How to Build a Strong Procurement Function

This blog entry is inspired by Leo King, independent journalist, who recently asked three questions and interviewed me for an article in The Times, 21 January, “Building a First-Class Procurement Function.” These are my notes in preparation for the interview, with a few additions and corrected grammar for this publication.

Q1:  What are the key factors required for a strong procurement function?  Why are these so important?

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Some cautionary advice on the use of Supply Positioning

A recent discussion with procurement consultant, Bill Young, caused us to reflect on the use of ‘supply positioning’ as a model for developing strategies to add value through procurement. We considered the possibility of positioning procurement projects rather than purchase items or supply categories. I concluded that this application had potential but also had practical difficulties. The use of supply positioning by Procurement, without the engagement of other stakeholders, is dangerous. As supply positioning is often misapplied, I thought I might share my thoughts here. Continue reading

E-auctions: when (not) to use them… and dirty tactics to look out for!

A recent article in Procurement Leaders magazine, “Are e-auctions all they are cracked up to be?”, concludes “by taking the personal touch out of the bidding process, you’re losing the opportunity to leverage your face-to-face skills to get really [to] know a potential supplier.” The article seems to be founded on the premise that e-auctions (reverse auctions) might typically be run in circumstances where buyer-supplier relationships are important.

I have been a long-standing critic of indiscriminate use of procurement e-auctions. Reverse auctions do have an important place in the procurement toolkit but are often misused. So, what constitutes misuse?  What can go wrong? And when is it appropriate to use reverse auctions? Continue reading

Procurement for Projects: Supply Planning (Part 2) – 3 Key Elements; 6 Tools & Techniques

This article is the second in a series written specifically as guidance for project managers. 

Many projects suffer from the late involvement, or absence, of the procurement professional. It is the Project Manager’s responsibility to determine the requirement (or not) for specialist procurement skills. The series sets out to educate project managers in the essential considerations, and to inform the PM’s decision as to the need for specialist procurement resource.

The first article (Part 1) answered the question, “When and why do project managers need supply planning?” This article covers three key elements of supply planning – requirements analysis, supply market analysis, and risk management – and six tools and techniques used in the supply planning process.  Continue reading

Procurement for Projects: Supply Planning (Part 1)

This article is the first in a series written specifically as guidance for project managers.  Superficially the requirements of projects and ‘business as usual’ may seem different. For the experienced practitioner, procurement for projects has much in common with other procurement practice, ideally drawing on a range of techniques from a comprehensive tool set.

Many projects suffer from the late involvement, or absence, of the procurement professional. It is the Project Manager’s responsibility to determine the requirement (or not) for specialist procurement skills. Irrespective of the makeup of the project team, it is most important that the procurement cycle is considered and planned from the project outset. This series sets out to explain why, to educate project managers in the essential considerations, and to inform the PM’s decision as to the need for specialist resource. Continue reading

Procurement for Projects? …or Business as Usual?

In a recent exchange on Twitter, I was asked if I had any writing on procurement in the context of projects, as there is very little coverage about this topic for Project Managers.

Is procurement for projects different from other procurement?

There are opposing arguments, on the one hand that procurement for projects is very different from other procurement, on the other hand, that the ideal approaches to procurement are very similar whether for projects or not, and that the approaches become different only as one makes compromises. Such compromises would arise as a consequence of differences in objectives for projects and ‘business as usual’ (BAU), and from constraints in the capability of the procurement resource. Compromises may also be forced by late involvement of appropriate procurement expertise. Continue reading

How to Determine Purchasing Organisation: Purchasing Activity Analysis

Judging by the limited references in the literature on purchasing practice and purchasing organisation, it would seem that purchasing activity analysis is a much underrated tool.

Why is activity analysis an important tool in determining purchasing organisation and establishing good practice? Continue reading

The Role of Procurement: Cost Saving or Adding Value?

Where does cost saving sit in your Procurement’s scheme of things?

In a recent series of articles I have been examining the reasons why procurement cost-saving initiatives frequently fail to meet expectations, particularly in term of delivering measurable improvements in business profitability. There is undoubtedly a bigger question: where does cost saving sit in Procurement’s scheme of things? Continue reading