Understanding the time required in a procurement activity is possibly the single most important driver in the whole procurement undertaking. Too many people believe that an arbitrary time can be allocated to the procurement process and are always surprised when the process overruns and has a myriad of issues to be resolved.
Recognising that the business has a need that drives the procurement activity, depending on whether the need is immediate or planned, will often drive the generosity in size of the procurement time window. The procurement function needs to respond in a timely manner but the old adage ‘act in haste, repent at leisure’ is very apt.
- Understanding the requirement
The complexity of equipment, usage profile and planned operating life of a product will add time to understand obsolescence, sourcing options and through-life maintenance support, including immediate spares.
Understanding commissioning equipment and warranty implications and costs are additional factors that need to be understood before going to the market. For those items with a high capital cost and very high running and maintenance costs, understanding and agreeing exactly which is the more important cost driver is essential at the outset.
A common belief is the market is always able to react immediately to a procurement, as manufacturers or service providers are eager to sell their wares or services. This widely-held belief is often proved erroneous due to; a lack of capability as a result of economic downturn; high market demand in niche markets; and the requirement of suppliers to undertake regulatory approval. Understanding the market offerings means tenders issued to the market will get the widest possible participation.
Many items can be sourced easily, but there are those that are less readily available. This may be due to a specialist nature or a bespoke requirement. Getting the right level of detail in the specification is essential if you are to procure what you need and at the right price. Detailing the specification to the appropriate level, with specialist input, and ensuring your pricing document has sufficient breakdown to achieve true transparency of cost will require sufficient time. Failing to get the specification correct and having a vague pricing document will almost always lead to supplier dialogue, thereby extending the process beyond the planned time. Supplier dialogue to clarify such elementary details will add significant time to the process.
Having got the specification correct and providing a relevantly detailed pricing document means supplier submissions will be compliant and easy to evaluate. Perhaps that view is a little simplistic, especially where warranty, spares, maintenance and delivery are criteria. Arriving at the answer of ‘which supplier?’ is not always the end of the awarding process. Depending upon the capital spend there is frequently the need for corporate approval for such high levels of expenditure. Corporate approval is never a quick activity and planning for this is essential. A cautious approach plans a degree of additional time for corporate scrutiny and questions. Execution of the purchase order or contract has a time requirement due, not only to transmission, but depending on value, the need for scheduled deposit payments or surety bonds.
Items sourced locally or regionally can have short lead times. If the item is bespoke or is in a sector with high demand then production lead-time can be significantly longer than expected. Shipping and customs clearance times can also add significant delays, so always take this into consideration if the supplier is likely to be overseas.
☛ Tom Alford is an associate director at Turner & Townsend contract services