There’s something quite primal about the ‘act’ of buying

It’s not a new thing, rather something that has always been done in one form or another. Even before there was the concept of money, goods were traded for other items with neighbours or at markets.

People got what they needed through these transactions by haggling. Each party had to carefully negotiate with the other to secure enough of what they wanted, without giving away too much of what they had.

Successful haggling could be the difference between families surviving the winter or meeting an unfortunate end. It was a such a revered skill that, in some societies, mastering it was seen as a rite of passage into adulthood.

But, what has this got to do with procurement I hear you say? Well… everything!

In its simplest form, procurement is very similar to this buying process which has kept people alive, societies functioning and businesses developing throughout history. In fact, Investopedia simply defines it as, “… the act of obtaining goods or services, typically for business purposes.”

Buying in a modern-day world

Fast forward to the modern day and the way we buy things has changed massively. In many cases we no longer negotiate over the deal we get, instead we opt to search around for the best solution or as in the case of shopping on the high street, accept what we are offered. And, when haggling is done, instead of taking place in bustling outdoor markets, it now takes place in boardrooms, online or over the phone.

Negotiating a sale or purchase isn’t something that comes as second nature to us anymore. Added to this, the pressure and anticipation of the buying process can combine to create a “heady” state. And, it’s in this state, with adrenaline running high, where mistakes are made.

Everyone wants to be a deal maker

It’s a sweeping statement, but one borne out of experience. Ego’s along with the desire to achieve “the best price”, often leads to the “economic buyer” failing to understand the true cost of the service/product being purchased. The focus of the acquisition being on price rather than total cost of ownership (TCO).

The value of the procurement process

But, when done correctly, procurement “is the haggling process”, honing each stage of the process so that it provides wider business benefits for your organisation.

How robust are your organisations procurement processes?

Ask yourself the below questions which will help you determine how robust (or mature) your organisations buying process are;

• Does your organisation have a procurement policy which provides guidance on “how” products/services procured?

• Who in your organisation provides the necessary oversight to ensure that products/services are being bought being bought correctly?

• For large purchases, does your organisation have a process to ensure that the business case is based on total cost of ownership and has an appropriate (agreed) return on investment?

• What contractual terms are typically used in agreements with suppliers?

• Who in your organisation is responsible for reviewing contractual terms; information security obligations, data privacy, service levels, business continuity in your supply chain?

• What is the approval process for authorising the purchase of a product / service?

• Does your organisation have a Supplier Management framework / Programme in place?

• What is your Business Continuity Plan for your critical/sole sourced supply arrangements for products / services?

• Are your suppliers “segmented” as part of your Supplier Management framework / process?

• Do you know which products/services are critical to the running of your business and the subsequent impact if there is a disruption in supply?

If you’ve answered “No” or “Unsure” to any of the above, you may wish to consider exploring the potential risks and implications with a procurement specialist.

Hopefully the above will have provided you with a high-level view of the role and value of procurement. Over the coming weeks we will be publishing a number of articles that will focus on specific areas of the procurement process i.e. the tendering process, negotiation management, supplier enabled collaboration and supplier relationship management.

If you’d like to learn more on how procurement can help improve your business performance, you can contact us here or call on +44 (0) 7812192754 to understand how we at Marriage-Stanley & Associates can provide you with support that will drive commercial improvements and mitigate risk in your supply-chain.