BY: ALEX SCOTT
Procurement should be a relatively uncomplicated process – a function by which an organisation buys the products or services it needs from other organisations to produce its own products or services to sell. Straight forward you might think. Well, so did I until I started digging deeper.
Procurement has evolved to become a highly sophisticated function, and at its core, it utilises different operating platforms and technologies to manage the process.
With the advent of artificial intelligence, many manual functions have been automated. This is a good thing, as it allows procurement professionals to focus on more relevant and meaningful tasks.
In evaluating the key functions which now go to make up the current mix of activities in tech-based procurement, I came across an image which looked like a centipede. On further inspection, it was a long, thin, oval shaped diagram, with scores of ‘legs’ protruding out around the ‘body.’ At the end of each leg, was an element of the procurement process.
I was struck at the sheer number of functions highlighted, and of course, each function has its own technology to drive the specified process.
Today, procurement is highly competitive, with great care and attention paid to each step. As a process, it is now broken down into many smaller components – it’s been sliced and diced. Every aspect of the process has a myriad of sub-functions to make it better, improve it, speed it up, all designed to save time and money, or so it seems.
The most basic activities that procurement entails are summarised as follows:
• Vendor Vetting & Selection
• Contract Negotiation & SLA
• Payment Negotiation
• Final Purchase
That’s it. Or so you would think. Not so. That’s not good enough for some people, and this is where the centipede principle takes over. Apparently, each function has to be studied, checked, examined, reviewed, analysed, scrutinised, monitored, inspected and surveyed.
So, here’s the million-dollar question. How does procurement technology work for you? Does it deliver on the many promises you expect? Is it driving down costs? Is it making life easier, and saving you money?
The fact of the matter is that technology has taken over every aspect of the procurement process, and users are all too often in thrall to the process, rather than the outcome. A state of subjugation, of rapt absorption to the means rather than the end seems to prevail.
Remember, procurement‘s endpoint is to acquire goods and services by securing the best possible prices and ensure that companies get what they need in a timely manner. How difficult is that?
Don’t get me wrong – I’m all for the technology, utilising it to maximise the end result, but what happens if the contract has been badly negotiated in the first instance and not delivering what you expect? What happens if circumstances have changed, and the contract doesn’t offer value for money? How can you hedge against factors beyond your control (Brexit/Covid) that may negatively impact on your ability to deliver your products or services?
The fastest, most expensive hardware and software won’t change the fact that a contract is no longer relevant or fit for purpose if circumstances change or it’s been badly negotiated.
It is critical to ensure the right terms and conditions are agreed up front, taking into account that flexibility will be required.
Caveat Emptor (Buyer Beware)
There are many analogies of poor procurement and getting things right up front. This is one of my favourites:
A friends clothes dryer broke down, so he went online to look for a reasonably priced used clothes dryer. He found an ad that listed a ‘New, Still in BOX, unopened, green & environmentally friendly Solar Powered Clothes Dryer’ for £50 with free delivery. Wow! It seemed it was a real bargain for such a high-tech dryer, so he ordered it.
The day he received it, his jaw dropped! He got a box with clothes pegs and several yards of rope. This makes the point – Buyer Beware. So, what can you do to get it right, even when conditions change?
Expertise on demand
The best technology in the world won’t help when it comes to negotiating contracts, or amending them when circumstances change, that’s why you need a trusted partner in your corner. Auditel has expertise in 100 different areas of expenditure, and this means that we can advise you on new, innovative products, services, policies and processes that can eradicate profit leaks and deliver a significant competitive advantage.
Negotiating from a position of knowledge, our specialists will help you avoid any contractual pitfalls that would disadvantage your organisation. Having supply-side expertise on your team ensures that any contracts agreed between you and your suppliers will be reviewed in detail, to safeguard your organisation from unfair clauses and protect you from unjustified price rises. Leasing is a classic example of this.
It’s great to have the technology, but it’s even better to have the know how!