Effective Procurement = Managed Delivery
What is the benefit of good or even great procurement without effective management of the product that is being procured? This question is not answered or even asked in many businesses. Worse still is that in this time of extreme cost consciousness this question is replaced by “who is the cheapest supplier”Now I hear a number of procurement guru’s out there saying “I have a system to ensure that only the correct vendor participates in the RFQ” (Request for Quotation) This may be true but that still does not ensure that the process of procurement is completed correctly. Many procurement decisions are made around price, with at best a consideration being given to whether the vendor can indeed do the work. The next steps, I believe the more critical steps are often omitted.
It is at the stage of the award of the contract that the real work needs to begin. Has a project plan been submitted by the successful vendor in terms of how the work will be completed and by when, what contingencies have been catered for (if any), is there to be a debrief of the project including aspects of what can be improved as far as the future of the particular job and finally is the vendor transparent in terms of their profit and loss.
Why do I make the final comment in terms of transparency?, simply put any good business deal will be based on relationship. The business relationship can only be successful if both parties to the agreement can “profit” out it. By demonstrating a willingness to disclose the profit and loss on a job the vendor demonstrates true business relationship. This transparency allows both parties to contribute effectively into the process to see how they can work at improving the process to better “profit” out of the ongoing business.
Clearly the procurement office would like to purchase the best priced product every time, but without acknowledging the need of their suppliers to make profits, the procurement officer runs the risk of losing valuable suppliers. Equally vendors need to be responsible enough to say, that is outside my scope of expertise and then decline the RFQ, or say to the client “we can do this better and this is how we propose to do it”.
My view is that procurement should be moving into the realm of effective process management, with business partners as opposed to suppliers. The vendor needs to have a managed delivery focus, which does not stop with the order being taken, but rather with the review meetings that discuss the success of the ongoing relationship. My contention is that in this economic client the difference between those that make it and those that don’t boils down to transparency and relationship.