The future of procurement in a rapidly changing global economy
Global economic shifts in the past few decades have been dictated by growing numbers of consumers in emerging markets. These trends, coupled with the free flow of information by way of technological advancement, for some time, will remain very crucial determinants of any organisations’s bottom-line and value-creation activity.
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After all, for any organisation to survive this rapidly changing global business atmosphere, it must be able to leverage its competitiveness in areas of technological advancement.
Although the procurement function of creating value for money has remained the same since its formation and placement in the organisational structure, technological developments have redefined the role and contribution that procurement brings to the realisation of the organisation’s vision and objectives.
Inevitably, a good number of organisations will carry on, regardless of these changes, to follow processes and procedures that have been in place for some time now. A purchase order will remain a purchase order, likewise a contract remaining a contract, but the future looks very different in terms of efficiency and speed of execution.
The role of procurement is, no doubt, changing alongside the changing global economy. These changes which are enabled by advancements in technology now allow procurement organisations to introduce automation, self-service buying and detailed analytics that provide more ease to use tools and solutions that capture huge data. Some of these integrated solutions have made procurement very transparent, visible and enabled stakeholder participation in the procurement process.
The Salford NHS trust case
Through organisational changes, the Salford Royal Foundation NHS Trust has run an integrated business solution (Integra) for more than 10 years, and that has made some saving by way of streamlining order management, virtually eliminating paperwork and increasing accuracy throughout the procurement process.
Prior to this, the trust was using a manual process of procurement that was slow and cumbersome, with inconsistent approval systems difficult to manage, and it took longer than expected to deal with urgent situations. Thus, the procurement automation solution brought about significant cost saving by streamlining processes and making them visible, eliminating duplication of efforts and generally improving the accuracy and efficiency of the procurement requirement.
Fit for purpose
Modern-day procurement has evolved from a traditional function of buying at the right price, place, in the right quantity, quality and time to include visibility, agility, sustainability, risk management and being more strategic.
The end-to-end procurement cycle may have to include all the associated costs of ownership till disposal stage. While challenges in visibility may be addressed with the introduction of integrated solutions that allow for all stakeholders to access information, agility allows for the procurement entity to respond to short-term changes in demand or supply quickly to enable the smooth and flexible handling of internal disruptions.
Procurement entities must not only play speed against cost but should be able to respond both quickly and cost- efficiently.
Proper due diligence, as part of the process, must be able to provide a source that contributes to a better and sustainable future by employing practices and operations that are not inimical to the survival of nature and the environment.
Entities that place procurement on the strategic platform should maximise supply security and reduce cost by moving procurement from a merely transactional activity to supply management. By this, a proper risk management programme should be employed to reduce or eliminate, if possible, activities that add to risks than to profit.
What next?
There could be significant challenges, operational and even emotional, that the procurement professional or team may face in the attempt to shift towards the new paradigm.
Procurement technology has been bound to the Enterprise Resource Planning (ERP) systems that take years to implement and is expected to travel for many more years. The ERP is a process by which a company (often a manufacturer) manages and integrates the important parts of its business. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance and human resources.
There is, however, the need to think anew based on the idea that systems, like that of procurement, in the business structure, will not have the longevity of previous decades. The long, drawn-out process of justification to buy - evaluation, acquisition, operation and replacement or replenishment cycle will need to be overhauled.
And it will be like this, not because business demands rapid replacement of systems but because the technological industry will dictate the cycle of obsolescence driven by consumer demand and the need for constant growth.
E-procurement for Ghana
The government’s decision to appoint a minister of state in charge of Public Procurement, to give focus to procurement processes in state institutions in Ghana is a laudable idea given the manner in which some institutions take advantage of the human element in the procurement process to engage in acts of corruption.
I was pleased when the Minister of Public Procurement, Ms Sarah Adwoa Safo, during her vetting, spoke about the government’s intention to make electronic procurement (e-procurement) a function of the procurement processes to eliminate the human element in transactions as part of efforts to deal with the age-long canker of corruption in the procurement process.
The writers are procurement professionals and graduates in Procurement, Logistics and Supply Chain Management from the University of Salford, UK
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