Make Right Choice to get the Most out of Procurement

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This article focuses on one of the strategic activities performed at every company and indeed by every team: making decisions. We’ve traversed through and wondered how the building blocks of decision making- developing options and defining goals are exercised by the sourcing and procurement professionals every day. Therefore, procurement does not require new technical skills to increase its value, perhaps needs to better package and promote its capability. The skills most needed for this are communication, marketing and selling skills.

A new and surprising status

Branding should be considered at an organizational level or renaming a group or revamping the titles to better convey the usefulness of procurement. However, rebranding can be started from the beginning since every sourcing project is a chance to change other’s understanding. This often comes with surprises and we have in mind two of them. They include:

• Sourcing is not about resources, but about results. The first question in procurement is not what you need but what your goals are.
• Sourcing is not about brilliant negotiation tactics; instead, it’s about building more options. Procurement helps you find more options to bring even more value.

After defining the goals and developing options, next comes to have a great foundation for the best possible outcome. The last step is to make the right choice. This is where the sourcing professional may face the most deeply established cliché in our field: that sourcing is all about getting the lowest price.

Obtaining the most competitive pricing is and will always be part of the sourcing and the procurement process. But at Aufait, our procurement management has already connected our work to the company’s goals and we work hard to develop better options that might have a wider scope and even greater benefits that we initially try to obtain. So now we come across another surprise: sourcing is not just about the lowest pricing but it’s about greatest value.

Connecting the old skills and tools to the new approach

By framing and guiding the process, procurement has set up the team to be positioned to be fruitful on the field-which for this situation means settling on the apt purchasing decision. Since procurement has seen so many of these decisions, it might even offer guidance to maintain a strategic distance from the common pitfalls.

This might look like:

• Reminding the team of the goals agreed
• Connecting product features to specific benefits that will advance the goals
• Keeping the team away from the sunk cost bias
• Helping calculate the total cost, switching cost, and cost of team’s time.
• Assume the uncertainty of the future with the help of probability.

The above-mentioned are the useful human functions that come as a result of a good analysis, RFPs and spreadsheets. It’s important that you are able to explain why we use the tools that we do.

Spreadsheets never show the absolute truth. However, they are used to organize current activities and their expenses and activities and cost of the future project. The fact is that every spreadsheet projecting the future is always at least partially wrong, but doesn’t mean that it’s not largely useful. Spreadsheets are never completely right but when prepared very well becomes an important part of the whole truth.

RFPs (Request for Proposals) are not ways to dumb down the market offerings, make vendors to do all the work and drive everything. It is an efficient way to help selected qualified vendors lets us know how the problem is going to be solved and at what cost. When done correctly it is an efficient way to manage communication.

e-Procurement: The new tool in the market

Before abandoning our techniques and tools, we need to study, realize and communicate that those tools do not define our job. However, one important step towards rebranding can be introducing our internal customers to the new eProcurement tools. The best tools among this class have outstanding interfaces that make it easy to keep the business goals and they are a lot of generations ahead of that working on the old spreadsheets.

The newly introduced tools will be able to better help us communicate who we are and what we do as sourcing and procurement professionals. Our duty is to facilitate decisions that have a greatest positive impact on the company’s limited resources. Reach out to us to see how you can streamline the procurement process at your organization.

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May 15th, 2018 by