Purchasing Professionals

Purchasing Efficiency Check-list

Introduction

In many organisations the Purchasing and Supply function is viewed as a routine low level activity. A couple of years ago a UK national survey of CEO's and FD's revealed that 48% could not readily recall their annual total expenditure on goods and services (defined as all non wage & salary expenditure) though they had no problem listing turnover, sales, profits, headcount and salary costs. Strange really, when one considers most sectors spend considerably more on goods and services than they do on wages and salaries. It follows therefore that in many organisations a re-assessment of Procurement performance will yield beneficial results by way of significant contributions to bottom line and competitive advantage.

Here is a short quick

 

Checklist

To help you think about where your organisation stands at the moment

(note for the purpose of this checklist the term ‘Buyer’ is defined as anyone spending money on behalf of the Business)

 

The Fundamentals

Many organisations do not manage their procurement in totality. They do not know how much their annual spend is on goods and services, let alone spend by commodity grouping, who is spending the money and with which suppliers. Without overall management of the function they are undoubtedly wasting large amounts of money.

 

There are also probably over cosy relationships in place that at best lead to over charging and at worst downright fraud.

Strategy:

  • Is the Business working to a carefully considered Purchasing and Supply strategy?
  • Is there accurate management information available and does top management use it to review and adjust the strategy?
  • Would an average 10% reduction in non-salary related expenditure be significant to the Business?
  • Are there cost reduction and quality improvement programmes in place which are regularly reviewed by top management?
  • Is the Procurement function viewed as an upstream or downstream activity and is it high or low profile within the organisation?
  • Is it fragmented and uncontrolled or centralised and bureaucratic?
  • Do you have better Suppliers than your competitors?
  • Is there effective planning and co-ordinated management of the entire Supply Chain?

Management

  • Is Procurement a profit centre delivering proven measurables on a continuous basis by way of more profit and increased competitive advantage?
  • Are suppliers selected objectively and do you operate vendor assessment and rating schemes?
  • Have you installed supplier development programmes for strategic purchases?
  • Do buyers have the negotiation skills to exploit market place potential?
  • Do you measure buyer performance and set targets?
  • Probity - is it satisfactory - are inducements taken which could at the least influence Buyer judgement?
  • Could there be collusion between Buyers and Suppliers?
  • Are your ordering, payment and information gathering processes automated via efficient IT systems?
  • Are your taking advantage of the new e-commerce B2B (Business to business) systems?
  • Does the organisation know how much the procurement function costs?
  • Procedures
  • Are your written Policies and Procedures an expression of the best practice techniques that Buyers must follow?
  • Could there be collusion between Buyers and Suppliers?
  • Do you have a written, Board approved, Ethical Code in place to sufficiently protect both the individual and organisation?
  • Is there also a Supplier's version that they sign up to?

People:

  • Have you undertaken a skills assessment programme in order to develop individual buying training and development plans matched to job needs?
  • When recruiting buyers do you have a pool of the very best candidates to choose from?
  • Horizon Associates are in business to help improve Purchasing and Supply performance. We are a little different to most other Consultants in the field who tend to adopt an 'audit type' approach, aiming to impress with a few cost saving quick wins. Sure we like quick wins as well, but only if they are actioned and owned by the people doing the work. We like to work very closely with them to change the whole philosophy and culture to ensure that medium and long-term wins become a natural part of the work, long after we have departed.

 

"Seven Tips for Best Practice" for procurement professionals interested in strategic purchasing.

 

According to Best Practice LLC a N.C, USA based research and consulting firm - "Best practices are documented strategies and tactics employed by the most admired and keenest competitors in the business." They undertook a two-year study, based on primary and secondary research, profiled more than 130 companies across 31 industries, including supply chain stalwarts Dell Computer Corp, Ford Motor Co, Texas Instruments Inc, Wal-Mart Stores Inc, Glaxo Wellcome Inc and Eastman Chemical Co.

 

From the research they came up with SEVEN TIPS FOR BEST PRACTICES

 

  1. Align supply chain management systems with strategic initiatives and goals.
  2. Forge partnerships with suppliers.
  3. Certify supplier-partners.
  4. Employ technology to improve supplier partnerships.
  5. Refine and enhance the manufacturing process.
  6. Foster communication between partner organizations.
  7. Emphasize the mutual benefits of partnership.
  8. Our view - well it was a big survey to confirm common sense; however it is a nice reminder list to benchmark progress.