So, what hampers the procurement process? And what factors negatively contribute to a company’s supply chain and its partners? Identifying and acknowledging them is the first step to mitigating their effects. At the same time, we must also unpack the process brick by brick to understand why they manifest in the first place.
The institution of procurement
Procurement officials have a great deal of power and influence. From their standpoint, they effectively have the ability to monitor marketplaces, determine who is worthy of approaching in each one, define what their working relationship or future agreements will be, and subsequently select the desired entities. It is specifically here where procurement is susceptible to corruption, with many high-profile cases emanating from a failure in selecting and overseeing contracted companies.
To combat this, a company must introduce and execute safeguarding policies. A great example of this is a source-to-contract policy, which encompasses several practices that ensure due diligence, such as sourcing multiple quotes, evaluation methods, and established selection criteria as well as a clear segregation of duties.
But in the pursuit of due diligence come the factors that result in a slow process à la red tape. In other words, companies must put in countless checks and balances to remove the subjective nature of selecting and purchasing. This is the case on multiple fronts, including legal, tax, finance, budget and contract ownership. In certain cases, companies that engage in procurement that involves a foreign currency transaction must even seek and obtain approval from the South African Reserve Bank. Paperwork is part and parcel of the procurement process, and it’s at the institutional level that we can see it take its time.
Having the right skills
Many procurement problems start with people lacking the required knowledge and skill sets to undertake the process and ensure smooth running. This is especially the case in South Africa, where a lack of education and the deployment of ill-equipped officials remain national challenges.
There are well-known areas, such as tax and law, which are essential to the process and are catered to, but lesser-known factors can often be overlooked. Finance is one example, such as when a finance manager is required to sign off on the financial structure. Contracts also tend to contain derivatives. Whole finance regimes are baked into agreements, and there can be other complex financial transactions, such as creating a joint venture. Never overlook the money in any shape or form – this requires a skilled individual.
Possessing the necessary skills to complete the procurement process is the foundation for other practices that make for smooth running. Contracts are the bedrock of any procurement deal. In many cases, I have witnessed companies having to scramble to collect the necessary information related to contractual obligations. A clear understanding of the operational process and how it fits into the bigger picture of the business such as the scope, is critical to get it done.
Swivelling chairs and other warning signs
There are tell-tale signs on both ends of the supply chain that are strong indicators of whether a business and its procurement partner are operating efficiently – and if the supplier is the right choice going forward. For example, procurement officials that occupy a swivel chair are a red flag as their only purpose is to push information from pillar to post and back again. I encourage companies to seek out the anomalies, whether they be in human resources or otherwise.
While surface-level assumptions should ideally not play a role in the official procurement selection process, there are two things to watch out for. Firstly, I would be hesitant to engage with a partner that presents itself to know and do everything. Supply chains are complex and intensive with specific areas of expertise. Finding a procurement professional with a specialty or even an eye for your sector is essential for not only the delivery of quality service but also positively contributing to an underlying sentiment of trust and speed of execution.
Secondly, your supplier must have a select number of partners for the specific service it offers. In other words, a business that has committed partners that offer roundhouse solutions for the industry it caters to. Widespread sourcing is a breeding ground for mediocrity, and you’re left with an average supplier.
The importance and evolution of IT procurement
At the turn of the century, information technology (IT) was an element that enabled organisations. It was a means to optimise, empowering companies to complete routine tasks with efficiency and accuracy. However, IT is and continues to be the pinnacle of procurement and a true demonstration of supply chain capability.
IT requires people to know how things work. Today, technology has a lifespan of six to twelve months. Factors such as software and intellectual property and the introduction of legislation, such as the Protection of Personal Information (POPI) Act, add even more complexity to the nature of IT procurement.
At the same time, IT is no longer a business enabler. Innovations in artificial intelligence (AI) and cloud technology demonstrate technology’s ability to transform business margins and eliminate redundancies. Supply chains produce a large amount of data, which needs to be taken care of. Procurement is now the enabler. While wielding so much power, it’s our job to exercise humility and provide the best service to our clients. No, your procurement processes don’t have to be slow when you apply the essential mechanisms and pre-emptive knowledge that best fits your objective. At the end of the day, a supplier’s job is to enable businesses and governments in a cost-effective, efficient, and optimal way. If yours isn’t doing that, it’s time to reassess.
Supplied by Dante Deo, a leader in IT sourcing and procurement.