Contest Article: Procurement’s Biggest Challenges

Technology is continuing to bring waves of change into the way we do business. In the past, as individuals, we had to go outside to the stores to purchase clothes or drive to the bank to pay bills. Organizations, government and businesses had to spend a large amount of money to hire contractors to run around to get the best and cheapest materials for production purposes. And most of the time, individuals and businesses did not get the best value for money. But this has changed. With e-procurement taking over the world purchasing goods and services has never been more convenient, transparent and efficient. By connecting to the Internet, individuals can now do banking and buy products right off the web. Organizations, businesses and governments will be able to scour the globe for the best deals to ensure that they provide customers with quality products.

Despite the tremendous momentum towards e-procurement, there are many challenges that entities and individuals will face. In terms of procurement management, it is vital that each function of procurement is carefully controlled and monitored. From the processes of planning, to sourcing and tendering, to contracting up to payment and follow up, each function of e-procurement needs to be set with proper controls to prevent fraud and breach of privacy. In businesses, challenges like customer privacy and data storage are some of the key issues. If there is no proper authorization to access customer profiles and transactions, one can easily expose confidential information of the businesses clients. And disaster recovery and data restoration plans are vital in case there is a breakdown in the system or if the system goes offline.

With public procurement, the burden is on governments to make public services more effective and efficient with e-procurement. With the availability of cloud computing, governments should strive to reduce labour cost, increase productivity and ensure quick and transparent transactions when dealing with contractors. All in all, the main aim of the Government should be to increase profitability and grow the economy of the nation. Countries like Singapore, Portugal and Canada have applied e-procurement extensively into their everyday operations.

Another challenge is staff training and professional development. Many organizations do not manage to follow modern procurement trends. Due to various reasons (budget, time, personnel) these organizations will have to make slow and small steps towards harnessing up-to-date procurement tools.

Besides that, the green procurement challenge is also often brought up. While the advancement of technology is speeding up, we must not sacrifice our environment and the welfare of our loved ones at the same time. Actions have been taken to maximize energy efficiency of PCs and to prolong the life and reduce disposal of hardware. There has also been suggestions to shift data storage facilities to colder regions in the globe to save cost and energy in terms of facility cooling.

As technology continues to grow, it is vital that e-procurement continues to be carried out. By keeping up to date with the latest advancements in technology and the digital world, we ensure that our organizations, businesses or governments stay up to par against competitors.

Leo Kaufman

International Public Procurement Consultant

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Contest Article: Cloud Procurement

With the advancement of technology and the rapid growth of the Internet all around the globe, cloud procurement is becoming an important tool for consumers and businesses alike. Whether you are purchasing e-book or groceries, doing online banking or ticketing or even buying DVDs, the Internet and e-procurement has made our lives much easier and faster. In the past, we had head to the hypermarket to buy DVDs and clothes, but now, all this and more can be done from the comfort of our homes.

Procurement is the process of acquiring goods and services. Businesses and individuals would usually want to procure goods that are of high quality and affordable costs. In most cases, businesses and consumers will scout and look for the best bargains out in the market. Cloud Procurement or E-Procurement has brought a change to that scenario. By using networking systems like Electronic Data Interchange (EDI) and Enterprise Resource Planning (ERP), the process of procurement has become much more streamlined and efficient. Individuals and businesses can now make better and faster purchasing decisions with the availability of cloud procurement services.

Public procurement is important also to the economy of the country. By using e-procurement, we will be able to increase the productivity of labour, allow faster and more transparent services and also eliminate unnecessary intermediaries. In certain countries, public procurement phases include sourcing, tendering, awarding, contracting and payment to suppliers and contractors. All in all, cloud procurement will help us to save cost and time.  Due to its benefits, many governments and countries are shifting their offline businesses to a cloud computing system.

But nevertheless, the conversion from conventional procurement to e-procurement will have some bumps along the way. Businesses have to ensure that there is sufficient security to protect client data and information. They also have to have disaster recovery and backup plans in case the system crashes or the company’s website goes offline. And due to the impact of cloud procurement, business functions and operations will change. Some employees might resist change and might feel that changing the system will make work harder for them. In terms of competition, the online world levels the playing ground. A business that provides a better service at a better price will always win the contract. It is all about speed and efficiency in the online world. Therefore, procurement innovation is important to help businesses gain the added advantage over their competitors and also to provide clients with the best solutions.

As we move towards a modern era, the Internet will continue to grow to be an important tool for citizens around the world. E-Procurement and online computing systems will be here to stay. To ensure that our business continues to be a strong contender in the market, it is essential that we keep up with the latest offerings in the market today. That is why procurement R&D has to continuously be carried out and implemented to ensure that our businesses are kept up to date and is ahead of our competitors.

David Goldberg

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Contest Article: Innovation in procurement

From procurement’s perspective, this is a red-hot area of focus, particularly given the increasing levels of outsourcing and growing complexity of supply networks.  Suppliers now take over more innovation responsibilities and engage in closer collaboration with their customers. This leads to innovation alliances and “open innovation” networks which can nicely leverage the procurement function’s natural interface to the supply base and – if done right – can result in clear competitive advantage to the organization.

Despite the obvious benefits, innovation comes with a series of challenges that are not easy to address: How is it triggered? Can it be replicated? How to sustain it? How to measure it?…  I have held several workshops and discussions with stakeholders in this area, which helped derived some crucial process steps to successfully drive sourcing innovation. Here are some of those thoughts:

Identify the “spark”
Often innovation seems to be accidental rather than intentional, at times resulting from desperate measures trying something different when all else has failed. Budget pressures, financial difficulty, even uncertainty on the company’s future are powerful drivers which urgently force us to think differently.

But there are also ways to ensure that your supply base remains intrinsically innovative without facing doomsday scenarios. For example making innovativeness a measure when selecting suppliers, incentivizing and recognizing innovation, and other “non-touchy/feely” supplier management approach.

Apply robust process in very few places
A replicable process to develop the innovative idea can be built by better understanding the following key elements to help identify the kind of innovations required from the supply base, and to distinguish between Process innovations (enhancing base line performance) vs. Product innovations (enhancing top line growth):
•       WHERE is the innovation’s origin? Is the spark Accidental or Intentional?
•       HOW is the innovation developed: Explorative vs. Exploitative? Is it a push or pull model? Will the output be mandated or voluntarily used?
•       WHAT is the result of the innovation: An entirely new invention or rather a new application? Does it represent breakthrough outcome, or an incremental improvement?
•       WHY is this innovation carried out: drive top-line growth or improve bottom-line? Are we trying to fix a problem or reach a “blue-sky” scenario?
Once defined, the process should be applied with a limited number of suppliers (3-5 max) in target categories, as the more traditional SRM set-ups (e.g. top 25 vendors by volume, distributed sponsorship etc…) will not encourage innovation.

At a recent event showcasing supplier relationship management (SRM), the presenter was asked how many of his featured innovation success-stories actually came out of the SRM program. The answer was none – SRM in this case and too often comes afterwards, almost like shooting randomly and then drawing the target around the hole.

Create an innovation governance
In-house innovations often encounter resistance within the organization, and it’s even worst for external ideas brought in via procurement. A rigorous process to probe external innovations and develop them further in collaboration with the supplier is critical so that once innovation is identified, it does not get slowed down or side-lined altogether during the internal review and approval process. Ownership is ideally assigned to the functions and leaders that will actually use the innovation output.

Broaden procurement’s mandate and capabilities
Allowing the function to focus on areas other than process compliance and/or cost savings, and expanding the Procurement team’s mindset are useful prerequisites to better identify where sparks happen, and ensure we are the first customer with whom suppliers share their innovation. There will obviously be little motivation to buyers for bringing innovation that drives top-line growth if they are only measured on bottom-line impact…

Procurement has a huge opportunity to leverage its supplier management performance capability to help grow its contribution beyond simple cost performance. Pressures to reduce costs are growing, but less than the need to drive top-line sales given the economic turmoil we continue to be in. As a source for innovation, procurement can be just as important as R&D – and may even get results faster!

Sammy Rashed

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Procurement Management: Can UN be at the forefront of procurement change?

Can UN be at the forefront of procurement change?

It could, but it hardly will in near future.

UN agencies are biggest procurers in the developing world. They share knowledge, best practice and procurement techniques with governments and local communities. UN is a very good implementer of procurement innovations. Good implementer, but not the trend-maker or inventor of new procurement approach.

One can hardly recall any new procurement approach or new industry standard offered by UN agencies. For decades any mind shifting progressive approach in green procurement, e-procurement, cloud procurement has been coming from corporate world or governments, but not the United Nations.

Is this the lack of will and motivation, proper system or the lack of proper people? In UN’s case we witness all together.

Being united, each UN agency has its very own procurement manual or guidelines, different procurement software, very own talent management system, very own application and evaluation system. (Imagine US states each having its own Federal Acquisition Regulation and different HR approach.)

Eventually, if a procurement specialist from one UN agency wants to move to another UN agency, s/he should start exploring the hosting agency’s procurement manual from square one. In addition to this, s/he should study new SOPs, software, workflow, etc.

You may see many “internal job opportunities” in UN. This happens because it is easier to hire a local officer, who is familiar with the setup and customs. This fully stops any fresh blood.

UN procurement can hardly produce a new industry standard with this approach. And as it is with any huge, inflexible corporation it only loses hundreds of millions of dollars every year because of this.

Few years back UN started its harmonization process to bring procurement into one common ground. Belated, but very necessary decision. However, decades of different, independent procurement approach and unique decision making in each agency make the process fail. Yet.

Mila Southey

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