What is procurement?
Procurement is quite simply ‘the acquisition of goods or services’ where it is favourable that the goods and services procured are appropriate and that they are purchased at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time and location.
British engineer and architect Sir Evan Owen Williams who was appointed chief consulting civil engineer to the British Empire Exhibition and old Wembley Stadium knew a thing or two about successful procurement and, particularly in today’s economic climate, his advice stands as true today as it did in 1924.
You need to understand what you are buying, and why, how it will affect your business, and what the potential risks are. That detailed understanding may be beyond the scope of a procurement department – Owen Williams
Your book of procurement
If you are responsible for planning and/or managing procurement for your organisation, formalising and structuring consistently applied policies and procedures across multiple purchasing operating locations is always a challenge. That’s why spending quality time and effort in pulling together a ‘Book of Procurement’ is a sound investment that will have a beneficial impact on the bottom line.
As in any endeavour, to design and implement quality policies and procedures, there is a balance to be achieved in terms of consistency, standards and maintaining the entrepreneurial commercial drive of any sourcing organisation.
Where to start
Having specialised in this area for many years, working with some of the big corporate players, I recommend that you first look at the issues that require a common and/or mandatory approach. From there you can start formulating the headline policy and documentation with explanatory guidance.
The objective is to document an oracle for your Procurement Team which will not only provide critical instructions for new joiners but will also be helpful in engaging with wider stakeholders from the outset on ‘the best way to do procurement here’.
An invaluable spin off will be the production of a ‘How to Buy Guide’ that will set out step by step instructions for all your staff to follow. Note that this will be different to the procurement team process.
Publish now rather than later
In my view, it is better to start light and to develop your policy and procedure on the basis of best practice. Enrich and keep alive your documentation through updates and additions later.
Publishing your book of procurement can be a never-ending exercise but if your management team is clear on why to do it and what to include in it – then it can normally be easily achieved in a few months with focussed resources.
One of the pitfalls is that sometimes along the way it becomes clear that there is a lack of clarity on certain policies and these will need resolving. If you have been delegated this task, don’t be frightened of asking for help or support in compiling your book or you can contact us to find out how we can provide hands-on assistance.
Key principles of procurement
When compiling (or re-designing) your Book of Procurement, there are some key principles you need to keep in mind.
The following table will provide a check list for some of the most important principles which you can use as a starting point.
| Main Categories | A few sub-category examples |
| Commercial Policies | Sole Sourcing and Multi-SourcingPayment Terms – (and variations to standards)Hedging – fixed pricing and embedded derivatives Currencies of choice Tax and Contractual Domiciles Dealing with Supplier Price Increases Modifying legal terms in contract templates Terms and Conditions of Purchase |
| Sourcing Activities | Sign – off for written sourcing strategiesSupplier dispute adjudication Contract renewals (including roll-overs) Promoting Supplier Innovation |
| Operating Procedures | Financial rules for recording savings Monthly performance ratings Supplier performance measurement Reporting and clearing supply chain disputes / complaints |
| Transactional Processes | ERP System Access for Purchase to Payment PO Management Invoice Processing and Matching New Supplier Account Controls ERP Account Ledger Balances Payment Cards – authorising holders, limits, spend profiles Payment Cards – processes and reconciliations |
| Ethics and Sustainability | Codes of Conduct Company Sustainability Policy Promoting Supplier Innovation Whistle Blowing Internal Audit Standards / Agenda |
| People Development | Organisation structure Career Pathways – including core skills matrix Training Programmes Team Communications and Engagement |
Get the right support
If you can’t find the help you need within your organisation, or you feel your organisation would benefit from some expert advice in this area, you will find helpful information here.
If you have any specific questions or you would like us to come in and help you, please contact us and we will be pleased to talk about how we can help you.
Discover more about ‘Procurement’ by going to: www.ociusconsulting.co.uk
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