When visiting companies to discuss their needs in the procurement space, we ask some simple questions to get a gauge of what is happening within the company. These questions will give a reasonable guide on where to start and what may need attention.
At Rowe Advisory, we work with very large multinationals through to smaller family owned enterprises. The size of the company often has little baring on how effective the ‘Procurement Division’ works.
We have seen large companies with little governance, training and process and small companies who have their finger on the pulse but lack the man power to review their agreements on a regular basis.
One of the key questions I ask any company is, “Do you have dedicated Procurement People?”. Whilst this may sound strange, many companies, even the large ones don’t have dedicated procurement people. Often the CEO or CFO is doing the final negotiations. Or, alternatively someone reasonably junior is sent off to ‘buy things’ with little to no training or support behind them.
In the first scenario it is important to determine whether the senior leaders are negotiating contracts and supply because there is no one else to do it, they feel more in control of company spend if they do the deals, or another reason all together. What ever the reason, in most companies of a reasonable size, a C Level Manager’s time is better spent on other key jobs within the business.
In the second scenario when someone junior is give the task of “procurement”, the key is to determine the skill level of the people involved and what skill gaps may exist. Often these team members have had no experience in negotiation, demand planning, KPI setting or contracting. They simply buy what they are told to, often at inflated prices and from a seller who knows that they are unlikely to be held to account.
In either case, these scenarios are less than ideal. If senior managers are doing the negotiating they may get to the big ticket items but never get a chance to look at the tail of their spend. Many dollars can leak out of the smaller deals that aren’t part of the top 20% of spend. In the second scenario, there isn’t enough emphasis on training or the art of procuring in cost and service competitive ways.
Somewhere in the middle of these two scenarios lies the truth! Most businesses of a reasonable turn over, need to have someone who is trained and capable to undertake the procurement function. They need to have clear processes and procedures around areas like Delegated Authority and signing of contracts to ensure no-one oversteps their bounds.
So, where does your company sit on this scale? Do you have a dedicated person or team looking after your Procurement? Are their skills at the level that is required to not only buy what is needed but to seek out better deals and hold suppliers to account when required? Do you have the processes and procedures in place to protect your business when it procures goods and services?
Do you need help with setting up a procurement team or training up existing teams?
Does your team need coaching or mentoring on how best to go about procurement?
If the answer is yes, then contact Rowe Advisory today to start the conversation.
Rowe Advisory is a leading consulting business in Australia. We are strategically placed to be able to lead, manage or advise on preparing your business for Industry 4.0.