Is Procurement a tight balancing act ?
If you’re a buyer for your organization this article is for you, if you manage a procurement process you may want to get some coffee or tea if you prefer so you can authoritatively debate in this discussion.
Bought properly, goods or services can help organizations grow, meet their objectives and operate efficiently and ethically. Efficient expenditure on procurements can have a return of tens or even hundreds of times its cost or in the non-profit arena substantial impact on people in need. But the converse also applies. In reality, much of the expenditure on procurements is wasted or even worse, results in negative impact on financial resources . Questions are therefore raised, how can procurement professionals achieve value for money? how can they professionally purchase goods and services more efficiently, more effectively and in a way that benefits your organization with due consideration to time sensitivity?
Answers to these questions have become too familiar to add value including but not limited to lack of controls, lack of clarity of roles and responsibilities, procurement managers inability to deliver results, lack of business continuity or perhaps your freight forwarder slept on the job! We can go on and on especially if requestors are driving you nuts with their irrational demands and their maverick spending habits trying to beat deadlines as they shoot their targets with scatter guns. Sound familiar?
Are you character-specific with your teams?
The Achilles Heel in procurement is lack of integrity in the process. HR departments in partnership with hiring managers are frustrated and exhausted in all sectors from financial services to medicine because of white collar criminals in smart suits who continue to commit crimes as respectable persons of high social status in the course of their occupation. Finding intelligent talent full of energy is a solid foundation, if however, they lack integrity, then the bricks are laid on quicksand that will sink finances and dent the organizations’ reputation. So! Is your system robust enough and does your team offer a solid foundation?
Who cares about your procedures?
Does everyone know why procedures are in place? Off course they don’t and that is part of why procurement practitioners and compliance watchdogs are hired! The BIGGER question to be asked is “do your procurement professionals understand how procedures affect implementation of projects?”. Do they match control and efficiency ? But how is control and efficiency matched? Could this be the heart of it?
Legendary Procurement Teams are "Business Partners"
to Budget Holders
Don’t get me wrong, my classification of business partners is not in the strict sense of the word, rather, business partners is used here to mean professionals who work closely with an organisations’ senior leaders in order to develop a procurement agenda that closely supports the overall aims of the organisation. To avoid narrow approaches to procurement assignments, practitioners need to have the ability to put themselves in the shoes of project managers they are serving in order to understand the project needs and the residual impacts. This in essence re-directs procurement procedures from an imposing process to a strategic tool for attaining success in projects. It’s about starting with the view that procurement actions can bolster projects to success raising the strategic value of practitioners. This paradigm shift encourages creativity and aligns the role of procurement to the overarching strategy and vision of an organization, structure and culture. This is the first step to matching control, execution and efficiency.
Leveraging team dynamics in procurement
1. Working in teams is proven to be an intellectual horsepower approach that blends inter-dependence, creative thinking and problem solving. Intellect is an individual trait that can be enhanced through teamwork. Blending teams at a strategic level results in hybrid solutions. Some people are sharp negotiators, others are creative think-tanks and having procurement teams in planning phases of projects as business partners allows them the opportunity to anticipate risks, pop solutions and layout solid execution plans. This acumen is what separates the golden teams from bronze cheerleaders.
2. Execution and implementation in procurement projects are considered successful if carried out with speed within the time allocated and if value for money is achieved in the desired output. To achieve this, procurement project managers must cut roles in the process using a sharp diamond bit, from defining specifications to identifying the sourcing strategy, from ensuring financial approval of the project to collaborating with the quality assurance team to endorse the potential buys. All the actions between requisitioning to purchasing rely on collaboration with key stakeholders. Achieving success is all about leveraging genuine business partnership.
What is really value for money?
The decision to buy from a specific offer requires an analysis of whether the expected output will justify the costs. The diversity in procurement projects makes it difficult to produce comparable measures of what constitutes good value for money for many interventions. For instance in the humanitarian sector, achieving value for money is about maximising the impact of each dollar spent to improve poor people’s lives. In the public sector, value for money is the core principle underpinning government procurement as it sets out how institutions must use their agencies’ resources in an efficient, effective, economical and ethical manner. In the commercial sector, value for money is assessed based on the ability to purchase inputs for conversion to utility satisfying outputs for customers whilst breaking even costs or raking in profits. The conversion of inputs to outputs is another topic of discussion under value chain analysis.
Achieving value for money does not always mean that the ‘highest quality’ good or service is selected. Value for money is achieved when the ‘right sized’ procurement solution is selected to meet an agency’s need.
Start getting your desired quality of goods and services at the lowest price, embrace business partnership for procurement projects.