Six Procurement Truths for the New Year

I wanted to write something deeply meaningful here before I go and pack up my Managing Editor of Spend Matters UK/Europe kitbag … but this is the best I’ve come up with!  I have also wanted to write a “ten commandments of procurement” for ages but haven’t quite cracked that either. But here are six high-level thoughts to leave you with anyway – good luck and I hope everyone reading this will continue to move the profession forwards. And I will no doubt keep writing (somehow, somewhere), so look out from more for me anyway next year and beyond …

Procurement is all about value

Value ultimately means competitive advantage and shareholder value for private sector firms; and achieving organisational policy goals in the public sector. Procurement delivers value through (at least) 8 different routes – see our paper here, which discusses those routes, from cost reduction to risk management, from driving internal efficiency to securing scarce resources.

But the KEY point to remember is that how we should deliver value is different - and indeed is unique - for every organisation and for every different category, product or service we buy. Which means that every article or book you read that proposes a single way of achieving procurement success is making a basic error!

For example, in one organisation, or for one product, packaging might be all about cost reduction and minimisation - within certain quality parameters of course. In another case, packaging buying might be all about innovation that drives revenue growth. Anyway, “savings” or cost reduction is important for certain purchases in certain organisations – as are risk, innovation, efficiency and all the other procurement value goals.

Competition works

How do we achieve this “value”? There are a number of routes, and many different models and strategies, but after thousands of years of trading, active and strong competition is the best route humanity has yet devised to make sure we get the best possible deal when we buy.

That’s true whether our aim is low cost, high quality, innovation or anything else (see the previous point). Competition – or at the very least the threat of competition – it is what keeps suppliers honest and on their toes. It drives performance and innovation, minimises complacency and reduces the chances of corruption.

But relationships are still important

Believing in competition does not mean relationships between buyers (and indeed other stakeholders) and suppliers are not important. But can you have a close, “strategic partnership” and a good relationship with a supplier and still apply competition, as per our previous point?

Yes, we believe so. You might decide to stick with one supplier for years – but the possibility of competition is still desirable and should be seen as complementary to the relationship side of things. In every supply situation though, a good relationship with the supplier is preferable to a bad relationship. We’d also stress that complex SRM (strategic relationship management) programmes are fine and have their place but simply acting professionally and with courtesy when dealing with suppliers goes a long way to achieving this.

Part 2 tomorrow ...

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