providing those supports automatically the efficiency level declines. Here the score 2.4 says that Procurement team are also satisfied with their stakeholders.

 

–         You are to perform jobs which are beyond your job responsibilities: If there is too much work load and if the employees are to perform beyond their job responsibilities, they become demotivated and this demotivation creates the inefficient job performance. Score 2.8 indicates that people are almost neutral with this statement.

 

–         There is no proper job description: A complete job description guides an employee to the proper direction which is very important for efficient performance. Score 2.6 says that Procurement team is also satisfied with this issue.

 

 

–         Lack of proper communication between you and your respective stakeholders hampers your job: Here the score 4.2 says that Procurement team is facing a problem with this issue. They are not satisfied with communicating their stakeholders.

 

–         Lack of proper communication between you and your job mates hampers your job: Procurement team is also facing problem here as the score is 4.2. That means there are some miscommunication within this department.

 

 

–         There is lack of sufficient resources: Score 4 says that procurement team agrees with this statement. At present procurement is suffering from the problem of insufficient human and capital resources. This department is to deal with lots of works everyday, but there is insufficient number of people to work. As a result there is huge work load on the existing employees which sometimes create job dissatisfaction and results is inefficiency. This department also requires some more space. The reason is this department is to deal with lots of files and paper which are piled here and there. As a result sometimes very important documents become lost for the lack of poor file management which extremely hampers the efficiency.

 

–         There are too much paper based works: The efficiency of any department highly depends on the systematic approach of the work. If there are too many manual works to do, the efficiency will be hampered. More the systematic work, more will be the efficiency. Here the score 4.2 says that procurement team is to deal with too many paper based works which actually kills lots of valuable time and the total working process slows down. So there is no doubt that too much paper based work is one of the main reasons for the inefficiency.

 

 

–         If paper based works are transformed into the system, will ease your day to day job: It has already been said that system based work increases the efficiency. Procurement team has also agreed this issue.

 

–         Too many suppliers hamper the current operation: Score 3.8 is an indication that it is also a problem for this department. At present there are too many suppliers among them there are many unnecessary suppliers which are creating disturbance to work.

 

 

–         There are lacks of information about suppliers: Here the result is neutral which means that supplier information is not a big problem for this department to maintain the efficiency.

 

–         You face difficulties with the BATB SRM system: It is very important to know because SRM is a very important Procurement tool. If it does not perform properly, it is never possible for the team to ensure efficient performance. Survey result of 2.6 says that it is also not a problem for this department.

 

 

–         BATB Procurement policy should be revised: Score 4 indicates that this statement is very true. If it is revised, working procedure will be much more flexible.

After the end of this part I have found the following issues which are creating the result of dissatisfaction for the working people of this department:

 

  1. Lack of proper communication among stakeholders and the department people.
  2. Lack of proper communication among the people within the department.
  3. Lack of sufficient resources.
  4. There are too may paper based works.
  5. There are too many suppliers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This is the last part of my report. I have worked in the Procurement department for four months. During this time I have observed and identified some issues for the inefficiency of this department. I will describe those issues in this part of the report.

 

During doing survey I have noticed that respondents escaped few matters for the security and code of conducts. So I have tried to highlight those matters in this part of my report. For the proper finding, it is very important to consider those matters.

 

Here there are some factors that I noticed:

 

  • In some cases I have found that there is no proper job specification. For example green POs are needed to be manually signed off but who will do this signing is not properly defined. As a result sometimes it creates problems.

 

  • Procurement team is to deal with all other departments of BATB. So there should be a proper policy regarding who will deal with which department. May be it is defined but not properly followed as a result there is too much working load on an individual person. This is another reason of inefficiency.

 

 

  • I have found lack of control and monitoring here. There is access of unauthorized persons like the clerical people and other staffs. It should be checked because lots of important files and papers are always on the table. Lots of times important papers are found missing or displaced. So here procurement must care.

 

  • There is no proper database for supplier information. All are manually filed. But it always kills valuable time to manually search information about suppliers. Moreover, due to manually search, sometimes documents become misplaced. It is a major reason for creating inefficiency.

 

 

  • Lack of resources is a big problem for this department. Procurement needs some more human resources for their smooth operation.

 

  • There is lack of knowledge among the stakeholders regarding Procurement policy and guidelines.

 

 

  • SRM has also some limitations like how SRM works is not incorporated. As a result stakeholders (especially new joiners) make mistakes working with it and ultimately it hampers procurement’s operation.

 

Recommendations:

Based on all the findings, I would like to recommend the following things for BATB Procurement to increase their efficiency:

 

 

  • There must be a clear job specification. For example among all departments, if a particular one deals with Finance, HR and CORA, he or she will deal with all POs and quotations of these three departments. No other one will be responsible for this. As a result workload will be distributed which will reduce job dissatisfaction. By this way a proper control can be possible.

 

  • Procurement should fix a time of approving POs and quotations like 24 to 48 hours. Within this time whenever papers will be realized, Procurement will inform the respective departments and only then staffs from those departments will come to collect the papers. By this way they can manage the unauthorized access of people.

 

  • To update people about procurement policy and guidelines, Procurement can arrange “Procurement Week” at least twice in a year where Procurement will take feedback from the respective stakeholders about their performance. By this way they can identify their weakness and strength and also can ensure a better service.

 

  • It is clear that lack of communication is a problem for the procurement. To remove this problem company can develop a Communication Network System  which will be electronically connected with every stakeholders. So if there is any new message, each and every one will get it. There could be a specific communication person whose responsibility will be to ensure the entire communication.

 

  • Company must think of expanding the department. There should be more space allocation and of course some more human resources are needed. Recruiting people also requires cost. So here company can recruit people on the basis of contract or part time basis.

 

  • All suppliers information should be transformed into a system. There should be a supplier database where all new and old suppliers information will be kept in record and every time it will be upgraded. There should be also a backup of this database so that any problem of the main database cannot hamper the operation.

 

  • Suppliers with whom there is no transaction for at least one year or more must be eliminated from the system. As a result it will ease to keep record of all the suppliers. If there are too many suppliers becomes very difficult to monitor.

 

  • Procurement team should negotiate with suppliers more promptly and during negotiation they can invite the respective stakeholders to minimize the dis- satisfactions level of the stakeholders.

 

  • Procurement team should do orientation program with the new suppliers to inform them about the procurement policy and guidelines.

 

  • They should arrange suppliers convention at least twice in a year with all suppliers to update suppliers about the policy and guidelines.

 

  • They should think about the size of the company, its location etc before enlisting any suppliers as suppliers need to communicate frequently. If their office is located at distant place from BATB, automatically the delivery time will increase.

 

 

 

 

 

 

Conclusion:

 

Finally at the end of the report I would like to draw the workflow again:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After the analysis of the whole report I have found that the efficiency problem is occurring in three stages of the work flow.      Sign is indicating those stages which are:

  • Negotiation.
  • Approving SC and Quotations.
  • Raising and approving POs.

 

Highest time is killed for approving quotations. So Procurement must think and should take necessary steps. I hope my report will help them to identify the reasons of inefficiency and will also help to take right steps of improving the situation.

 

 

 

 

 

 

 

 

 

Appendix
Project Proposal

 

(1) Background of this Project:

1.1: Brief description of the responsibilities of BATB indirect procurement:

 

According to the BTB procurement Policy, the entire procurement system is divided into parts. One is direct procurements which includes al direct goods as wrapping materials and leafs. The another part is indirect procurement which includes all other goods and services excluding direct goods, taxes and salaries. The major function of the indirect procurement team is purchasing items from preferred suppliers as identified by the procurement team. On the obscene of a preferred supplier, an enlisted supplier may be used. In this regard two major functions of indirect procurement are as follows:

 

Approval of quotations: Quotation includes list of prices of all necessary items. If any stakeholder of BATB requires to purchase any thing,  at first need to inform the indirect procurement department. This department will then ask for quotations form different enlisted suppliers. When suppliers. When suppliers will drop the quotations, procurement team will go for negotiation and after the negotiation, the lowest price offered supplier will be selected and his or her quotation will be approved.

 

Approval of purchase order: When the quotation will be approved, the respective stakeholder will raise purchase order against that particular and will submit both the documents (Purchase order along with the quotation) and the procurement team will approve the purchase order. When the purchase order is approved, the stoke holder is allowed to purchase. So in this regard, three types of purchase orders are used.

(a) System generated purchase order (SRM and SAP)

(b)                  Manual purchase order.

(c) Legal agreements stating the quantity and rate.

Based on the nature of the indirect and service there are two types of purchase orders.

(a) Green purchase order: These are orders are raised against these goods and services which are frequently required.

(b)                  Red purchase order: These orders are raised for those goods and services which are not frequently purchased.

 

1.2: Brief overview of my project: Thee focus of my project will be to support the indirect procurement in increasing their level of Efficiency means the better service at the shortest possible time. To increase the efficiency level, at first I have to find out the beneficiary groups. If the efficiency I increased, different stakeholders will be benefited. When stakeholders will be benefited, ultimately the entire company will be benefited. In this regard I will try to find out the problems identified by these stakeholders. When the problems will be identified, I will with the procurement team and enlisted suppliers and will try to find out a proper solution without violating existing procurement policy of BATB.

 

v Steps to be followed:

  1. Consulting with the procurement team at first.
  2. Studding the procurement guidelines properly.
  3. Consulting with different stakeholders and of the departments.
  4. Making a survey to measure the level of satisfaction of respective stakeholders.
  5. Will suggest for “BATB procurement Efficiency Week” where the entire procurement department will run according to my own suggested plan for seven days.
  6. My survey will have two phases. At the first phase current satisfaction level of different stakeholders will be measured. Then at the next phase the satisfaction level of stakeholders regarding the efficiency will be measured after observing “BATB Procurement Efficient week”. This will actually show the gap of satisfaction level regarding efficiency. It will also represent at the fruitfulness of my suggested plan.

(2) Current Situation of the indirect procurement:

After working for few days with the procurement team, I have found some lacking s which is affecting the level of efficiency. If I am allowed to run this project, I will pinpoint those lacking and I am pretty sure that it will help the procurement team to increase their efficiency. There is a good number of BATB stakeholders who are not at all satisfied with the efficiency level of the procurement team. So my major function will be making a survey among the BATB stakeholders. This survey will help me to identify the problems and the gap between the expectation and the real benefit got by  the stakeholder from procurement department.

According to BATB policy, every PO will be approved by 24 hours but in reality tit takes two or even more than two days to be approved. Moreover the is no specification of  emergency because sometimes some Pos are required for urgent approval but there  is no proper guideline of getting approval in this situation. My job will be suggesting for a proper guideline to improve this situation.

 

(3) Methodology:

(a) Types of data: Both primary and secondary data. I will make two surveys. One for the BATB stakeholders and the other one is for Procurement team. Basically I need to take direct feedback from the stakeholders about the procurement efficiency. Because it is only the stakeholders who can give real picture of procurement efficiency. Moreover, I also need to know the limitations of working in BATB Procurement because without knowing these limitations we cannot go to the root of the problems. That’s why I will provide another survey question for the Procurement team. For my analysis purpose, I need to know the procurement policy and guidelines so I require the primary data on Procurement policy and guidelines.

 

(b) Sources of data:  Secondary data will be collected from different vendors, stakeholders of BATB, website and company policy. Primary data will be collected form a survey based on a questionnaires.

 

(c) Data Collection method: For primary data a close ended questionnaire will be used. For secondary data I will directly consult with different vendors and stakeholders.

(d) Data Analysis method: I will use M.S. Excel for the data analysis purpose.

 

(e) Population: BATB stakeholders who are directly or indirectly involved with the operation of indirect procurement and all Procurement employees will be my population.

 

(4)     Reporting:

The report will be submitted after the end of the research. I will present all of my findings and recommendations with a hard copy and on audio-video presentation.

 

(5) Requirements for the projects:

(a) Relevant information: For this project the detail list of all suppliers (both preferred and potential) will be required. Besides a proper job description of the procurement team, relevant stakeholders information will be required. A detail list of Green purchase order and red purchase orders will be required. Moreover I will be required for the detail of BATB procurement policy.

(b) Time: 15-20 days will be sufficient for this project after getting the approval.

(c) Budget:

Transportation = 1000/-

Printing Cost = 1000/-

Binding cost = 200/-

Miscellaneous = 500/-

This is an approximate budget required for the project the amount could be deviated from this amount.

(d) Proper Supervision: To conduct this project I will be required supervision from you and also from my BATB reporting manager.

 

This is a questionnaire prepared by Satyajit Roy, Intern, for the BATB Stakeholders on the

efficiency of BATB Procurement Department for the purpose of preparing Internship Report.

This is solely for academic purpose and all information will be kept secret.

 

 

 

Department:

 

About procurement policy, guidelines and Department structure:

 

  1. 1.    How much are you aware about the BATB Procurement policy?

a. Fully aware                   b. Little bit aware                  b. Not aware

 

 

  1. 2.    According to you it takes to be approved of your POs by budget owner within:

a. One day                b. Two days                  c. Three days                d. More than three

days.

 

 

  1. 3.    According to you it takes to be approved of your quotations by procurement department within:

a. One day                b. Two days                  c. Three days                d. More than three

days.

 

 

  1. 4.    How many days do you expect to be approved of your POs?

a. Within one day   b. Within two days      c. Within three days    d. Within one week

 

 

  1. 5.    How many days does it take to be approved of your quotations?

a. Within one day   b. Within two days      c. Within three days    d. Within one week.

 

  1. 6.    Please put tick mark

 

Strongly agree

5

Agree

4

Neutral

3

Disagree

2

Strongly disagree

1

BATB procurement policy is complex
It takes longer time to get sign off of your POs and quotations.
If there is any change in the procurement policy, it is instantly communicated.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In case of confirmatory PO, cancellation of PO etc, procurement department supports very quickly.
Smoothness of your operation is being hampered for the current performance of procurement department.
Information is available in procurement department, when required.
Procurement has enough resource (both human and material resources), to fulfill all of your requirements properly.
The length of time, procurement department takes to bring quotation after requisition, meets your requirement for smooth operation.          
Procurement department is fully compliance.

 

About SRM

  1. 7.    Please select the type of benefits you desire from the SRM

a. Speed          b. Lotus note notification for the pending GR          c. Auto generation of password

d. SRM related support from admin  e. FAQ support

f.. Others_____________________

 

8. Please put tick mark

Strongly agree

5

Agree

4

Neutral

3

Disagree

2

Strongly disagree

1

SRM system should be modified and upgraded.
SRM is very much user friendly.
SRM provides a vital support to your daily transaction with the procurement department
You are satisfied with the SRM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

According to you, SRM is an effective tool for procurement efficiency.

 

About suppliers:

9. Please put tick mark

 

 

 

Strongly agree

5Agree

 

4Neutral

 

3Disagree

 

2Strongly disagree

1Supplier information is available in procurement department..     Suppliers can provide goods according to your requirement.     You are fully knowledgeable about our supplier enlistment policy     Our supplier enlistment policy is effective when emergency situation arises.     Negotiation with suppliers against the frequent price change in the market is effective.     If suppliers change, procurement department informs you timely.     Suppliers deliver goods on time.     Suppliers  provide better quality of goods     Suppliers  provide necessary service     Suppliers are knowledgeable about procurement policy     Negotiation takes longer time

 


10. Please mention your valuable suggestions to increase the efficiency of BATB procurement department.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THANK  YOU


               This is a questionnaire prepared by Satyajit Roy, Intern, for Procurement Team on the efficiency of

BATB Procurement Department for the purpose of preparing Internship Report. This is solely for

academic purpose and all information will be kept secret.

 

 

 

Please put tick mark:

  Strongly agree

5Agree

4Neutral

3Disagree

2Strongly Disagree

1There is lack of supports from the superiors     There is lack of supports from the subordinates     There is lack of supports from the respective stakeholders     You are to perform jobs beyond your job responsibilities     There is no proper job description     Lack of communication between you and your stakeholders, hampers your job.     Lack of communication between you and your job mates, hampers your job.     Procurement has lack of sufficient resources including both human and capital resources.     There are too much paper based works to be performed.     If paper based works are transformed into the system, will ease your day to day job.     Too many suppliers hamper your daily operation.     There are lacks of information about suppliers.     You face difficulties with BATB SRM system.     BATB Procurement policy should be revised.     

  • If you think that BATB Procurement has lack of sufficient resources including both human and capital resources, please mention the necessary steps to be taken.

 

a. Increase human resource                           b. Increase capital resource

c. Training for the existing human resources.      c. Proper orientation for the

joiners.

d. Others_________________________

 

  • · If you think that there is lack of proper communication between you and your  stakeholders, please mention the reason behind it:

a. Busy working schedule of you.                           b. Busy working schedule of your

stakeholders    c. Organizational hierarchy.   d. Indifferent attitude of stakeholders

  1. Others______________________________

 

  • If you think that there is lack of proper communication between you and your  jobmates, please mention the reason behind it:

a. Busy working schedule of you.                           b. Busy working schedule of your

stakeholders    c. Organizational hierarchy.   d. Indifferent attitude of stakeholders

  1. Others______________________________

 

  • · If you think that there should be some changes in current SRM,please briefly mention here:

 

  • · Please briefly mention your job responsibilities with this department:

 

 

Thank You.

 

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