As
I visit procurement executives from across the UK public sector, we often come
to discuss what seems like an ‘elephant in the room’ - how much of the total
spend on goods and services is actually under some form of procurement
influence. Often procurement can be considered as simply an operational
department placing orders and completing tenders, their influence reduced
to only a proportion of the total goods and services expenditure. There is
a mismatch between this reality and the expectations of policy makers and
senior management who, especially in the current economic climate, still expect
significant savings and commercial governance across all spend categories.
The
role of procurement in high impact categories
In
many private and public sector organisations, non-procurement specialists
specify the goods and services required. This may be an engineer, clinician, IT
professional, construction expert, etc. Often these categories of spend carry a
high cost and business continuity impact and harnessing the specification
process and point of demand for those goods and service is crucial to long term
organisation and supply base efficiency.
In
the public sector the top 5 categories of spend are; Construction,
Pharmaceuticals, Social Care, Medical technologies and Information
Communication Technologies (ICT). They constitute over 50% of the public
sectors spend on goods and services.
In
these categories, it can often be the case that procurement influence is
limited to an operational or administrative tender execution role, rather than
being involved in the early stages of the product or service specification.
In
many cases, non-commercial decision makers will specify solutions that meet
their technical and quality needs, but pay less attention to comparative best
value, life cycle costs or price. As may be expected, if your priorities are
not commercial or financial, then your specifications will not pay full
attention to these factors.
Some
argue that this leads to a positive emphasis upon quality, but as many will
testify, over specification in many cases will not lead to improved quality.
There are often counter intuitive factors that emerge such as increased;
product and supply chain fragmentation, as well as unnecessary complexity and
volatility all of which lead to supply chain inefficiencies. There is also the
stark reality that public sector organisations deal with private sector
commercial entities whose main motive is profit. This is not necessarily tied
to quality and without strong contractual management; any private commercial
entity is incentivised to reduce quality in favour of profit margins.
Should
procurement be given more influence?
Should
public sector organisations increase procurement coverage and influence in high
impact categories, and if so, what would it mean for the skills and education
of their procurement teams?
I’ll
be exploring this theme in tomorrow’s post: Procurement Influence (Part 2):
Better Value & Better Outcomes!
Tweet
No comments:
Post a Comment