Apr
18
The purchasing function typically acts as the interface between the customer (internal or external) and suppliers. Purchasing’s primary role of taking a business requirement – finding a supplier, negotiating a deal and then ordering the item is hinged on that first step – without knowing what’s really needed – costs can be far higher than required and the purchasing process inefficient.
Specification can be attributed in two ways, attributes related to things – (i.e. the part, component or raw material) and actions (functions, processes, ,procedures, services, performance)
Let’s consider this practically:
Requisition 1) A loose specification – “I want something to drink my coffee out of”
Requisition 2) A tight specification – “I want a red cup to drink my coffee from – it must be no more than 15 inches high – and it must have a white handle – it must be microwave safe.”
Consider in the above simple example that both orders want things (a cup) but they want different attributes. Requisition 2 enables the buyer to measure the market against specific needs and where he can achieve cost reduction it’s done directly against the specification without detriment to the fit form and function. Requisition 1 provides the buyer with much more scope however there is the chance that the person who raised the requisition may well change their mind / refine the specification as quotes begin to arrive.
Once the item is delivered the specification can be used to compare the delivered item to what was ordered. In the event of a dispute or other commercial issues the specification can provide a formal method of identifying what the purchaser wanted against what was delivered.
Apr
18
Why procurement should use project management disciplines.
Filed Under Blog | Comments Off on Why procurement should use project management disciplines.
Businesses deal with projects all the time they come in all shapes and sizes large and small, complex and simple but they share common elements in that they have a defined start and end point, and a set deliverable.
In recent years, businesses are becoming more aware of the formal project methodologies that are available (such as PRINCE 2 etc) with more and more senior executives attracted to this form of rigour and control that formal project methods can deliver. Many large organizations may utilize a standard method for all projects.
What benefits does Project Management provide?
Despite what you might think project management is not simply a copy of Microsoft Project! A disappointing number of organizations think that a copy of Microsoft project coupled with minimal training makes a project manager – that is not the case. The key role for a project manager is the responsibility for planning, co-ordinating, controlling and executing a given task (the project) while juggling resources, risk management, and internal/external stakeholders. Becoming a successful project manager requires training and experience which can itself act as a facilitator of leadership skills.
What does a project manager do?
The project manager is responsible for the success or failure of their project. While not an exhaustive list – expect the project manager to manage:
• Activity Planning
• Resource Planning
• Risk Management
• Monitoring and controlling against plan
• Scope Management
• Communications
• Budget control
Can good project management discipline aid procurement?
Absolutely! – consider the myriad of projects that a procurement department might tackle eg.
• Outsourcing
• Competitions/Tenders
• Purchasing for NPI (New product Introduction)
• Supply chain rationalization
• Performance improvement
Each of the above could be considered a project and would benefit from the rigours and controls that robust project management can provide.
A significant number of business initiatives fail to deliver on their initial promise. Poorly defined requirements, poor time management/planning, scope creep, unclear deliverables all have their part to play and can be improved upon with the right skills and approach. Procurement and Supply chain projects are no different with initiatives suffering from the same issues.
Next steps for business
So what should businesses do to facilitate competent project management? Clearly not everyone needs to be a project manager so selecting the right candidates is key; coupled with a suitable development program ideally grounded in on of the formal ‘off the shelf’ methodologies.
Perhaps the key task that businesses face is to ensure that any initiative is managed in an appropriate way instilling robust project management discipline from the start whilst providing suitable training and support for its staff.