Retention of title (ROT) states when ownership transfers from supplier to buyer.

The retention of title terms also referred to as the Romalpa clause, which is related to a legal case from 1976 between Aluminum industries Vaassen BV and Romalpa Aluminum LTD

Damages are ‘sum of money that the supplier pays if it fails to carry out its contractual obligation. Damages are categorized into two types; liquidated and un-liquidated.

Liquidate Damages are fixed amount of money agreed between the parties that is payable if a contract is breached. For example, knowing that supplier not being able to install a device properly in a power transformer may destroy the device and going ahead to include a fee in the contract if the device was destroyed.

Un-liquidated damages are unfixed amount of money. It is used when the amount of money that will compensate the injured party cannot be known in advance. A court decides the amount when the damages occur. For example, knowing that supplier not being able to install a device properly in a power transformer may destroy the device, other appliances and equipment unknown, cause the buyer delay in the process and reputational damage as in customer dissatisfaction. Yet, unquantifiable as both party are unable to fix a fee in advance on the damages and leaving it to the court to decide the damage if it may occur.

Though strong due diligence procurement professionals can assess which suppliers or potential suppliers appear to meet the criteria associated with ethical practice.

Prior to the contract being awarded, strong due diligence can save the organization from the following cost:

1) Cost of reputation

2) Environmental damage

3) Stakeholders dissatisfaction,

4) poor quality and rework

5) Breach of contract

6) Ethical concerns

A sector is an area of an industry, e.g., private, public or third sector.

A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer’s money. And therefore owe the general public an ethical explanation towards all investment and decision.

Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.

A current ratio of 1 shows that the organization has enough assets to repay (cover) it liability

Buyers can be encouraged to deal with these suppliers after if they considered proven and strong in other areas.

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Fraud occurs when a person acts deliberately to secure monies from another party through dishonest method. Within the supply chain of an organization, fraud can represent itself in the following ways:

1. Kickbacks: e.g. (commission given to a bribe taker for service perform)

2. Corrupt influence (e.g ordering more than what is required)

3. Collusion: (group of suppliers working together to submit multiple bids and split profit.

4. Bid Rigging (a contract is informally agreed with a chosen supplier prior to the official process

5. invoicing fraud

6. Substitution (submitting products that are below the required quality

7. False claims (files false document)

Case Study

A series of news stories reporting events such as the collapse of the Rana Plaza building in 2013 have drawn attention to the poor conditions in garment factories across India and South East Asia. Human rights groups have long be critical of the excessive hours and poor wages workers are forced to endure, as well as the abuse they receive from supervisor. With consumers becoming increasingly aware of these conditions, more pressure is being put on global brands and retailers to ensure their supply chains are fair and ethical.

Certain areas have been notorious for the mistreatment of workers. In India’s textile valley’, young women are been bound into contracts where they work for two to three years, in exchange for a lump sum of money that they can then put towards a dowry. This is known as the ‘Sumangali [a married woman] Thittam’ scheme. These women are forced to live in hostels under restrictions that prevent them from moving, and are denied the opportunity to improve their living conditions. Retailers including Walmart and H & M are known to source garments from factories in the ‘textile valley’.

Reports by organizations including the Asia Floor Wage Alliance (AFWA), Central Combodia, Global Labor Justice, Sedane Labour Resource Centre (LIPS) Indonesia, and Society for Labour and Development (SLD) India have exposed unethically run factories that supply garments to H & M, Gap and Walmart. However, retailers will continue to benefit from expensive labour until mounting customers pressure causes them to change.

A sector is an area of an industry, e.g., private, public or third sector.

A public sector is a sector of the economy that is owned, finance and run by the government. This sector is financed with tax payer’s money. And therefore owe the general public an ethical explanation towards all investment and decision.

Once the supplier that is awarded the contract has accepted, the buyer can tell the unsuccessful bidders. This usually happens through email or letter. The public sector is more likely to give feedback to unsuccessful bidders and also have to respond to any stakeholders that request information on why a supplier is not successful.

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Condition performance monitoring is a surveillance system that is designed to get the maximum production uptime and availability out of an asset. And this can be achieved by timely monitoring and measuring of temperature, vibration, output, speed, noise, emissions and quality. With this, decision has to be made as to what, if any, action needs to be taken. The five approaches to condition performance monitoring are as follows:

1. Do nothing: Use like a commodity. This will bring worries later.

2. Reactive: Fix it when it breaks. This will run to failure.

3. Preventive: Scheduled maintenance.

4. Predictive: Fix it before it breaks. Predict faults.

5. Proactive: Continuous improvement defect elimination.

The most cost-effective approach is ‘Proactive’, because is the only approach that has continuous improvement in the process, people and policies to minimize downtime. Being proactive takes defect out f the system and continuously harness opportunity that will optimize the system

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Once the need has been understood, defined, justified and authorized, the next stages are to analyze and test the market. Analyzing and testing the market includes looking at the following

1. STEEPLE analysis

2. SWOT analysis

3. Porter’s five forces

4. Level of suppliers competition

5. Supply and demand

6. Push and pull

7. Supplier segmentation

8. Product life cycle

9. Ansoff matrix

10. Early supplier involvement

11. Make or buy

12. Offshoring

1. Porter’s five forces: The use of porter’s five forces helps the procurement professional to understand the level of competition within the marketplace. Whether it is a monopoly, oligopoly, imperfect or perfect market. Knowing these will equip the organization to better negotiate a favorable price.

2. Supply and Demand: the procurement professional must also think about supply and demand as part of their market analysis when they receive a requisition. This economic factor has a significant effect on the prices charged and on the cost incurred.

3. Supplier segmentation: in this the procurement professional start to form an opinion of potential suppliers.. They can segment current suppliers into four categories, depending on their level of integration into an organization. This can help to inform the procurement professional of which type of supplier relationship that would be most appropriate.

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