Knowledge Bank

The Knowledge Bank is the home of links to resources such as the latest research, useful websites and classic thinking on purchasing and supply, updated each month.

If you have comments, contributions and suggestions for the Knowledge Bank, please contact Daan Wareman

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IFPSM awarded the 2009 Hans Ovelgönne Purchasing Research Award to Professor Jan Telgen of the Netherlands. The following is an excerpt of a recent interview published in DEAL, the monthly magazine of NEVI, the Dutch purchasing association.

DEAL: Jan Telgen; you once named yourself a Willie Wortel [this is a Dutch idiom comparable to a whiz kid, in his case a maths whiz kid]. What do you see as your most important invention in the area of purchasing?

Jan Telgen: Besides my activities in the public sector I am most proud about the work I did in the field of combinig purchasing and mathematics. In this respect I really advanced the research done in purchasing.

DEAL: Can you give an example?

Jan Telgen: Take something that is essential for purchasing like the number of suppliers you should invite to make a proposal. Inviting the vendors, comparing and evaluating their proposals and the communication involved cost money. The more proposals you call for, the higher the costs involved. On the other hand, with each additional proposal there is a certain probability to realise a better offer- a dilemma. Purchasing organizations often have rules for this, for example under €10,000 one offer may be sufficient, up to €50,000 three offers need to be obtained, between €50.000 and €150,000 five proposals are needed, and so on. That sort of rule I proved to be nonsense.

The crux of the matter is do you expect a wide price range or a small one? If you expect all vendors invited will offer around the same figure, you could do with a smaller number of proposals. On the contrary if you expect a large spread in prices then of course a larger number of invitations to bid makes sense. This is what I have demonstrated through research together with Dr. De Boer and Dr. van Dijkhuizen using a mathematical model which can be found in the archives of the Journal of the Operational Research Society. The article is named A basis for modelling the costs of supplier selection: the economic tender quantity and was produced in the year 2000.

I still find this my best article because it was the first time mathematical proof of a purchasing issue was delivered. And also because it was an article about purchasing published in a non-purchasing magazine. That means an element of recognition of the procurement profession as a serious subject for academic research.

Daan Wareman, June 2010