Centralised procurement – managing stakeholders in New Jersey, circa 1920

We featured the 1920 New Jersey paper concerning their centralised procurement initiative recently, and said we would come back to how they handled the issue of stakeholder engagement and management. That’s still critical to any central procurement team in any organisation anywhere in the world today, I’m sure, and there are points made by Joseph M Coyle that resonate today and provide pretty good advice for anyone in that situation still.

It is clear from the report that the author was very proud of the steps New Jersey had taken to manage stakeholders and ensure the centralised procurement organisation achieved traction and acceptance. At a governance level, there was an advisory board, and each agency could have one representative on an advisory board which oversaw the central purchasing intuitive. The board was divided into groups and given responsibility for a certain group of categories as well.

Coyle then lays out how the co-operation of the participating bodies was sought at a day top day level.

The Department threw itself into this work whole-heartedly and sincerely, having as its slogan; “Our part of the Government is in serving you”.

Now there’s a slogan for Crown Commercial Service and other centralised procurement organisations to consider ... Coyle continues.

Personal contact was had with every individual agency, from time to time suggestions were adopted, constructive criticism was invited, good will established, courteous treatment made uniform, and every possible inducement held out for co-operation, with the result that in New Jersey the Purchasing Department has the earnest co-operation of all the using agencies. There is no friction, there are no jealousies, and there is no dissension.

Of course, it would be great to turn back the clock and see if the recipients of the central purchasing service felt quite the same about it!

In New Jersey, the central team was organised on a broad ‘category management’ basis, with four specialist areas. One for example had clothing and household supplies, material, and equipment. But in addition, there was a small team – an “accounting and statistical division” to oversee the bookkeeping and analysis, and there was also a traffic and stores manager, responsible for logistics and supply chain type activities. All pretty much the way we might structure matters today.

As well as putting together aggregated contracts, the specialist purchasing agents (category managers) got involved in helping the users work out what they needed to buy.

In instances of this kind the Purchasing Department, by its more varied experience and better contacts with sources of supply and technical information, can, at times, suggest the very item desired.

Coyle gives the example of advising an agency on the purchase of a particular type of “spraying hose”. The agent got involved and did some research:

As a result of this action, when the occasion next arose for the purchase of 6,000 feet of this hose, the Purchasing Agent was able to suggest to the using agency the substitution of a certain size pipe for this work, which the Department consultant tried out and found would serve the same purpose as hose. As a result, instead of an expenditure of over $6,000 for the same kind of hose, the second purchase was for pipe at a cost of slightly in excess of $700.

Another nice win for the annual savings report there! Anyway, it is a fascinating read, and shows that the basic principles of successful procurement, and successful central procurement organisations, haven’t changed much in ninety years. And you can download the whole paper here.

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