What does it mean to be Procurement Efficient?

The Asturian Quality Club is a non-profit Association, founded in 1995. Its aim is to raise awareness, train and promote change for the improvement of management (Quality, Environment, Social Responsibility, Risk Prevention, Excellence, etc.), promoting the exchange of good practices and cooperation.

The Club focuses its value proposition on several axes. One of them is to promote the Exchange of Experiences and Knowledge between organisations, managers and professionals. They organise meetings to disseminate good practices and coordinate multi-sectoral working groups.

Dokify is leading one of the working groups that aims to connect, share challenges, exchange experiences and discuss issues of interest to procurement professionals.

On 24/6/21 one of its virtual meetings was held with the theme: "Measuring the efficiency and Optimisation of the purchasing function", in which the Director of Supplier Evaluation and Development of Dokify participated as a speaker, with a presentation focused on Efficiency as a concept and its implementation in the Purchasing function.

When we want to develop some aspect of knowledge, we usually start by defining the concept and we usually turn to the Real Academia Española de la Lengua (Royal Spanish Academy of Language).  

And the RAE defines efficiency as "the ability to dispose someone or something to achieve a certain effect".

In order to be able to specify who that someone is in Purchasing or what that something is, the first thing to do is to ask ourselves: What is the particular effect that Purchasing is trying to achieve?

Well, logically, to be efficient in the performance of its function. And to be efficient in the performance of the purchasing function, the first thing we have to be clear about is what its function is.

What is the purchasing function? What would be the (classical) description of the purchasing function?

Adequate satisfaction of the demands, with the required quality and on time and at a competitive price.

The problem is that Purchasing is only remembered when Materials or Services are needed. We act reactively, and in Purchasing, in order to be efficient and optimise the function, we have to act proactively, i.e. not go out and look for suppliers when something is needed. We have to work upstream of the need, have the materials and services that we usually buy structured in categories, with suppliers approved by purchasing families and be in the forums where demand is generated and decisions are made about what is going to be purchased.

And as far as possible influence so that the product or quality that will be required is not tailor-made or a "copy and paste" from a supplier's catalogue that is made unique. But the key question is:

Is efficient purchasing meeting the demands of our internal customer?

Have we ever stopped to think about the difference between what the internal customer demands and what the company really needs?

We must focus on real needs, not only on the demands of our internal customer. The internal customer is, or should be, our ally and we should combine our capabilities with those of the supplier.

The real efficiency on the part of Purchasing will be in facilitating the alignment of the 4 actors: the technical, administrative and/or executive areas (what I call Internal Customers) + Market + Supplier + end customer.

To be efficient and optimise the purchasing function, we must have agile purchasing procedures, with management processes differentiated by amount and strategy according to market and, of course, have tools that facilitate the digitalisation of internal approval processes for purchase requests, automatic requests for quotations from approved suppliers and receipt of bids. And in repetitive purchasing families, to have negotiated framework agreements or coverage contracts.

To be efficient is not only to cover needs but to provide value in each management.

We should not necessarily limit ourselves to the faithful fulfilment of what is requested. We must seek greater and better performance, durability, waste reduction or waste recovery, energy savings, reduction of environmental impact: less noise, greenhouse gases, etc. and we must promote and value these contributions to the supplier who provides them (take advantage of the supplier's R&D&I) and promote their involvement, rewarding their attitude in future tenders.

Therefore, if we want to be efficient and optimise the function, we must put aside the actions associated with the classical conception of the purchasing function in favour of

The adequate satisfaction of needs, with the quality adjusted to the market, without waiting to be asked for it, providing value in each purchase and opening new business opportunities.

Returning to the meaning described by the Real Academia Española de la Lengua of what efficiency is, which is nothing more than "the capacity of having someone at one's disposal or of something to achieve a specific effect". And having seen what the effect to be achieved in Purchasing is, and having made clear what that something is, which is evidently none other than the coverage of the need with the contribution of value, let us now think about the "someone" included in the meaning of efficiency.

In order to dispose of something, I need someone... who is that someone?

Well, certainly in the procurement function, that someone is the supplier. One of the many things we have learned from the pandemic is that we are much more dependent on suppliers than we realise. And supplier certification is still the unfinished business of many purchasing departments.

True purchasing efficiency can only be achieved with a pool of approved suppliers that allows you to leverage your ability to get the right supplier at the right time.

A good pool of suppliers, approved by means of a rigorous methodology, makes any buyer good. But a buyer can never be efficient in its function if it does not have a structured and ordered supplier pool with good and efficient suppliers.