There’s nothing like a good procurement discussion to get the blood flowing! Themes getting our community this month included Maverick Purchasing and KPIs.
On our agenda this time, we’re looking at the best ways of dealing with maverick purchasing, and what matters more to procurement’s stakeholders, speed of delivery vs. other product factors. And to top it off, no procurement discussion round-up would be complete without a look at that classic – KPIs.
Maverick purchasing is a topic that gets a lot of column inches, but that organisations have had difficulty stamping out completely. Maverick purchasing can be defined as “when an employee purchases goods, parts or materials for a project, going outside of the accepted buying channels of their organisation”.
The most popular answers focused on the two key issues that underline the ‘why’ of maverick purchasing – procurement’s relationship with the business, and the systems in place for purchasing and contract management.
Building relationships with business stakeholders, and knowing their requirements at the outset, could help to minimise maverick purchasing. As well as this, being able to show the value that procurement can bring to the table, and ensuring an understanding of procurement’s role, were also seen as critical.
It’s also important to remember the technological and systems argument. Within procurement, the likely cause of maverick spend was seen to be difficult to use systems. By making systems user-friendly, and putting the required approvals in place, it can help to minimise out of process practices.
It comes down to handling both people and technology, and not, as one answer said, using a taser. Although, for those of us who have seen this while working in procurement, a taser might actually seem to be the right option…!
Most procurement professionals will heard the question, “when will it arrive?” at some point. The focus in this question was whether or not speed was the most important factor for business stakeholders.
The general consensus from the community was that the shorter the time taken to supply against a requirement, the happier the stakeholder was going to be. However, it was also voiced that procurement needed to be involved much earlier in the process than it normally is, in order to supply goods and service in good time.
The idea that procurement needed to be involved with, or understand, the planning cycles was another piece of the puzzle that is often missing. Having all contracts in a single repository, and being involved in specification discussions before parts were agreed, were two of the solutions put forward to allow procurement to do this.
However, the traditional idea that procurement can only offer two of speed, cost and quality in most situations. The lack of leverage in sourcing activities means that one will be compromised, but stakeholders will still be expecting all three.
Being able to do all three is where procurement can weave “magic”, or otherwise, the function needs to get better at saying no and pushing back.
Key Performance Indicators (KPIs) or metrics for individuals and procurement departments are high on the agenda at this time of year. Ensuring that your team is measured, both internally and externally, against the right metrics is key to both good data and success.
When asked about the 3 key metrics to evaluate the procurement function, the community’s answers didn’t spring many surprises. However, in nearly a third of the answers, savings generated were rated as one of the top KPIs. Although other answers highlighted value as a metric, it appeared fewer times than total spend managed, and shows that even now, procurement is still widely viewed as a savings generating function.
It also shows that, despite the profession looking to move towards value generation metrics, many procurement teams are still measured on this.
Other key KPIs highlighted were:
- Percentage of on time delivery
- Total Spend
- Customer satisfaction
- Stock Turnover
- Supplier Consolidation
- Supply Chain Security & Risk
- Customer of Choice
- Procurement Engagement
On the other side of the debate was the question of KPIs other than cost savings, particularly in relation to Capital Investments for Projects. Suggested approaches involved the use of a Balanced Scorecard, including cost, quality, delivery, inventory and sustainability amongst others, and with a focus on reduction of Total Cost of Ownership.
What was seen as important in the answers was communication with internal stakeholders to understand their needs, and let them understand what procurement can offer. Within the Capital Projects environment, the feeling was that this was more about generating value for internal stakeholders, rather than focusing solely on cost.
Do you agree with the answers? If you want to add anything, join in the Discussions on Procurious, where you can find a variety of other questions, or start your own.