1. Need Identification and Specification
Chapter 6
Need Identification and Specification
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2. Key Questions Addressed in Chapter 6
How do we determine organizational needs?
How do we translate and communicate these needs to (potential) suppliers?

3. Need Identification Criteria
Strategic
e.g., mission critical, total spend, risk reduction, access to new technology or new markets, assurance of supply in tight markets, etc.
Traditional supply criteria
quality, quantity, delivery, price and service
Additional current criteria
financial, risk, environmental, innovation, regulatory compliance and transparency, social and political factors
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Categories of Needs
Category
Description
Resale
Resellers comprise retailers, wholesalers, distributors, agents, brokers and traders. What they can resell covers the full range of the remaining categories.
Raw and Semi-Processed Materials
Most users of materials are converters, such as factories, and this category includes commodities, agricultural and industrial.
Parts, Components and Packaging
Assemblers use parts and components produced by their suppliers to create a finished product. Parts and components may be standard or special depending on the decision of the designer of the finished product.
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Categories of Needs
Category
Description
MRO and SVP
Every organization has MRO requirements and SVP’s. The availability of MRO suppliers is critical to maintain continued uninterrupted operation of the office, factory, facility, etc. Because many MRO requirements are relatively small in dollar value, SVP’s are also included in this category. For SVP’s assuring availability at minimum acquisition cost is a challenge.
Capital Assets
Any requirement that accountants classify as capital, and, therefore, an investment, becomes a capital item. Equipment, IT, real estate and construction are included in this category. Capital items can be depreciated, are often bought under a separate budgetary allocation and may require special financing arrangements.
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Categories of Needs
Category
Description
Services
Services are intangible and nonmanufactured. Every organization acquires a variety of services.
Other
Anything not covered by the above categories falls into this last one. Major requirements could be energy and water. This category would also include unusual and infrequent requirements, probably better dealt with on an ad hoc or project basis.
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7. Opportunity to Affect Value
High
Opportunity
to affect value
Low 1.
Need
recognition 2.
Description 3.
Potential suppliers 4.
Selection 5.
Receipt
Acquisition Process Steps
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8. Methods of Description
By brand
“Or Equal”
By specification
Physical or chemical characteristics
Material or method of manufacture
Performance
By engineering drawing
By miscellaneous methods
Market grades
Sample
By a combination of two or more methods
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