Five ways to create value in procurement
The role of procurement has changed. No longer is it just about purchasing goods and services, but it’s about ensuring operations run smoothly all year round. This means establishing requirements, researching the market and evaluating vendors, as well as negotiating contracts and managing risk is key. Here are five ways procurement executives can gain value in their organisations.
- Cut costs
All businesses want to reduce their costs without damaging their profit margins, but how is this achieved? Through sourcing the right suppliers, procurement staff actively help reduce their company’s outgoing costs and operational risks. However, finding reliable data and insight on potential suppliers is often expensive and takes time.
2. Drive innovation
Procurement professionals hold a prominent position within a business. They are the people that choose which suppliers to work with and their choices often define their organisation’s overall supply chain. By choosing suppliers that add value, procurement teams can place their company in a better overall position.
3. Leverage good data
There is a difference between collecting as much data as you can and basing decisions on high-quality supply chain data. A complex supply chain that involves product development, engineering, packaging, delivery, sales, forecasting and more, utilising data correctly creates insights that drives revenue and scales efficiency.
4. Drive growth in new markets
The best opportunities for value growth are often found outside established markets and supply chains. Previously untapped markets are often full of eager companies seeking to innovate and develop at an increasing rate. However, moving into the unknown requires a lot of research, knowledge and assurance.
5. Help with CSR compliance
Corporate social responsibility (CSR) is a big area of focus in business. The reputational damage that can come from non-compliance within an area of CSR, such as the UN Sustainable Development Goals, because of its business supply chain can often be irreparable. As a result, a detailed pre-qualification process is crucial for procurement professionals.
Will Public Procurement Budgets Increase in 2021?
Procurement is more than just a private enterprise. COVID-19 reminded us that sourcing materials is an essential part of the government’s role. Throughout 2022, tiny departments sourced massive amounts of personal protective equipment (PPE), medical supplies, and emergency vaccines and testing kits. Even non-procurement professionals were pulled into the fray, as frantic timelines demanded nothing less.
According to Celeste Frye, co-founder and CEO of Public Works Partners, the crisis brought procurement to the attention of skilled employees who had never considered it. As non-procurement personnel stepped up to help their coworkers, many found that they’d stumbled upon a critical and rewarding job. “Existing public employees have seen the essential nature of the work”, Frye said. “[They’ve] gained some critical skills and possibly [grown] interested in pursuing procurement as a longer-term career”.
Small, Local Suppliers Take Charge
Frye, whose firm helps organisations engage stakeholders and develop long-term procurement strategies, thinks it well worth the effort to open one’s mind to new opportunities. Cooperative contracts, for instance, can help public departments and municipalities save money, time, and effort. By joining together with other towns or cities in the region, public procurement teams aggregate their purchasing power and can drive better deals.
These cooperative contracts have the added benefit of advancing equity. Smaller suppliers that struggle to compete with established firms for government contracts can act as subcontractors, helping big suppliers fulfil bits of the project. Once they get their foot in the door, small, local, and disadvantaged suppliers can then leverage that government relationship to take on additional projects.
Especially as governments start to pay attention to procurement resilience, public procurement departments must expand their requests for proposals (RFPs) to take into account innovative solutions and diverse suppliers. According to Frye, Public Works Partners—a certified female-owned firm—has benefitted from local and state requirements that specify diversity.
Post-Pandemic Funding Swells Procurement Budgets
And the pandemic won’t be the end of it. City governments need to build sustainable energy infrastructure such as solar panels, charging stations, and recycling plants, ensure that masks and medicines are never in short supply, and source new technologies to keep up with cloud and cybersecurity concerns.
Public procurement budgets will likely increase to match demand. As Peter Ware, Partner and Head of Government at Browne Jacobson, explained, “in a non-pandemic world, the [U.K.] government spends on average around £290 billion on outsourced services, goods, and works...anywhere between 10% and 14% of Gross Domestic Product (GDP). Post-pandemic, city procurement will only increase as national governments provide local divisions with emergency funding.
And in truth, government employees might jump at the opportunity. Frye noted that public procurement could give immediate feedback on new programmes: “[Procurement] is where new laws and policies ‘hit the road’ and are implemented”, she said. “Professionals in these fields get the satisfaction of creating real change and seeing quantifiable outcomes of their work”.