From the sidelines to centre stage

2 January 2003
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02 January 2003

In 2003, a key goal for purchasers will be to judge where procurement can make the biggest impact on their organisation's performance. David Arminas reports

Ask 100 purchasers what they wish for in 2003 and you are likely to get 100 different answers. It's a sign that procurement has matured into a multi-faceted profession where hammering down supplier prices doesn't even register on its Richter scale of priorities.

Instead, the people interviewed by SM were concerned with the way purchasing could improve the performance of a company's products and services.

These statements reflect SM's news coverage over the past year. Purchasers have shown a deep-seated belief that their profession has something of value to say about corporate performance, both financial and ethical. To prove this, they are willing to leave their so-called silos - the purchasing department proper - and interact more readily with business colleagues who will listen and, more importantly, those who initially will not.

More than ever, the key goal for purchasers in the coming year will be to address business issues and judge where procurement can make the greatest impact on corporate performance.

These efforts will be noted by senior management up to the chief executive level where, hopefully, more purchasing people will find themselves.

The profession would do well to focus on several issues as it takes aim at its goal.

As Richard Anstis, senior lecturer in procurement at the government's Centre for Management and Policy Studies noted, more communication between private and public-sector procurement is needed.

Nowhere is this more important than in the arena of private finance initiatives (PFI). This year will likely see the usual number of reports and studies by government, think-tanks and consultancies either decrying or blessing PFI contracts.

Purchasers have been largely absent from the public debate on PFI. How often have we read a newspaper comment or analysis written by a procurement director? But their understanding of PFI is essential to a debate that has been left almost exclusively to politicians and union leaders.

Fear of failure

E-procurement is another area where purchasers have gained valuable knowledge despite the past year being notable for little debate on the subject as companies chopped their IT budgets. If companies start spending more freely on large projects, purchasers will again be subject to an onslaught of e-hype from solutions providers.

But unlike 1999 and 2000, there can be little excuse for not knowing the difficulties in implementing e-procurement. There are many more projects under way with quantifiable results. However, there is still a fear of failure when it comes to implementation.

Failure of major public IT projects, including e-procurement, are well publicised thanks to the National Audit Office. For a more realistic appraisal of e-procurement possibilities, senior management must allow purchasers in the private sector to openly debate their successes and failures, especially on the conference circuit.

The cat was let out of the bag in 2002 when it came to the procurement of accountancy services, especially those of auditors, thanks to the Enron debacle in the US. This year UK businesses can expect the dead weight of government regulation on contracting accountancy and audit services.

There is a real danger that the government, business organisations - such as the Confederation of British Industry - and professional accountancy bodies will dominate the debate. If the procurement profession remains on the sidelines, then government and suppliers will dictate the terms under which purchasers buy these services.

But 2003 is also a year of unfinished business following the 11 September terrorist attacks in the US. A war with Iraq appears unsettlingly on the horizon.

However, purchasers, especially logistics specialists, learned from the aftermath of the attacks. Global logistics did not suffer massive disruptions and global sourcing focusing on Asia and the sub-continent continued apace. Just-in-time supply chains remained intact for the most part.

Logisticians have had to accommodate increased security concerns over international travel. Increased time has been allowed for some exporting and importing because of greater container scrutiny and security checks.

The consequences of a war with Iraq can only be guessed at and purchasers can do little but prepare contingency plans. But with uncertain times ahead, such preparation is necessary now more than ever.

SMjan2003

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