Methods of description
The description of an item may take any one of a variety of methods or, indeed, may be a combination of several different methods. For our discussion, description will mean the various methods by which a buyer conveys to a seller a clear, accurate picture of the required item. The term specification will be used in the narrower sense referring to one particular method of description.
The methods of description will be discussed in order:
1. By brand
2. “Or Equal”
3. By specification
a. Physical or chemical characteristics
b. Material and method of manufacture
c. Performance or function
4. By engineering drawing
5. By miscellaneous methods
a. Market grades
Let us understand each method in detail.
1. Descriptions by brand
This method is used when a product or service is proprietary, or when there is a perceived advantage in using a particular supplier’s products or services.
Descriptions by brand may be not only desirable but necessary under the following circumstances:
a. The manufacturing process is secret or covered by a patent.
b. The supplier’s manufacturing process calls for a high degree of ‘workmanship’ or ‘skill’ that cannot be defined exactly in a specification.
c. Only small quantities are bought so that the preparation of specifications by the buyer is impracticable.
d. Testing by the buyer is impracticable.
e. The item is a component so effectively advertised as to create a preference or even a demand for its incorporation into the finished products on the part of the ultimate customer.
f. There is a strong preference for the branded item on the part of the design staff, a bias the buyer may find almost impossible to overcome.
The main disadvantages of specifying branded item are as follows:
a. The cost of a branded item may be higher than that of an unbranded substitute.
b. The naming of a brand effectively results in a ‘closed specification’ which restricts the number of potential suppliers and deprives the buyer of the possible advantage of a lower price or even of improvements brought out by competitors.
2. “Or Equal”
It is not unusual to see requests for quotations or bids that will specify a brand or a manufacturer’s model number followed by the words “or equal”. In these circumstances, the buyer tries to shift the responsibility for establishing equality or superiority to the bidder without having to go to the expense of having to develop detailed specifications.
3. Descriptions by specification
In some cases, an organisation may need to provide very detailed descriptions of the characteristics of an item or service. Specification constitutes one of the best known of all methods employed. A lot of time and effort has been expended in making it possible to buy on a specification basis. Closely related to these endeavours is the effort towards standardisation of product specifications and reduction in the number of types, sizes, and so on, of products accepted as standard. It is becoming common practice to specify the test procedure and results necessary to meet quality standards as part of the specification as well as instructions for handling, labelling, transportation and disposal to meet environmental regulations.
a. Specification by physical or chemical characteristics
This specification provides definitions of the properties of the materials the buyer desires. They represent an effort to state in measurable terms those properties deemed necessary for satisfactory use at the least cost consistent with quality.
b. Specification by material and method of manufacture
The second type of specification prescribes both the material and method of manufacture. This method is used when special requirements exist and when the buyer is willing to assume the responsibility for results.
c. Specification by performance or function
The heart of performance specification is the understanding of the required functions. Performance or function specification in combination with a request for proposal is employed to a considerable extent, partly because it throws the responsibility for a satisfactory product back to the seller. Performance specification is result-and user oriented, leaving the supplier with the decisions on how to make the most suitable product. The assumption is that the supplier will know the best way to meet the buyer’s needs. This enables the supplier to take advantage of the latest technological developments and to substitute anything that exceeds the minimum performance required. The detailed specification is in the hands of the supplier.
Where applicable, performance specifications are to be preferred in that they allow a wider competition and enable suppliers to suggest new improved ways of meeting the requirement. The satisfactory use of a performance specification, of course, is absolutely dependent on securing the right kind of supplier. It should be noted that it may be difficult to compare quotations and the supplier may include a risk allowance in the price.
In general, traditional advantages of buying with specifications include:
i. Evidence exists that thought and careful study have been given to the need and the ways in which it may be satisfied.
ii. A standard is established for measuring and checking materials as supplied, preventing delay and waste that would occur with improper materials.
iii. An opportunity exists to procure identical requirements from a number of different sources of supply.
iv. The potential exists for equitable competition. This is why public agencies place such a premium on specification writing. In securing
bids from various suppliers, a buyer must be sure that the suppliers are quoting for exactly the same material or service.
v. The seller will be responsible for performance when the buyer specifies performance.
However, there are also several limitations in using specifications:
i. There are requirements for which it is practically impossible to draw adequate specifications.
ii. The use of specifications adds to the immediate cost.
iii. The specification may not be better than a standard product that is, readily available.
iv. The cost is increased by testing to ensure that the specifications have been met.
v. Unduly elaborate specifications sometimes discourage potential suppliers from placing bids in response to inquiries.
vi. Unless the specifications are of the performance type, the responsibility for the adaptability of the item to the use intended rests wholly with the buyer.
vii. The minimum specifications set up by the buyer are likely to be the maximum furnished by the supplier.
|Please read about ‘specification’ on pages 140 – 143 from your textbook Procurement Principles and Management, 10th edn, England: Prentice-Hall, Pearson Education Limited by Baily, P, Farmer, D, Crocker, B, Jessop, D and Jones, D (2008).|
4. Descriptions by engineering drawing
Description by a blueprint or dimension sheet is common and may be used in connection with some form of descriptive text. It is particularly applicable to the procurement of construction, electronic and electrical assemblies, machined parts, forgings, castings and stampings. It is an expensive method of description not only because of the cost of preparing the print or computer program itself but also because it is likely to be used to describe an item that is quite special as far as the supplier is concerned and, hence, expensive to manufacture. However, it is probably the most accurate of all forms of description and is particularly adapted to procuring those items requiring a high degree of manufacturing perfection and close tolerances.
5. Miscellaneous methods of description
There are two additional methods of description:
a. Description by market grade or industry standard
Buying on the basis of market grades are confined to certain primary materials and might be the best choice for standard items, where the requirements are well understood and there is common agreement between supply chain partners about what certain terms mean. Wheat, cotton, lumber, steel and copper are commodities. For some purposes, procurement by grade is entirely satisfactory. Its value depends on the accuracy with which grading is done and the ability to ascertain the grade of the material by inspection.
Furthermore, the grading must be done by those in whose ability and honesty the buyer has confidence. It may be noted that even for wheat and cotton, grading may be entirely satisfactory to one class of buyer and not satisfactory to another class.
b. Description by sample or prototype
Still another method of description is by submission of a sample of the item desired. Almost all buyers use this method from time to time but ordinarily — there are some exceptions — for a minor percentage of their procurements and then more or less because no other method is possible. Good examples are items requiring visual acceptance, such as wood grain, colour, appearance, smell and so on.
At times, organisations need to develop prototypes or samples to share with their suppliers. Prototypes can provide critical information on the look or feel of a product or service. Such information is often difficult to convey in drawings or written descriptions. Note that prototypes or samples are not limited to physical products. An excellent example is a prototype information system that an organisation might share with potential software suppliers. The prototype may include sample output screens and reports. Through the prototype, the organisation can give its software suppliers a clearer idea of how the organisation expects its users to interact with the systems.
When orders are placed and products specified by reference to a sample, it is important that the sample on which the contract is based should be:
iii. The signed and labelled samples retained by both buyer and supplier
It is implied that where goods are sold by sample, the bulk must correspond to the sample in quality and the buyer must have a reasonable opportunity to compare the bulk with the sample.
|Question to activity 3.1
||Suggested answer to activity 3.1