Buying is the practice of exchange. In its simplest form, it is called purchasing, acquiring, obtaining, getting and picking up. Over time, buying as an art has evolved into the practice called Procurement having its clear cut structures and operating functional parts. In the course of time, procurement practice has also further evolved into a fully fledged profession having its own strategies, processes, procedures and policies.
According to the Business Dictionary, the buying process is the set of procedures used to identify products for purchase, verify quality and compliance of products and vendors carry out purchasing transactions and verify that operations associated with procurement have been executed properly. Different organizations have their own buying processes of various complexities depending on the industry in which they operate and the nature of the products being purchased.
The application of strategy to buying as well as forecasting, inventory management, supplier relations and other advanced buying practices have all combined to make buying more scientific and integrated than previously requiring smart approaches by professionals to achieve the goals of procurement profession. This explains why procurement leaders insist on proper training and on-boarding of young practitioners of the profession. We expose them to the entire body of knowledge which form the practice and emphasize the need for them to acquire necessary tools required to thrive in the profession. It is expected that these strategic capacity development efforts will strengthen the skills of practitioners in the art and practice of the buying profession.
In this vein, the following presentation by Francis Churchill on The Six Fundamentals of procurement is expected to be of great use to young professionals in their quest to become procurement experts.
The Six Fundamentals of Procurement
Procurement isn’t rocket science, it’s not brain surgery and it’s not curing illness, junior buyers have been told.
For the most part, procurement is “absolutely about following a series of systems and processes” to identify, source and manage contracts, said Matthew Sparkes, head of financial services at the Crown Commercial Service (CCS), who describes himself as “not a procurement person by trade”.
Speaking to new buyers and non-procurement professionals with purchasing responsibilities at the Procurex conference in London, Sparkes shared six top tips for buying right.
1. Identify customer need
Identifying stakeholder or customer need, and separating it from what the customer wants, is crucial, said Sparkes. “If you don’t understand what that need is – it doesn’t matter what the want is – you’ll get it wrong.”
Using the example of Heathrow’s Terminal 5, Sparkes said the airport originally wanted “rows and rows of check-in desks”. The procurement team identified the real need wasn’t having enough desks, it was moving footfall quickly through the terminal. Armed with this understanding, Sparkes said the procurement team suggested an alternative solution based on supermarket checkouts, reducing both check-in times and costs.
2. Look outside your market
Heathrow’s procurement teams were able to suggest an alternative to traditional check-in desks because they understood what other options were available, said Sparkes. Not only should buyers understand their own market, but they are always looking outside their market for innovation.
3. Prioritise relationships
Good contract management will give you what you expected to get and it’s important to regularly check suppliers are meeting contractual obligations. “But the relationship is the bit that will give you over and above. It will give you the growth, it will give you the innovation, it will give you the partnering if you want to run it that way,” said Sparkes.
Relationships take time, so think about which suppliers are more important to you and how this might change in the future.
4. Collect spend data
Spend data is possibly the most powerful tool buyers have, said Sparkes. Data can help buyers get a view of exactly what they are buying, who they are buying from and frequency, thereby helping to find savings.
Analyzing spend data helped Sparkes save £3m on a single contract, he said. Widgets he was buying at a premium with a flexible ad-hoc contract were actually being bought very regularly. “The data essentially said for three years we’d been buying this every quarter, pretty much at exactly the same time.” By changing the contract to help the supplier balance their workload he was able to get a much lower price.
5. Communicate what you are doing
When going to tender be clear about all aspects of what you are going to do in your procurement, said Sparkes. Be explicit about your market strategy and where you are in the tender process. “If you’re going to work well with people, you need to bring them on that journey with you, and that starts with the first engagement.
“It will also – and this is quite practical – reduce the levels of quite frankly annoying emails writing to get hold of ‘when are we doing this’ and ‘what’s the next step’.”
6. Know your negotiating position
Agree your position with your stakeholders upfront, including red lines and walk away points, before you start negotiating with supplier. “It’s absolutely about understanding what I can do in the [negotiating] room and not having to take things away,” said Sparkes. It will empower you and generally help things go a lot smoother, he added.
In conclusion, the determination of procurement leaders to advance the professional practice of procurement must be sustained through continued emphasis on capacity development.
By Gob-Agundu, Uche FCIPS, Chartered (with contribution from F. Churchill)
