Question:
Practitioner Corporate Award
Assessment Code: PIN
This assessment tests the learning outcomes and module content of the following Modules:
- Driving value through procurement and supply
- Managing expenditures
- Developing contracts
- Sourcing essentials
- Negotiation in procurement and supply
Task
Select a category of spend from your organisation. Develop and discuss a plan using the knowledge gained from this programme which could form the basis of a formal commercial negotiation. Your assignment should include an explanation of the key facts, data and approaches that you will use in the negotiation.
Remember, the negotiation does not have to be just about price. Other considerations could include quality, delivery schedules, timing and amendments/variations etc.
Guidance for candidates
Your work should consist of 5,000 words. The integrative assessment requires candidates to use their knowledge gained from the previous four modules therefore, candidates will need to refer to the syllabus coverage in the following modules:
Answer:
Executive Summary
This is an integrative report of Corporate Award Program for a formal commercial negotiation set for Eco2Solar organisation in United Kingdom (UK) energy sector. To develop this, key facts, data and approaches relevant for negotiation process have been applied. The selected category of spend is Solar Panels in their advancing of super-efficient solar energy categorised as durable, versatile and minimisation of wastes with a maximised energy usage. A set of tools, techniques, theories and concepts have been used to evaluate and propose a good negotiation plan. The category of spend has been selected due to its critical nature of ensuring the organisation is successful in provision of solar energy solutions to new build homes and commercial constructions. This is identified as a highly reliable, super-efficient system which is sustainable for 30 years and more. Further, as a result of the prevalence of COVID-19 pandemic and Brexit policy in UK, there has been long-term procurement and supply issues adding to the fluctuations of price changes. Therefore, the demand for the solar panels in Eco2Solar organisation substantially increasing. Hence, for successful negotiation, Eco2Solar engages professionals to harness one-on-one and virtual-based negotiations, set terms and conditions, holistic preparation and streamlined procurement and supply chain management. Through efficient forecast and plans, they utilise and guarantee offering of opportunities for customer’s needs.
In this report analysis, a set of findings have been obtained which note that Eco2Solar organisation follow different steps in negotiation based on CIPS guidelines. They include preparation, opening, proposing, bargaining, agreement and closure. Also, in line with the market environment analysis by use of STEEPLE, Porter’s 5 forces and SWOT analysis, a set of strengths and leveraging areas for success in negotiation strategy have been recommended. In stakeholder analysis and supplier preferencing matrix core findings, they note the need for harnessing successful negotiation. Also, as evidenced in 5 Rights of Procurement and the 3P’s Triple Bottom Line models, the importance of acquiring important skills and competencies has been established. These include communication, engagement, teamwork, accountability and management of entire conflicts as critical. The identified strategies promote successful negotiation framework and mitigation of potential bottlenecks in achieving and embracing BATNA technique.
Lastly, as evidenced in the sourced findings, the different recommendations obtained are;
- Successful restructuring of Eco2Solar negotiation strategy with the different vendors roles classification to solve the identified duplicated roles and procurement cycle improvement
- Implementing success in outsourcing process for ensuring an increased value addition in regard to products and cost saving
- Establishing an accurate and relevant specifications for their inclusion in the overall stakeholders of Eco2Solar organisation contract development. This is instrumental for promoting successful organisation procurement strategy
- To promote suppliers selection approach by evaluating their SWOT profile to consider financial viability, evaluating suppliers risks and leveraging on competitive advantage
Table of Contents
1.1 Objectives of this Report 5
1.2 Eco2Solar Organisation Background and Procurement and Supply Management (PS&M) 5
1.3 Categories of Spend in Eco2Solar Organisation. 6
1.3.1 Selected Category of Spend. 7
2.0 Eco2Solar Organisation Procurement and Supply Process 8
2.1 RACI Stakeholders Model in Eco2Solar Procurement Cycle. 10
3.0 Negotiation Plan for Eco2Solar Organisation Solar Panels Category of Spend. 14
3.1.3 BATNA in Negotiation Preparation. 18
3.1.4 Negotiation Approaches Applicable. 19
3.4.1 4R’s Model Application. 23
5.0 Conclusions and Recommendations. 26
Appendix 1: Eco2Solar Organisation Procurement Terms and Conditions 31
Appendix 2: Creating the Right Procurement Environment 35
Appendix 3: Kraljic Analysis Matrix. 35
Appendix 4: Procurement Strategy Steps 36
Figure 1: Factors of consideration in a Negotiation. 6
Figure 2:Eco2Solar Organisation Structure in PS&M.. 8
Figure 3:Eco2Solar Spend Categories 9
Figure 4:Main Consideration of the procurement and supply cycle. 11
Figure 5:RACI Matrix and application in PS&M in Eco2Solar organisation. 12
Figure 6:Categories of Stakeholders. 14
Figure 7:Mendelow’s Analysis in Eco2Solar Organisation Solar Panels Spend Category. 15
Figure 8:Negotiation Strategies 17
Figure 9:Negotiation Stages summary. 17
Figure 10:SWOT Analysis for Eco2Solar Organisation. 19
Figure 11:Eco2Solar Solar Panels Spend Category BATNA. 21
Figure 12:Potential Negotiation Strategies in Eco2Solar Solar Panels Procurement 22
Figure 13:The 5 Rights of Procurement Process 24
Figure 14:4R’s Model of Eco2Solar Solar Panels Procurement 26
Figure 15:Supplier Preferencing Matrix 27
Table 1:Eco2Solar sub-categories of Solar Panels Spend Category. 10
1.0 Introduction
In today significantly competitive environment, commercial contracts rates of success are significantly constrained. The failure is attributed to flaws in stakeholder management, cost overruns, delivery, quality and need to amend/vary. In line with CIPD (2021), commercial negotiations success are based on embrace of effective communication, stakeholder relationship amongst the buyers, negotiators and advisors. For successful negotiation process, an organisation is supposed to note on their stakeholders interests, concern issues and identify all variables. Also, in line with CIPS (2020), negotiation process include a detailed communication among different parties with core objective set and expectations on the results of achieving mutual agreement set. In line with the figure 1 summary negotiation process success is dependent on various factors put into consideration. They entail cost management, quality of products and services, conflicts management and addressing any evident issue. Also, for success in negotiation process, there exist different parties to be satisfied with their interests considered for improvement of performance for meeting assigned Key performance indicators (KPIs) and Service Level Agreements (SLAs).
Figure 1: Factors of consideration in a Negotiation
Source: CIPS (2020a)
1.1 Objectives of this Report
This report is founded on offering a background information on a best practice in commercial negotiation plan for Eco2Solar organisation. As part of analysis and selection of the best negotiation strategy, facts, strategies and organisation data has been used. Also, different factors critical for evaluation including quality levels, terms and conditions (see appendix 1), schedule of delivery, communication strategies and stakeholders relations have been evaluated. For this report scope, different tools and models such as 5 Rights of procurement, Mendelow’s matrix, Kraljic, 3P’s Triple Bottom-line, BATNA and MIL have all been used. Also, the Supply and demand curve, STEEPLE forces analysis, SWOT tool and Porter’s 5 forces for external environment analysis have been used. Eventually, relevant recommendations are provided for increasing the negotiation approach.
1.2 Eco2Solar Organisation Background and Procurement and Supply Management (PS&M)
Eco2Solar has been operating in UK energy sector from year 2007 with a target of address of current climate change threats. The scope of operation is lowering the CO2 emissions and fuel shortage through a facilitation of use of solar energy (Hutchens, 2019). Eco2Solar for a long period of time has been providing the solar energy solutions to newly constructed residential homes and commercial installations. Most of their clients include multinationals such as Barratts, Taylor Wimpy, Linden Homes, David Wilson ad Lovells. For the organisation achieving success in their business environment, as a best practice, the organisation projects in the past are in healthcare centers (40%), schools (50%), care homes (30%), and large apartment installations (20%). Currently, the overall profits of the organisation average upto £10 million characterised by past engagement process with clients inclusive of Worcestershire County Council and Sanctuary Housing occupying approximately 50% of organisation overall spend category (Eco2Solar Internal classified documents). This is critical in organisation achievement of their set objectives. Other than this, they have been able to set multiple domestic construction areas in Midlands and others.
The PS&M department operates a hierarchical structure with three different levels as shown in figure 2. These departments include the procurement and supply management (PS&M) at the top with different affiliates and tendering portal, services, indirect and direct products procurement in third level. The different levels work collaboratively to guarantee successful procurement which is guided by the Eco2Solar organisation terms and conditions (see appendix 1). The Eco2Solar PS&M core values entail their employees competencies in tendering, stakeholders management process and usage of technology. This is specifically important in today COVID-19 pandemic where procurement and supply dynamics have been altered substantially.
Figure 2:Eco2Solar Organisation Structure in PS&M
1.3 Categories of Spend in Eco2Solar Organisation
The Eco2Solar categories of spend are grouped into three core sections. As illustrated in figure 3 summary, these include the direct materials, direct materials and services. For the direct materials, they include every day procurement by the organisation in areas of employees facilitation, COVID-19 pandemic safety strategies, equipment safety and the package materials. This is contrary to indirect materials which are the solar panels, fuel and services, vehicles, uniforms and other logistics. More critically, the different spend categories are directly influenced by a set of factors relating to stakeholders relations, policy development and set procedure, incurred risks and obstacles. This is while their quality and efficiency of products and services delivery being intended to achieve end-user preference prioritised.
Figure 3:Eco2Solar Spend Categories
1.3.1 Selected Category of Spend
In figure 3 summary, the various spend categories selected influence driving value in the overall PS&M. In line with Lorentz et al. (2021), differences in different spend categories harness the process involved to narrow down set focus and ensuring entire categories are prominent. In my placement in Eco2Solar organisation, I work hand in hand with the P&SM department to facilitate the process followed to source and deliver the Solar Panels product. This is what has contributed to Eco2Solar being ISO 90001 certified in terms of setting standards for ensuring meeting of needs of customers effectively, consistently and efficiently in quality management system (Eco2Solar, 2021). The identified spend category is instrumental in 2021/2021 financial year since Eco2Solar has budgeted approximately £10 million in procurement fees. In evaluating the Eco2Solar different categories of spend, table 1 can be generated which entail different subcategories of the construction process. this include their importance and need to prioritise on the existing policies.
Table 1: Eco2Solar sub-categories of Solar Panels Spend Category
Table 1:Eco2Solar sub-categories of Solar Panels Spend Category
| Eco2Solar Spend Categories | Source | Sub-category Example |
| Energy storage | Locally and internationally | Pumped hydroelectric, compressed air, flywheels, batteries and thermal energy storage |
| Electric vehicle (EV) chargers | Locally and internationally | Level 1, Level 2 and Level 3 based on delivered power to a vehicle |
| Condition monitoring | Locally and internationally | Vibration analysis and diagnosis, lubricant analysis, acoustic emissions, infrared thermology |
| Solar panels inspection | Locally and internationally | Service by government and internal quality assurers |
| Installation of the panels | Locally and internationally | Rooftop solar panels, solar PV installations |
2.0 Eco2Solar Organisation Procurement and Supply Process
Prior embarking on negotiation process, procurement is core which is executed through adoption of different stages to guarantee quality and on-time products and services provision as guided by buyer specification. In line with CIPS (2021a), procurement cycle is relevant as it highlight various phases and evidence step-wise strategy influencing process efficiency. A major requirement is embraced of competency in various areas by the procurement team and to ensure attainment of assigned organisation goals. Procurement cycle summarised in figure 4 identify the best strategy. At initial phase for instance, the entire requirements are defined with specifications established. Also, it is in this stage where the organisation is mandated to evidence the prevalent needs and opportunities available. According to CIPS (2021b), this is the first stage and has cross-functional evaluation of stakeholders for developing a detailed and a high-level specifications scope. This is also inclusive of engaging different stakeholders from the start to mitigate delays and bottleneck.
For specifications development, main issues of interest are counterfeited products and services, quality demand, sustainable practice, effectiveness of stakeholder inclusion, innovation embrace and technology application.
Figure 4:Main Consideration of the procurement and supply cycle
As illustrated in figure 4, this represent the best practice adopted by Eco2Solar in their procurement and supply cycle. The rationale of this is to clearly establish business need, market analysis, good plan and strategy, documentation, issuing tenders, performance improvement and logistic. For Eco2Solar, the main considerations in procurement strategy include stakeholders input in their solar panels procurement category. Hence, CIPS (2019) note the most appropriate strategy as being inclusive of identification of the type of a stakeholder core for positioning an entity in negotiation process and P&SM efficiency. Further, to achieve success in stakeholder analysis, an entity active involvement with best individuals and enhancement of sourcing plan is relevant.
2.1 RACI Stakeholders Model in Eco2Solar Procurement Cycle
A holistic procurement and supply strategy is identified through being accountable and competent in different cycle phases. Through the application of RACI framework, it is possible to identify factors of Responsible, Accountable, Consult and Inform. They are evidenced as instrumental for noting personnel competencies in resourcing and supply approach for all tasks implementation. As evidenced in Project Smart (2021), RACI model is applicable to ensure stakeholders interests evident and are a priority in procurement and supply (see figure 5 summary).
Figure 5:RACI Matrix and application in PS&M in Eco2Solar organisation
Source: Summarised from CIPS (2019)
Responsible– This include stakeholders or people with a mandate to execute particular functions. For Eco2Solar spend category, PS&M is engaged. Starting the top of hierarchy technical personnel, different stakeholders are engaged for success in procurement. For instance, Installation of the panels and solar panels inspection, they necessitate stakeholders in coming up and evaluating all demands and best sources. For RACI framework, responsible include people collaborative practice for guaranteeing entire process success. Through a reference of New Zealand Defence, Wemyss (2018) evidenced RACI Model as best practice in roles demonstration and inclusion level of various stakeholders in procurement.
Accountable– This entail decision making process and authority to approve or reject a specific process. In Solar Panels spend category, stakeholders are expected to highlight level of accountability to execute their roles. The mandate of procurement and supply chain manager is accounting for all decisions. In line with Davies et al. (2009), inventory planning is applied for ensuring procurement stages are implemented based on prevalent demands. For Solar Panels procurement spend category, entire strategies require obtaining approval from an inventory planner and PS&M senior manager. Other than the procurement cycle success, accountability ensure any problem faced is owned up.
Consulted– This aspect note on stakeholders and individuals provided by detailed feedback and input before commencement of their operations. In line with NC State University (2021), different stakeholders are identified as actively participating in the process. A set of stakeholders are engaged in Eco2Solar organisation procurement and supply management process to guarantee successful procurement process. This evidence the importance of executing stakeholders analysis to note on the stakeholders relevant in PS&M. An appropriate instance is where the customers as a stakeholder is supposed to influence the overall process.
Inform– For RACI model, this include different stakeholders and individuals notification for procurement cycle decision and set progress. More critically, consultation are informal and unnecessarily contribution of relevant decision-making (New Zealand Government Procurement, 2021). In line with figure 6 in subsequent area, the stakeholders category need to be monitored. They entail solar panels installation, management operations and condition monitoring. To inform the different stakeholders categories ensure Eco2Solar abide to assigned policy making and quality measures. For RACI model, negotiation approaches need to be prioritised on quality issues which impact on necessity for approving and abiding the government regulation. The relevance of the RACI model and its application in modern COVID-19 pandemic provision with various regulators and stakeholders engaged in harnessing safety and products quality offered. Significantly, different demands directly impact the efficiency, on-time service provision and success in planning the products provision.
2.2 Stakeholders Analysis
In line with the RACI Model, a series of stakeholders analysis is instrumental. In line with CIPS (2021c), stakeholder is a person or an organisation affecting a service, product or project implementation. For the set of practices followed by the organisation (tactical, operational or strategic), success process is impacted by scope of support from various stakeholders, commitment and input. Generally, for Eco2Solar organisation, a set of stakeholders categories exist categorised into internal, connected and external (see figure 6);
Figure 6:Categories of Stakeholders
In line with the summary in figure 6 of stakeholders types, they are involved in active practice of influence of supply chain success and overall cycle of procurement. This engage consumers, clients, logistics and delivery and regulations set by UK government on energy regulations. The mandate of the different stakeholders is to harness successful organisation operations. A distinct issue in procurement and supply management is essential for addressing complexities which characterise the thinking and eventual actions taken with innovation and experts engagement to collaborate and communicate. This is impacted by set of external factors illustrated in appendix 2.
Particularly, the solar panels area of spend, different stakeholders are engaged as summarised in figure 7. Their interests hence need to be set as a priority and guided by their interests planning and execution.
| High |
| Level of Interest |
| High |
| Low |
| Level of Power |
| Low |
Figure 7:Mendelow’s Analysis in Eco2Solar Organisation Solar Panels Spend Category
Low-Interest, High-Power– The UK government and energy sector regulators are characterised with low influence and power of their roles embracing facilitative role. This is guided by application of available resources and to establish best environment appropriate for Eco2Solar operations. Hence, they are not regarded as engaged in negotiation process. These is categorised as the keep informed stakeholders required to be provided with updated information on solar panels procurement quality of service.
High-Power, Low-Interest– This is noted to be keep satisfied stakeholders and including management and directorship. They hold high power owing to their scope of influence in the overall organisation. Today, owing to low demand of renewable energy and solar panels area of spend, budgetary allocation have been lowered with board of management approval harnessing sourcing plan and offering services.
High-Power, High-Interest– This category include procurement team, manufacturers of the solar panels, clients and end-users and finance team. The level of interest are required to promote close management and inclusion of strategic sourcing strategies.
Low-Power, High-Interest– For solar panels procurement, this include suppliers engaged in this category. Their interests are to increase overall profits and market dominance by establishing sustainable relationships with buyer who is eco2solar organisation. Further, the community in UK and society take an active role in CSR practices featuring Eco2Solar organisation with different competitors to ensure lack of hindrances of successful organisation practice. Hence, they ought to be guided on the best strategic practice.
3.0 Negotiation Plan for Eco2Solar Organisation Solar Panels Category of Spend
In order to achieve benefits from the PS&M operations, successful negotiation plan is instrumental. In line with CIPS (2013),
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