Procurement exists in a dynamic, fast-paced, constantly changing environment. So surely the reasons we use to select our suppliers and supply partners would change over time too? Wouldn’t they?
It’s been over three years since the Procurious network was canvassed on what critical factors they look for in their suppliers. The world has moved on a-pace in the intervening period and it’s interesting to take an inward look to see if procurement has developed at the same pace, particularly in its supplier selection processes.
Gone are the days of the cheapest price (or at least they should be!). Gone, and consigned to a very dark part of history, are the days where supply decisions were made over lunch or in private meetings, and related more to who you knew than what you knew, which golf course or members’ club you were part of. Or even (sharp intake of breath) what you might be offering the buyers in return.
Even the list below, the key factors highlighted last time out, may have been superseded. So what are the new criteria? Or, if they are still the same, why is this the case?
Cost and Quality vs. Social Value and #MeToo?
If we take a look back at the responses from the network in 2015, we find ourselves looking at a list with a number of the usual suspects on it:
- Cultural Fit – including values
- Cost – covering price, Total Cost of Opportunity/Ownership
- Value – value for money and value generation opportunities
- Experience in the market and current references
- Response to change – in orders and products
- Quality – covering products and service quality and quality history
In addition to this, some that didn’t make the top 7 as it was included trust and professionalism, strategic process alignment and technical ability. There’s nothing that looks out of place on the list. In fact, they’re all eminently sensible and fair criteria to be considering.
The problem is it that it reflects a very traditional view of procurement.
Given the changing environment that procurement operates in, wouldn’t we expect to see these criteria changing too? In the past couple of years, geo-political instability has dominated the landscape and shows no sign of disappearing soon with Brexit and a potential trade war between USA and the rest of the world just two examples.
But what about the other factors we need to be considering? Social value has jumped to the top of many organisations’ lists, increasing work with SMEs and Social Enterprises. And let’s not forget an increased focus on harassment, discrimination and equal opportunities following #MeToo and campaigns like Procurious’ own ‘Bravo’.
What Does the Network Say?
When asked their opinions on what the critical factors were, the Procurious network highlighted the following:
- Previous Safety Performance
- Service Delivery
- Cultural Fit
- Quality and Consistency
- Supply Chain
- Financial Stability
- Environmental Policies
I’ve highlighted in bold the criteria that appear in the previous list that also appear in the new one. As you might expect, they are the common criteria that procurement are known for, and may be expected to deliver as standard.
It doesn’t appear that other factors in line with Sustainability, Social Value and Equal Opportunities (to name but a few) are getting much of a look in. However, we’d need a much bigger sample to be sure. And that’s where the wider knowledge base comes in.
Having a trawl through the latest articles on supplier selection and key criteria two things struck me. One, there were very few articles, blogs, thought leadership posts or even research papers from the past couple of years. The most recent one I found was from early 2017 and even using a broad range of search terms, it was difficult to find anything relevant.
The second, and perhaps most surprising/concerning, thing was how few mentioned any different criteria for suppliers. Only one article I could find mentioned Social Responsibility or Environmental Performance/Sustainability. The remainder still focused on the criteria commonly found in a Commercial or Technical/Quality evaluation. The most common criteria still were:
- Years in business and financial stability
- Quality and Delivery
- Cultural Match
What does this say about procurement? Is the profession still falling back on the old favourites when it comes to supplier selection? Or could it be that traditional “thought leadership” is no longer leading the way, and organisations are working differently without shouting it from the rooftops?
For me, it’s a combination of all of the above. There’s no denying that it’s hard to separate procurement from cost and quality (after all, it’s what we’re there to do). And why wouldn’t professionals use criteria that are both reliable and easy to measure, particularly when time and resources are tight?
Getting our Message Across
Speaking from experience, however, there are areas in which overall value is much more prevalent. In the Scottish public sector, organisations are mandating Community Benefits for contracts above a certain value. These can cover everything from creating apprenticeships to financially supporting community projects.
In addition, Local Authorities have started to mandate evaluation of ‘Fair Work Practices’ in all procurement exercises. Again, this can cover a multitude of elements, such as paying the living wage, no zero-hour contracts, equal opportunities and good training and development. Suppliers are being forced to consider these criteria to the benefit of their employees and the wider society.
There is good work going on in procurement, but maybe we aren’t making the most of communicating our message to the wider market. And if communication is one of the key factors in supplier selection and subsequent relationship management, it’s high time the profession started telling suppliers what is important to us and seeing what they have to offer.