Procurement is an essential aspect of any organization. When it’s properly managed, it becomes a very important tool for the improvement of different processes: purchasing, expediting, logistics managing, material distribution control, recycling, repurposing and the subsequent wastage reselling. Whether it comes about a specific project, merchandise produced through high engineering processes, or standardized produced goods, it is advantageous for any company that the products or services are suitable for customers and that managers procure them at the best beneficial cost. The latter, in order to satisfy the demands of the acquirer with the best quality, quantity, time and location the company could possibly offer.
Procurement departments have an important task then: in first place, capturing value in organization supply-channels (strategic partners, freight forwarders, trucking contractors, fabricators, warehousing solutions). In second place, in order to make sense to the operations department assembly, through the creation and execution of contract strategies. In third place, procurement departments must, in the short term, save the whole cost of ownership and life of products. Stakeholders usually understand the risks involved in the supply process thanks to the procurement departments and that’s a key function for keeping the agreements alive with them.
How can you improve the procurement management in your company?
1. Always be prepared
Every year, nature teaches us that we can’t give for granted the equilibrium we have been get used to. Hurricanes, earthquakes, floods, tsunamis and other catastrophes happen and we don’t see them coming. Maybe it’s not about natural disasters: an economic recession, a fast depreciation of local currency or the increase of unemployment are aleatory events, and, at the same time, they are part of the usual economic landscape. Being able to adapt to any circumstance is not a virtue: it’s a need.
Don’t depend only on your usual clients, because things can change in any moment. Prefer long term contracts with the aim of reducing cost uncertainty numbers and for keeping your flow of cash constant, even though all people is having a tough time and think of firing part of the staff for reducing costs. In addition, you can buy a good insurance to your company and never think that bad things never happen.
2. Think first, act later
Evaluate your plans before starting any move; unless it’s a current emergency, don’t hurry. A poor time when planning will always lead you to trouble Remember the old Sun Tzu: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” Think in everything that can go wrong: delays, an employee gets sick, a nature disaster happens, etc. It is very important that you spend enough time planning things: a plan A and a plan B (sometimes C). Consider all the things that need to be done, how, when and at what cost. Never plan things alone: always try to seek help from experts and don’t take important decisions alone if you can.
3. Think in terms of value not of cost-savings
The common challenge of selling procurement to big companies and teaching people who believe that purchasing is merely a cost-saving process, is a tremendous source of frustration. It’s better if you consider how can you teach the right lessons to the people around you. Think beyond and act in consequence. Reducing costs is, of course, an important issue, however, value is above that in the priority scale: it goes beyond financial benefits.
4. Don’t use outcome based on how something should be done
It’s a daily issue to deal with: buyers constantly generate that kind of requirements, instead of what the ideal outcomes really are. This is not easy at all for vendors… and don’t let me start about how hard it is for evaluating and comparing. Outlining the goals for the specific project and then challenging your suppliers for bringing creative answers is always better.
5. Walk the walk, and learn from it
It does not matter how much you have learned in college, from blogs like this one or from friendly advices from colleagues. Experience doesn’t come from heaven, and the truths you carve on stone after failing and standing up again will be priceless. Theory will never correspond practice 100%. So, don’t close your mind, think horizontally, be creative and remember tip number one: be always ready for adapting to new situations.
6. People is the key word, not purchasing
Purchasing is not an automatic process: it is made by people, hard-working people, who need incentives, congratulations, advices and direction from you. People is your higher active and you better give them reasons for doing a good job for the company (because they work for the company, not for you). Train them constantly, treat them as a living organism.
7. Listen to your team
This is related to the prior tip: why not listening to your team (specially the employees that have been working there for years) instead of your conscience only? Your suppliers know things that maybe you don’t; manufacturers, the security guards, secretaries, managers… and, if they don’t give you the answer you are looking for, it’s ok: they will feel that you care about their opinion, and that’s important.
Good luck with that. See you next time!