These 4 blog posts have been the most viewed over the past year. Take a look and hopefully they can help bring some new thoughts or forgotten topics back to mind.
Take another look at local suppliers, think creatively, and see if local procurement can now work better for your business.
We must first define exactly what tactical procurement is, how it works an why it can be such a great benefit for your business.
Examining KPIs can help your purchasing department focus in on the areas that will maximize cost savings for your business.
The Kraljic Matrix helps companies to use to minimize their procurement vulnerabilities while simultaneously maximizing the buying power.
Outsourcing and sourcing from overseas has gotten a bad reputation. People take great pride in being an American, buying American, and searching for “made in America” tags. Many small to medium business owners take steps to source locally when possible in order to help build the community where they are situated. However, there are times when your sourcing needs cannot be met locally or grow to a point where you need an alternative source to handle some of the overflow. China has surpassed the US as the world’s largest trading nation. So how do you know if this is something you should consider for your business? Procureasia.com has produced a helpful infographic to illustrate situations that are favorable and unfavorable to sourcing from China. Take a look and let us know what you think about the pros and cons to sourcing overseas?
ProcureCon TV screens exclusive interviews with Europe’s leading procurement professionals. They go behind the scenes at major industry events to bring the very latest news, views and insight from the procurement sector.
Here is a 2013 interview with Graham Copeland (Xchanging) discussing the challenges faced by procurement professionals in the financial services industry. There is a constant need to upgrade IT, enhance security, and adhere to evolving regulations. All this needs to be accomplished while controlling spend and saving money? Mr. Copeland highlights 3 strategies they use to keep up with these seeminly conflicting goals.
We’ve spent some time discussing the role of procurement manager. It is no longer just about ordering staples and copy paper, but is more and more becoming an intergral part of the startegy for the entire business. If you missed it here are a few posts about strategic procurement:
If you are still part of a culture where the purchasing and procurement job is seen as a bottom-tier position it can be challenging to change that perception. ProcureCon TV did a 2012 interview with David Rasa-Ratman (Tata Consultancy Services) discussing common pitfalls and how to resolve them. ProcureCon TV screens exclusive interviews with Europe’s leading procurement professionals. They go behind the scenes at major industry events to bring the very latest news, views and insight from the procurement sector. Though the interview was from a year and a half ago, there is still good information that applies today if you are stuck in a cultuer of complancency.
A transparent procurement system is all about the process by which the
departmental agencies purchase services and goods openly for others to see. However, the process of a transparent procurement system will be subject to specific policies and rules policies covering how the relevant decisions are made. Though there are many advantages as we discussed last week in the “Transparent Procurement…Pros” blog post, there are some potential drawbacks as well.
May Not Favor Local Business:
In a transparent procurement system you feel like price is the most important aspect because of the visibility of your purchases. So in trying to find the best deal you may bypass local businesses to save a few cents per item ordered. It tends to put the emphasis on paper results and doesn’t factor in all the intangibles of supporting local small businesses in your community.
One of the advantages of a transparent procurement system involve grouping orders across all departments of a business into a single, larger quantity order that can yield better pricing. Part of the process may involve waiting on other departments to add to the order and meet the required minimums for reordering. The delay may give you a better cost basis, but that may be offset by shortages and lost productivity waiting on the materials your department needs.
Grouping orders becomes possible and welcome with transparent procurement, but is not always the best solution. Consider perishable goods and multiple locations. Combining into a single order delivered to a central location may work well with office supplies like paper, tape, pens and pencils, but perishable goods may suffer from this treatment. The extra handling by employees who may not be qualified and trained and the extra time involved to redistribute may lead to damaged or spoiled goods.
Sacrifice Quality and Reliability:
There is a risk of suppliers who may provide low-quality products in an effort to keep the costs down. You get what you pay for so there is a risk that trying to keep costs down due to the transparency factor may result in trade offs in other areas beyond low-quality products such as unreliable fulfillment, missed delivery deadlines, or cancelled orders. Paying a little extra may be necessary to maintain higher standards and best practices.
Too Many Chiefs:
Transparency may lead to the over involvement of those monitoring the purchasing processes. Without understanding the intricacies of your job, other department heads, managers, or stakeholders may decide they know better than you do and try to tell you what to do. However, they may be unfamiliar with this procurement method and your job is to ensure that other project success factors are not compromised.
Benefits of Transparent Procurement
Transparent is something you may use to describe an object or material that can be seen through. In business, transparency is something that has a generally positive connotation if you are the one providing it and negative if you refuse to do so implying that you have something to hide. Here’s what Wikipedia says about transparency in business:
Transparency, as used in science, engineering, business, the humanities and in a social context more generally, implies openness, communication, and accountability. Transparency is operating in such a way that it is easy for others to see what actions are performed. It has been defined simply as “the perceived quality of intentionally shared information from a sender”. For example, a cashier making change after a point of sale transaction by offering a record of the items purchased (e.g., a receipt) as well as counting out the customer’s change on the counter demonstrates transparency.
So when it comes to transparent procurement for business or for government, this is an area that will vary depending on the entity in question and the “department” or branch within the government. One example would be the military branch – as procurement of certain items would be considered part of national security and therefore transparency would not be ideal. What we are looking at is a organization that is accountable to itemployees/customers/citizens and the benefits of transparency.
No duplication: With a transparent procurement policy in place it will often reduce or eliminate the duplication of the purchased items. Expensive items with a limited purpose will be visible to different departments and may have the possibility of being shared instead of purchased again. With the awareness of visibility and accountability looming, duplicate requests will be more closely watched and prevented.
Record management: Records are often better organized and managed because multiple people can access at different times due to the transparency. It will need to be a well defined system so everyone can understand and access the information they need. Overall, this helps increase efficiency for everyone involved.
Bulk purchasing: In a transparent procurement system the purchasing officers are now able to buy in bulk quantities. Requests and PO’s from different departments can be combined into a single order. In this way they will reduce transportation and unit costs. Upon arrival the quantities would be distributed to their designated locations.
Regular improvement: The people who are behind the procurement process must not be satisfied with what they have. Transparency has a way of increasing accountability and improving performance. You’ve heard the saying about when the boss is away the mouse play? Transparency means someone is always watching. It may not mean someone is literally there hovering over the shoulders of the procurement team, but knowing that people can see or check at any given time or even go back and review the process, orders, and spending changes the environment. People rise to the occasion and perform better and strive for improvements that all can see.
This list is not exhaustive, but it should help give you some ideas about the benefits of transparent procurement. This doesn’t necessarily mean you need to revamp and make everything transparent on every level. In our next post we will look at some of the disadvantages and then you can have a complete picture to decide what is best for your organization.
Last week we discussed a handful of business clichés purchasing managers, or anyone, should not use. This week we wanted to look at a few more, but from a different perspective. Some people use traditional clichés as a crutch or an excuse. Let’s look at a few more and consider a time when you used it and consider other approaches.
The ball is in your court: It means that now it’s your turn to make the next move. However, some use this as an excuse to shift responsibility and potentially blame to a coworker for the completion or failure to complete an action. If you consider this sports analogy and apply it to basketball or tennis or any other event that uses a ball and a court, if the ball is in the other person’s court what is your job? Does that mean you are off the hook and can do something else? No, it means your responsibilities shift. You are getting ready to defend the goal or return the serve. You are still involved in the game. In business it is the same. You are still involved and share responsibility in seeing it through to completion.
But that’s how we’ve always done it: Many people by nature are resistance to change. Sometimes a new manager, company owner, or even employee will bring a new perspective to procedures that are given very little thought. An outside perspective may bring to light a different way of doing things and to say that’s the way you’ve always done it as though that is a reason not to change? That is no reason at all and shouldn’t even be mentioned. It makes no difference if that method has been followed for 6 days or 6 years, there is the possibility that there is a better way to do it.
If it ain’t broke, don’t fix it!: It simply means that if a component is s running pretty well, trying to make changes may set you back. That can also be an excuse to settle for where you are. What if you were to operate from the opposite perspective: If it ain’t broke, break it! There is always room for improvement so even if something is working well after some time has passed try taking it all apart and looking at it again. Find a way to improve it.
Don’t re-invent the wheel: It simply means that it’s best to do the things the usual way. The franchise business model has experienced a tremendous amount of success by creating a system that anyone, in theory, can follow and find a similar level of success by following all the steps outlined. You don’t have to be original or creative and in fact, you are not permitted to veer too far from the guidelines. However, making this application in all situations would be a severe disservice. There are times where reinventing the wheel is exactly what you need to do. Even a small change can have a big impact on your company.
Act in haste, and repent in leisure: When translated literally it means that you should not attempt to do things too fast without thinking it through otherwise you’ll have plenty of time to regret the poor decisions you made. Using this philosophy to justify your own inability to make a decision and put it into action or just plain procrastination won’t excuse it. Some decisions need to be made in an instant. Be ready, be prepared so that when the time comes you decide and act from a place of knowledge and preparedness as opposed to reacting to the situation in fear.
Some Trivia: It is said that the word “cliché” originated from the French printing industry. A printing plate was made to produce multiples of identical content. A phrase used over and over, ready-made, came to be known as a cliché.