In part 1 of our interview with Dr Jo Meehan, Senior Lecturer and Director of the Liverpool MBA at the University of Liverpool, published yesterday, we talked about her interests and about procurement education generally. Today we will get into her thoughts on the nature of procurement, which reflects how she teaches the subject too.
As we said last time, she is keen to unpick what we mean when we talk about procurement needing to be “more strategic”. What would we actually do if involved earlier in the end-to-end process? What do we bring in terms of skills and knowledge? The opportunity for procurement, she says, is to be the “arbiter of value and accountability”. That means understanding the choices facing the organisation and how they might play out. Risk is important, but we shouldn’t just be seen as risk managers. So she structures her teaching of the topic around “challenge, choice, consequences”.
“We start with an overview of scope to cover the basics: what the job involves, the opportunities that come from negotiation, supplier evaluation, contract management and so on. Then we go back to “challenge”. What questions should we be asking of suppliers, and indeed of internal and external customers? That picks up on varied issues including transparency, technology, access to new or scarce materials. This all feeds into decision making”.
The next stage is around choices. There are different challenge points, and a suite of options that can indicate the choices we have. That might include for instance balancing the potential benefits of introducing new suppliers against the cost and risk of doing so. “Stability versus innovation” as she describes it. These are commercial choices.
Consequences arise from our choices, and procurement must be aware of the results our actions drive. (In social care, for instance, we are often in effect buying ‘people’ – if we don’t pay for travel time, that may be commercially appropriate but has real consequences for the provider’s staff as well as care recipients). We can’t optimise the costs of people in the same way we might optimise the costs of widgets. Different choices take us to different places.
Meehan points out that buyers often have very imperfect market information, much of which they gain from just a few sources, usually their current suppliers. She gives the example of a buyer who was proud to have held prices for 5 years – but really the market price had dropped by more than 10% in that time. “Power comes from knowledge” as she says.
Power also entered the discussion when Meehan talked about collaboration. One of the difficulties of driving collaboration in the public sector for instance is people don’t like giving away power, and sharing knowledge, even with people and organisations who are supposedly “on our side”, feels like we are doing just that.
“Public organisations have tried to collaborate, and it has been successful up to a point, but they often don’t challenge sufficiently their motives – copying the private sector but not questioning the underpinning assumptions”, she says. Even in the private sector, collaboration requires a level of procurement maturity in order to succeed, a level that is not always present in public sector organisations. That maturity means people with the right skills, a strong systems and data infrastructure, and a lack of the fear which can sometimes surround collaboration because of that apparent loss of power.
So as procurement maturity increases in the public sector, she is hopeful that more organisations should see the benefits of collaboration, which is also driven by capacity and demand. But we have to understand economies of scale, “not just aggregate, aggregate, aggregate”. We need to know where we are on the economy of scale curve, what shape it is and make rational decisions about whether and where to do more (or less) aggregation.
As you can probably tell, our conversation ranged pretty widely. Meehan has bracing views; she is a great advocate for and supporter of professional procurement, but is also a realist. She is challenging professionals to think hard about what we do, how we do it, and how we develop and apply our skiils. Thanks to her for sparing the time to talk to us, and we very much hope she will be back here with more to say in the future.