Monday 28 October 2013

To Centralise or Decentralise? That is the question... (Part 2)

By Paras Sood

From my perspective, the argument for centralising purchasing operations has to revert back to the original intentions of strategic sourcing and how much an organisation wants to control the procurement activity within a company. If we assume that an organisation is looking to drive cost savings and manage their spend, the next steps are largely based on the organisation’s cultural drivers for how ‘spend under management’ can be achieved.
As a result, I believe organisations need to consider short, medium and long-term activities when organising their procurement operations:

Wave 1 – Short-term Activities:

· Situation Analysis – before an organisation structures their procurement department, a factual examination into the ‘current state’ of purchasing needs to highlight the buying behaviours across the organisation. This may be a detailed analysis of spend data through finance systems or other purchasing routes such as ‘one time vendor’ requests, purchasing cards etc. Either way, a geo-political footprint needs to be developed to see what people are buying in which parts of the organisation, which may highlight greater purchasing demand in particular business units over others, hence, they require more hands-on structural procurement support.

· Challenge Demand – in conjunction with the situation analysis, and often an ignored part of the purchasing strategy, organisations typically analyse the buying trends across an organisation and quickly look to identify tender-based cost reduction exercises without challenging the historical evolution and demand for certain goods and services. For instance, why does a manufacturing organisation need to buy 15,000 pairs of sunglasses under personal protective equipment rather than providing hard hats with visors? This behaviour can only be highlighted through stakeholder engagement and factual debate, sometimes facilitated by localised procurement operational teams.

More on the medium-term activities to follow later this week...

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