The Importance of Stakeholder Engagement

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We work with a number of different food manufacturers, delivering tenders and procurement projects where procurement teams are under-resourced.

With no exceptions, stakeholder engagement is key to the successful delivery of a tender or procurement project.  It doesn’t matter how good your invitation to tender, your supplier research and quality of data is, getting buy-in, or being able to influence others who are directly affected by the outcome of the project is often the difference between success and failure.

It is imperative to invest the time at the outset to listen to colleagues and stakeholders, not only to understand their challenges and opportunities but to also tap into their wealth of experience.

Procurement Policy Basics

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Do you have a procurement policy outlining your procurement process, spend thresholds and rules? Do teams adhere to it? Do they even know it exists?

A procurement policy is an important pre-requisite for controlling spend. It should be accessible to all staff who have the authority to purchase goods and services in an easily readable format.

Procurement Policy Basics

A procurement policy is a set of guidelines used to establish and standardise the procedure for purchasing goods and services in a business and should cover the following:

  • Policy objective. What are the goals of the policy? For example, is it to provide a consistent process for use by all departments? Is it to ensure that all procurement activity is aligned with company goals and values?
  • Process overview. The policy should include a high level summary of the procurement process detailing the steps involved (a flow chart is often useful here).
  • Procurement thresholds. Spend limits for staff and the criteria for the type of procurement activity required, e.g. number of quotes, tender, etc.
  • Tender process. The policy should include an outline of the formal tender process for purchases that meet the established criteria.
  • Sustainability and diversity statement. Include a brief overview of goals and initiatives.
  • Ethics and anti-bribery (as above).

Pare can support with the development and delivery of a procurement policy to ensure a consistent buying approach across the business.

Our Top Tips for an Effective ITT

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Not to blow our own trumpets, but we often get praised for the effectiveness of our tender documents. So, what are our top tips for an effective ITT?

–       Consider your audience.

–       Keep it precise, to the point, yet engaging.

–       Be clear on the objectives and the drivers for the tender.

–       Provide a clear set of service requirements.

–       Pre-empt questions from participants to reduce clarifications.

–       Set a realistic deadline for participants to prepare a tender submission.

–       Include a standardised price matrix to make for easier cost comparison.

–       Outline the evaluation criteria.

–       Set out a procurement timetable to include all the relevant milestones.

An example of outsourced procurement in practise

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A valuable client of ours is a UK based food manufacturer who have a strong procurement team overseeing the purchase of raw materials and packaging.  The management of in-direct procurement is outsourced to Pare.

One recent project we completed saved them £48k per annum on their PPE and janitorial spend (a saving of 18%).  That’s £48k to their bottom line!  As part of the process, the supply base was reduced from 8 to 2 and the product range was completely streamlined and standardised, thus making the ongoing buying process easier to manage.

What are the other benefits of outsourcing?

  • No costly recruitment fees
  • No ongoing costs of employment
  • No direct employment headaches
  • Additional/short term resource to solve immediate problems
  • Flexible contracts
  • Focus – complete dedication to projects requiring a quick turn around
  • Expertise
  • Specialists, not generalists
  • Removed from internal politics
  • Fresh perspective
  • No learned “bad behaviour” from within the organisation

The list is endless!

What % of your spend is “unmanaged”?

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What % of your business’ overall spend is not “managed” in the same way as the spend which falls under the control of your procurement team?

There are opportunities to make savings and reduce risk when the same procurement principles are applied to tail spend, not to mention the raft of other benefits (improved credit terms and cashflow, measurable supplier performance KPIs in place, fixed pricing, budget control, simplified procurement processes, etc)

In many instances, tail spend is overlooked mainly due to lack of resource but also due to the accessibility of  the purchase data available for these types of categories.

This is where you would benefit from having an outsourced procurement partner; a dedicated resource to get into the granular detail of this spend and ensure that these often overlooked categories are managed in exactly the same way as your internal procurement team would.

Is it time to change your supplier strategy?

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When was the last time you carried out an in-depth review of your suppliers?

We are all aware of the supply chain challenges that businesses are faced with.  In light of these, is your business looking to resurrect a more local supply chain to re-direct risk across a broader supply base?

Historically, sourcing activities were far-reaching, in many cases due to lower production costs overseas.  However, recent events have caused businesses no end of disruption due to the inability to get hold of materials, thus wiping out any costs savings from sourcing abroad.

 

Procurement Resource

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All procurement projects need to be data driven, however, this often requires additional resource in your procurement team or otherwise.  It is necessary to get into the granular detail in order to identify the best purchasing opportunities and deliver consistent, successful results.  This often requires the detail included in invoices and unless you have an advanced system to recognise, read, collate and report this detail, then its just down to hard graft!

Why Outsourced Procurement?

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Are procurement projects a priority in your business, or do they frequently get put on the back burner in order to deal with more pressing issues?

Should these projects be deemed less of a priority when Procurement is one of the key functions to drive improvements in a business’s profitability and cashflow?

An outsourced procurement partner can ensure that these projects are consistently delivered.

How robust is your procurement process?

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A poorly executed procurement process often leads to failed sourcing activities with detrimental consequences: budget over-spend, losses, frustrated stakeholders and suppliers, wasted resource, fragmented buying, maverick spending.

We regularly hear that procurement processes are avoided because they are authorisation and admin heavy and actually easy to circumvent.  A robust procurement process doesn’t necessarily mean that it has to be cumbersome.  The process should be lean and as efficient as possible, however, there should be a process.

An example of holistic procurement in practise…

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A manufacturing company has 3 separate departments purchasing stationery. Department 1 buys it from a local supplier, department 2 buys from a national supplier, department 3 shops around and buys from whoever offers the best prices. There are up to 10 different stationery suppliers set up on the system. The product range is extensive, prices vary for similar products and delivery charges are frequently applied where order quantities are below MOQ. Orders are placed on an ad-hoc basis, so the finance team are processing multiple invoices and payments and are continually dealing with price queries.

By looking at the procurement of stationery across the whole of the business, the process can be simplified. By involving all stationery stakeholders, a much reduced and common product range with a standardised specification can be agreed. The consolidated volumes can then be purchased from the supplier offering the required specification of product at much more competitive prices. The intangible benefits of this process are reflected in the time saved shopping around, a reduced number of POs, consistent prices, fewer and quicker processing of invoices.

Of course, this principle can be applied across all spend areas in a business…