Ever heard that before? Quite often procurement is simplified and many believe they’ve mastered procurement having put together a sourcing document such as an RfP, RfQ, RfT etc. Sometimes, and quite traditionally, the sourcing document is a simple replica of ‘whats been done in the past’ and includes some copying and pasting from other documents that look rather good. Bang, its ready to go and we’ll get some amazing responses from the market. But then we wonder why responses are more costly than we’d budgeted for or don’t hit the scope as well as expected or more worryingly we don’t create competitive tension and have to make do with a poor response rate. Still, it’ll do and lets move on to the next one.
Sounds familiar? But will having ‘something that will do’ really do? I figure there’s a lot more to procurement than just sourcing, procurement requires thought. Thought about how to optimise the offer to the market and not to maximise risk transfer to your provider for instance, after all risk costs money.
Planning for your sourcing activity is time very well spent and will save time, resource and dollars in the long term and help you source what you really need from the market. Equally, ensuring that you manage the contract and the supplier performance can drive some real gains.
A simple checklist can open up new opportunities, open new ways of doing things and most importantly add efficiency and effectiveness to your procurement process:
Here’s my top ten ‘must have’s’.
- Consider how well your specifications really represent what you are looking for. Are you over or under specifying? Is your specification tight, easy to understand and doesn’t carry gold plating?
- Is the market able to respond to your requirements? Have you engaged with the market prior to sourcing? What does the supply market landscape look like? Should you be ‘courting’ new entrants?
- Where does the risk lie? Are you able to retain some risk in-house? Do you really need to transfer all that risk to a supplier when you’re better placed to deal with it yourself?
- Whats the best type of contract? Offering a contract to the market that they know of, can understand and is equitable will result in greater participation.
- Have you thought about innovation? The market is your audience and they know all about how to innovate so ask for innovation in responses.
- How do you feel about sustainability? A topical subject but is this important to you and can the market respond without loosing any key players?
- What happens if my supplier doesn’t perform? Have you thought about a KPI platform to monitor achievement of critical success factors?
- How will the supplier report back to you? Have you included a reporting mechanism that will properly reflect actual achievement against your specification?
- Are you fully resourced? Have you planned enough time and resource to adequately plan, source, evaluate and manage the contract?
- How much will this cost? Are there opportunities to incentivise (and potentially penalise) your supplier to perform? Could you share the risk and reward? Do you have the funds available and how can you ‘get more for less?’
There’s a whole lot more to procurement than doing more of the same in the sourcing stage. Procurement is not a black art but it’s more than just rushing out an Rfx.
Good practice procurement can provide the glue to achieve operational efficiency. If your procurement lifecycle is well thought through, effective and market representative then the savings that you will reap will be more of an output than a sourcing imperative.
Any more ‘must have’s’ ( I actually have a checklist totalling over a hundred and I’m open to more).
Richard McKenzie-Browne is an avid procurement fan and advocate. Making a difference in procurement is what counts and moving forward beats standing still.
Contact Richard at email@example.com and see how MB Associates can help you make a difference.
MB Associates Ltd is an NZ wholly owned Procurement Consultancy and Advisory firm specialising in procurement, commercial and project management services to both public and private sector clients within infrastructure and facilities management. Visit www.mb-asociates.co.nz to view our full range of services.