Sourcing & Procurement is serious business

02. 10. 2018 by First Avocado

Mr X is chasing a deadline, along with regular office task, he also needs to finalize on an important purchasing deal for his company. This time, its advisory services for improving work effectiveness. Mr X understands that a buying decision such as this cannot be contracted  over a period of three to four days. He knows this is different from purchasing standard products such as laptops and everyday items which can be settled in days.

 

But unlike Mr X, there are executives entrusted with the role of a procurement officer, who oversee purchasing activities as mere an evaluation of weights and numbers – factoring  only quality and cost as key evaluation criteria. The other challenge, in the procurement function is making use of standard evaluation templates that don’t sync with the needs of actual users & consumers in the Organisation. This approach has serious implications not only on the effectiveness of upstream business activities but can negatively impact all aspects of the Organisation – be it revenue cycle or other support activities.

 

Take for example, contracting services such as technology implementation, business consulting or design work. Services such as this touches all aspects of the Organisation. A design agency selected only on capability parameter is risky. You are only gauging at its capabilities without focusing on specific values it offers to the company.  Sure, one can gather vendor’s past work and draw an idea from references or employ consultants to help you make a choice. These options are valid but comes with a cost and a biased narrative.

Some Organisation fail to understand that leveraging vendor’s capabilities for organization needs requires more than a standard procurement process. It requires investment on time and resources

For procurement functions that deal in buying sophisticated products and services, a practice that greatly adds value to purchasing process should be a high level of engagement with vendors and other functional departments in the Organisation.. 

 

Engagement acclimatizes both buying and vendor organization into their respective work culture and  management style. Gradually, this develops trust in both the parties resulting in a more open and transparent ideas and information sharing. A collaborative effort such as this results in product offering tailored to Organisation needs. Furthermore, shared objectives gives way to flexible contractual obligations. An important aspect of such collaborative effort is that it promotes co creation of services – a mindset that leads to innovation in companies, or at the very least in the upstream activities of procurement and sourcing.  

Engagement acclimatizes both buying and vendor organization into their respective work culture and management style.

Some Organisation fail to understand that leveraging vendor’s capabilities for organization needs requires more than a standard procurement process. It requires investment on time and resources. As much as the buying party may want the vendor to follow its procurement norms, equally applicable is the case when vendor would want the client to follow their engagement approach. Many of them requires multiple break out sessions in order to to deliver a compelling value. This calls for commitment from all nominated stakeholders. Often seen, buying entity treat such activities as secondary by delaying meetings or sending a non-representational executive who can’t make judgment calls. Poor engagement leads to poor understanding of strategic intent or nothing at all. This leads to standard delivery of goods and services that don’t deliver value as promised by the vendor. Take for example the procurement and implementation of business application software, a poor requirement gathering leads to poor design of the software. However, a requirement gathering is not simply a data collection exercise. It is a relationship that vendors build with diverse stakeholders and in the process gets attuned to their motivation and vulnerabilities. It is a co-creation exercise and building shared vision that can only work in a climate of high trust. Procurement officers and functions can facilitate this process by engaging the right stakeholders all through the contractual journey.  

Procurement is serious business and directly linked to upstream activities.

As it follows, engagement does not end with just vendors but also extends all the way to customer facing side of the business. Most organizations have their strategy working full throttle for customer facing functions. The sales and marketing are in sync with customer’s need and their processes are highly streamlined for engagement. Procurement department needs to develop a deeper level of empathy by constantly connecting with Organisation strategy and other functions for improved purchasing decision

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