Best Value Procurement
Possible for buying 3rd party logistics?
Eindhoven, ESCF Conference, Tuesday 22, 2016
Jeroen van de Rijt
2
Outline
•
What is Best Value Procurement (BVP)?
•
How does BVP work?
•
What are the results of BVP?
•
How can BVP be applied within the market of 3rd party logistics?
•
Q&A
Outline
•
What is Best Value Procurement (BVP)?
•
How does BVP work?
•
What are the results of BVP?
•
How can BVP be applied within the market of 3rd party logistics?
•
Q&A
The problem
Clients
Suppliers
Contractors
Contracting
Designer
Planning / Programming
Supply Chain: Working in silos
30 K Foot level
Technical Details
6
THE PROBLEM IS NOT (EUROPEAN) TENDERING
PROCEDURES
BUT
THE WAY WE APPLY THEM!!
Why Best Value?
•
98% On-time, On-Budget, Customer satisfaction
•
5% Increase in Vendor profit
•
High quality & low price go hand-in-hand
– Source: PBSRG
Validity
• Conducting research since 1994
• 1600+ Projects
• $4.4 Billion Services & Construction
10
WHO SHOULD KNOW BETTER
HOW TO DO A CERTAIN JOB:
THE CLIENT OR THE VENDOR?
WHO SHOULD TALK MORE:
THE CLIENT OR THE VENDOR
Micro management!
13
Transition from
• Manage
• Direct
• Control
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• Observe
• Listen
• Align
Climbing a mountain…..
15
HOW DO WE IDENTIFY A GOOD GUIDE?
The use of expertise!
(climbing a mountain)
Scenario A
•
Hire a guide and:
– Tell him how to climb a mountain and tell
him what tools to bring
– Tell him you know a better route to climb
the mountain
– Tell him how to build his team
– Tell him it can be done faster
– Tell him it can be done cheaper
– Hire another guide to tell him how to
climb...
Scenario B
•
Hire the best guide and let him
lead you to the summit of the
mountain
Dominant information
Question: Which is the most green circle?
Scenario 1
1
3
18
1
2
4
6
Scenario 2
5
7
3
2
4
6
5
7
Impact of minimum Standard
“The Maximum
Performance
I get”
Low
High
Low
High
Contactor 1
Contractor 2
Contractor 1
Contractor 3
2
Contractor
Contractor 3
Contractor 4
Contractor 4
High
Low
Low
High
“The minimum
Quality level I
want”
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What does the Best Value model do?
1. Makes things simple (measurement, dominant information)
2. Minimizes the fuel of bureaucracy (decision making, non-dominant information,
management, control, and direction)
3. Creates transparency
4. Allows organizations/vendors to be highly efficient and successful
5. Will minimize risk by having a plan
Outline
•
What is Best Value Procurement (BVP)?
•
How does BVP work?
•
What are the results of BVP?
•
How can BVP be applied within the market of 3rd party logistics?
•
Q&A
Process of Best Value
0123
PHASE 0
Preparation
PHASE 1
Selection
PHASE 2
Clarification
PHASE 3
Execution
Best Value is not only about procurement….
0123
PHASE 0
Preparation
PHASE 1
Selection
PHASE 2
Clarification
PHASE 3
Execution
Award criteria
Price 25% (max)
Quality 75% (min)
–
–
–
–
–
Level of Expertise Plan (LE)
Risk Assessment Plan (RA)
Value Added (VA)
Price
Interview
Metrics!!
Outline
•
What is Best Value Procurement (BVP)?
•
How does BVP work?
•
What are the results of BVP?
•
How can BVP be applied within the market of 3rd party logistics?
•
Q&A
Results: Fast Track Project
•
Program results: 15 projects finished
(expectation was 10)
•
Delivery time of projects accelerated by
25%
•
Transaction costs and time reduced by
50-60% for both vendors and client
•
95% of deviations were caused by
Rijkswaterstaat or external [not vendor
caused]
•
Ministry of Transport wins prestigious
Dutch Sourcing Award
Outline
•
What is Best Value Procurement (BVP)?
•
How does BVP work?
•
What are the results of BVP?
•
How can BVP be applied within the market of 3rd party logistics?
•
Q&A
30
Buying 3rd party logistics
Low bid of Best Value?
Evaluating criteria in 3rd party logistics
Aguezzoul (2014)
Applying Best Value
•
The philosophy is more important than the technical details
•
Technical details look simple, are in practice quite difficult (as it is a paradigm change)
•
When using Best Value: stick to it
–
Integrity of the system (and the client!!)
Conclusion: paradigm shift
•
•
•
•
•
BVP is more than just procurement
Do not use “management, direction and control”
Dominant information is “metrics”
Forces the improvement in vendor skills, planning, increased profit
Vendor expertise is utilized
Q&A
More info?
[email protected]
+31 6 50 272855