We visited a potential client last year, a busy Hospital with over 300 bed capacity on invitation by their procurement manager. Within the first 20 minutes of our meeting, we realized why there was public outcry due to poor service the customers were experiencing at the hospital.
“I am no longer the custodian of Purchase Order forms, I just get called in to sign PO’s ” The procurement manager told us. “The receptionists are out looking for suppliers of for stationery, doctors are busy looking for suppliers of reagents, everyone is busy ‘shopping’ on behalf of the organization” he continued.
Is everyone doing shopping in your organization?
Streamlining a procurement process requires creating specific purchasing steps to minimize the time between when a person requests an item and when he receives it. Based on your current purchasing process, you can streamline your system by changing who’s involved, granting more purchasing authority, automating the process and establishing specific vendor policies.
“Doctors save lives one at a time but procurement experts will save or kill thousands of lives with one decision” Anonymous
The first step in streamlining your procurement process is identifying why you want to do so.
You could be spending beyond the budget. Your employees might be less productive because they have inadequate resources to do their work. Your customers might be unhappy because you can’t get materials fast enough to fulfil orders. Inefficiency in manual sourcing processes is causing bottlenecks. Once you know what your purchasing problems are, you can examine your process to see what might be causing the problem.
Build long-term supplier relationships
Suppliers are often the source of joy in procurement manager's life, they could cause pain in equal measure if not handled strategically. There are so many factors to consider- including price, service, efficiency and reliability. Don't underestimate the importance of delivering goods or services that are on time, within budget and - most critically- of a respectable quality.
While it is always important to get multiple quotes always ensure that once you have established a good relationship with a reliable supplier, you maintain the relationship. Critics might say this breeds complacency, but it will foremost alleviate contractual headaches, and ensure a certain level of consistency.
Just like hospital above, there is a dangerous tendency for procurement to be a sprawling function that is decentralised throughout the organisation, and not held as tightly at the centre as other group functions such as finance, human resources or marketing. A centralised procurement function can create efficiencies and economies of scale, and will almost certainly ensure that decisions are made more quickly.
Further benefits to the centralised approach include reduced duplication of administrative work, increased efficiencies associated with centralised recordkeeping, and potential discounts from high-volume purchasing.
Some peace of good news is that ERPs, procure-to-pay and eProcurement solutions have automated every procurement process from supplier registration, e-tenders and tender evaluation, vendor management, contract management, invoice/PO matching, data and spend management. Another piece of good news is organizations can enjoy these solutions with no capital outlay. The list for goods news for procurement in relation to technology cannot be exhausted.
The star is bright for your procurement team and they have no excuse for not being strategically involved in taking business to the next level.
Purchasing Authority and Tighten Controls
The case of procurement manager in hospital was one where the guy had completely lost control and authority and therefore could not perform his job. He eventually resigned.
It is important to give staff adequate authority to do their jobs. You will even help them further if you couple the authority with procurement policies to guide their actions and tighten controls.
Tightened controls will allow greater bargaining power, and can empower the procurement professionals to ensure that suppliers are on boarded faster, contract templates with terms are predefined, and that signoffs are attained more efficiently.
Formulate and adhere to a procurement policy
It is critical to professionalise the procurement function, and ensure that there is delegations of authority in place to hold your procurement officers accountable for the decisions they make. Define the terms of your policy and make them simple and actionable.
Another key benefit is the near-guaranteed quality control. A strong procurement policy will determine the minimum required criteria to become a supplier, for example track record, financial position, operational history and performance.
Make this an organization wide process with inputs from all departments. Price stops being the main factor and an organization looks at other factors like supplier base, communication, negotiations, long term relations and align these factors with overall business strategy. Incorporate your procurement partners from the outset, involve them in internal team discussions and ensure they are well-prepared in terms of operational, maintenance, health and safety, as well as quality assurance risks. Don't treat them solely as project-based suppliers, but rather as strategic assets who are jointly responsible for a win for your company.
By streamlining your procurement process, you will likely see organisational benefits from your operations down to the bottom line. Initially it may seem overwhelming to implement these changes, but ultimately the cost, and operational efficiencies will make it all worthwhile.