Wednesday 30 October 2013

To Centralise or Decentralise? (Part 3)

By Paras Sood

Having discussed the short-term activities for an organisation to consider when organising their procurement operations, let's now take a look at the medium-term activities:

Wave 2 – Medium-term Activities:

·         Manage Risk – now that you understand the spend footprint, your organisation may choose whether or not to implement contractual control to manage risk and deliver affordable pricing and service based agreements. The challenge here will be to identify existing contracts, whilst establishing an accessible framework for new ones. Decisions will also need to be made on the level of compliance that is required to drive buying behaviours against these contracts, whilst considering who takes ownership and control for these agreements.

·         Option-based Sourcing – “You have to get three quotes before you buy that generator...”, “Why haven’t you bought those pens off the preferred supplier list?...”, “Have you raised a purchase order for that maintenance man?...”; some common frustrations for an individual looking to source at the point of need. If you imagine that buyers typically fall under two categories: ‘options-oriented’ or ‘procedures-oriented’; the latter prefers compliance and policy (these individuals often make the procedure more important than the outcome), whereas the former leans toward creative purchasing, considering all the options presented to them before commitment (these people often reinvent the wheel!). Understanding both these types of individuals within your organisation largely determines the types of transactional and strategic purchasing systems that may be adopted and how much control they exhibit over the organisation.

We'll be going into more detail on the long-term activities on Friday...

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