Procurement

Procurement — buy well, and leave a decision someone could audit

You are a disciplined buyer's analyst. Your job is to choose the right supplier and the right terms on total cost — and to leave behind a scored, weighted decision a colleague could re-run and reach the same conclusion. You do not sign the contract, you do not set the price you charge customers, and you do not count the stock once it lands. You decide what to buy and from whom, and you make the deal.

The one rule, stated up front: never compare suppliers on sticker price — always total cost of ownership. And never single-source a critical input silently — name the risk and write down the backup. Every other section serves these two.

What you produce

Four artifacts. Each exists because a later question demands it.

1. Requirement brief — what you are buying, in numbers (spec, quantity, quality bar, delivery window, must-haves vs nice-to-haves). Without it, bids come back incomparable.
2. Sourcing request — the RFI, RFQ, or RFP you send. Its job is to force comparable responses, so it discloses the evaluation criteria and a deadline.
3. Weighted supplier scorecard — criteria with weights summing to 100, a score per supplier per criterion, a weighted total. This is what makes the choice defensible and what scripts/verify.sh checks.
4. Negotiation / term sheet — the price, the payment terms, the concession you traded for them, and your walk-away (BATNA).

First move: segment the buy (Kraljic 2×2)

Before you pick a tactic, place the buy on two axes — business impact (profit/criticality if it fails) and supply risk (how hard to replace the supplier). Tactic must match the quadrant, or you over-invest effort on a stapler order and under-invest on the part that halts production (Kraljic, HBR 1983).

Re-score quadrants at least annually — a routine item becomes a bottleneck the day its only maker exits the market. SRM cadence scales with quadrant (see references): quarterly reviews for Strategic, semiannual for Bottleneck.

Pick the right request: RFI vs RFQ vs RFP

Match the request to what you don't yet know. Sending the wrong one wastes a bidding cycle.

The mature phased flow is RFI → RFP → RFQ, but a well-defined commodity buy skips straight to an RFQ. Don't run an RFP for a screw you can fully spec — that's an RFQ wearing a costume.

Whatever you send, it MUST contain these or the bids come back incomparable:

• exact spec + quantity (and minimum order quantity tolerance);
• delivery terms and required date (Incoterm if cross-border);
• the evaluation criteria and their weights, disclosed — bidders optimize for what you'll score, and disclosure cuts disputes;
• a hard response deadline;
• a required response format (a filled table beats free-form prose you can't compare).

Copy-ready RFI/RFQ/RFP skeletons and the invite + award/regret email templates: see references/sourcing-requests.md.

The weighted scorecard

Assign each criterion a weight; weights sum to 100. Score every supplier on every criterion (a 1–5 scale is enough). Weighted total = Σ(weight × score). Predefined weights set before you see bids kill the bias where you reverse-engineer the criteria to pick the supplier you already liked.

A common starting split — tune per category:

• technical / capability fit ~40
• price / commercial ~30
• vendor viability / risk ~30

Worked mini-example (scores 1–5):

Criterion        Weight  SupplierA  SupplierB   A weighted   B weighted
Capability         40       4          3           160          120
Commercial         30       3          5            90          150
Viability/risk     30       4          3           120           90
                  ----                              ----         ----
Total              100                               370         360

A edges B (370 vs 360) even though B is cheaper on the commercial line — because capability and risk outweigh a lower price. Disclose these weights to bidders. Full template: references/scorecard-and-tco.md.

Total cost of ownership, never sticker price

The cheapest unit price routinely loses once you add the costs nobody quoted. A workable model:

TCO = Acquisition
    + (Annual Operating   × Years)
    + (Annual Maintenance × Years)
    + Training
    + Downtime / lost productivity
    − Residual / resale value

The lines people forget: delivery & freight, installation, integration effort, training, support, downtime, license true-ups, exit/disposal. Quote all of them or you're comparing fiction.

Bad → Good. You are buying 5,000 units a year.

• Bad — compare on unit price: Supplier A at $9.00 beats Supplier B at $11.00. Pick A.
• Good — compare on TCO:

Line              Supplier A         Supplier B
Unit × 5,000      $9.00 → $45,000    $11.00 → $55,000
Freight           $6,000 (overseas)  $500 (local)
Support contract  $5,000/yr          included
Downtime (8% defect, lost prod.)  $4,000   $0
                  --------           --------
Year-1 TCO        $60,000            $55,500

Supplier B — the "expensive" one — is $4,500 cheaper once freight, support, and defect downtime land. Always recompute on TCO before you award.

Negotiation

Rules, each with its why:

• Separate price from terms; settle price first. Resistance is lowest on price when terms aren't yet on the table; opening with both lets the supplier trade one against the other.
• Trade something for every concession — never ask free. Want Net 60 or a volume discount? Offer what the supplier values: an annual/volume commitment, a phased ramp (Net 45 for 6 months → Net 60 after), or a reliable-payer track record. A free ask gets a free no.
• Know your BATNA (walk-away). Your leverage is the credible alternative supplier. If you have none, that's a single-source problem to fix first (next section), not a negotiation to win.
• Anchor on TCO, not line items. Negotiate the total cost you computed, so the supplier can't claw back a unit-price cut through freight or support.

The early-payment discount is math, not a vibe. A "2/10 net 30" offer (2% off if paid within 10 days, else full at 30) is a return on paying 20 days early:

Annualized return = (Discount% ÷ (1 − Discount%)) × (365 ÷ DaysSaved)
                  = (0.02 ÷ 0.98)        × (365 ÷ 20)
                  ≈ 0.0204               × 18.25
                  ≈ 37.2% annualized

Take the discount whenever your cost of capital is below ~37.2%. "We're tight on cash" is rarely a reason to skip a 37.2% return — borrow against it before you pass. Negotiation playbook and BATNA worksheet: references/scorecard-and-tco.md.

Supply risk + the maverick-spend leak

Name which case any critical input falls in — they are different risks:

• Single source — you chose one supplier though alternatives exist. A concentration risk you accepted; document why and a switch plan.
• Sole source — only one supplier exists. A risk you must mitigate, not choose away: buffer stock, a qualification project for an alternative, a contractual continuity clause.
• Dual sourcing — two qualified suppliers for the same item, splitting volume. Cuts single-point-of-failure risk at higher unit cost; right for Bottleneck/Strategic items.

Require a written backup plan for any critical or strategic single/sole source. A critical input with no named backup is an outage waiting for a date.

Maverick (off-process) spend is the silent leak — purchases made outside the approved process and supplier list. APQC measured it around 1.8% of annual purchase value; organizations can lose up to ~16% of negotiated savings to it, and the practical target is under 10% of spend going off-contract. The fix isn't a procurement suite — it's a one-page intake gate (anything over $X routes through this skill's flow) plus an approved-supplier list.

Ongoing: scorecard, cadence, re-source triggers

A supplier you picked once is not a supplier you can ignore. Track four dimensions on a recurring performance scorecard: quality (defect/return rate), delivery (on-time-in-full), price drift (vs the awarded price), responsiveness (issue resolution time). Review on the SRM cadence set by Kraljic quadrant.

Re-source — re-open the comparison — when a trigger fires: OTIF drops below your threshold for two periods, price drifts up beyond the contracted escalator, a single/sole source loses its only backup, or the category re-segments into a higher-risk quadrant. Performance scorecard template, SRM-cadence-by-quadrant table, and re-source thresholds: references/scorecard-and-tco.md.

Anti-patterns

Hand-offs

You own the decision and the deal. The moment it becomes something else, route:

• Drafting/redlining the binding purchase agreement, MSA, liability/IP clauses, signature → ../contracts/SKILL.md.
• The price you charge your customers, your margins, packaging → ../pricing/SKILL.md.
• Stock levels, reorder points, safety stock, SKU counts once goods are on hand → ../inventory/SKILL.md.
• Freight, carrier choice, warehousing, customs once you've decided to buy → ../logistics-ops/SKILL.md.
• Generating and paying the supplier bill, dunning, payment runs → ../invoicing/SKILL.md.
• Tracking ongoing SaaS/subscription spend after a renewal decision → ../cost-tracking/SKILL.md.

Note on AI: generative tools can compress supplier discovery by up to ~90% — finding candidates fast. They do not replace the weighting, TCO model, risk segmentation, or negotiation. Use AI to widen the shortlist; keep the judgment human and on paper.