Category Archives: Procurement Innovation

Good Public Procurement Recommendations from the McClelland Report, Part III

It may have been written five years ago, but the recommendations from the McClelland Report, which inspired Scotland Public Procurement to new levels of efficiency and performance, are as poignant today as they were then. These recommendations include:

  • Procurement “Centres of Expertise” should be established on a commodity-by-commodity basis.
    And these centres of expertise, which can be cross-disciplinary should be coordinated by a centre of excellence.
  • It is obvious that there is a level of mandatory compliance required for the effective operation of the [contracts] model described above.
    Projected cost avoidance is only realized if the plan is followed.
  • A Charter for Suppliers should be established for the complete public sector in Scotland. It should essentially describe the sector’s commitment to suppliers by defining the generic standards which suppliers can expect from the operation of public-sector procurement and in turn what will be expected of them as suppliers to the sector.
    Suppliers should know what to expect and what to deliver.
  • There should be total transparency in connection with procurement decisions.
    Hidden opportunities are lost opportunities.
  • There should be a review of non-core activities to establish candidates for outsourcing evaluation.
    Remember, outsourcing doesn’t necessarily mean offshoring. You can outsource to an operation down the street. Outsourcing is about doing what makes financial sense. Letting someone do non-core activities that they are better at than you so that you can do what you’re good at.
  • A clear and unambiguous central information systems strategy for the Scottish Public Sector would deliver major benefits in terms of effectiveness of services, staff productivity and overall cost, including improved benefits to procurement.
    Good technology enables good processes and good results. Plus, good technology enables good data, which enables good data analysis, which leads the way to good results.

Good Public Procurement Recommendations from the McClelland Report, Part II

It may have been written five years ago, but the recommendations from the McClelland Report, which inspired Scotland Public Procurement to new levels of efficiency and performance, are as poignant today as they were then. These recommendations include:

  • The procurement leadership role should extend to those activities associated with functional excellence including staff communications, education and training, staff development, career paths, job gradings, salary scales and where appropriate workload balancing.
    Procurement leadership is more than negotiations and contracts. Good procurement is also about good people.
  • A public sector-wide Procurement Policy Handbook should be established offering a standard and well-documented approach to be utilized across all of the public sector.

    It must also cover ethics as well as procedures.
  • Each organization within the Public Sector should review its procurement organization to establish the adequacy or otherwise of the resources including skill levels dedicated to the procurement activity.

    The team must be appropriately skilled.
  • Work should be undertaken to establish how a complete, cross-public sector career path or ladder can be established which will facilitate career management and employee development and retention.
    Talent wants a career path.
  • Every public-sector organization should have a formal programme of procurement internal efficiency measurement and management.
    Improvement requires a baseline.
  • Absolute information and performance data should be exchanged and shared across the public sector in a formally co-ordinated procurement benchmarking programme.
    A little data goes a long way. Let the teams challenge each other for better performance based on the metrics.

Good Public Procurement Recommendations from the McClelland Report, Part I

It may have been written five years ago, but the recommendations from the McClelland Report, which inspired Scotland Public Procurement to new levels of efficiency and performance, are as poignant today as they were then. These recommendations include:

  • The optimum reporting line for the Head of Procurement is directly to the Chief Executive but at a minimum he or she should report to an Officer or Executive who reports to the Chief Executive. The Procurement Function should not have a less senior reporting line than this minimum.
    Procurement must have visibility at the highest level.
  • Contractual commitments on behalf of all organizations should be executed by a “Procurement Officer”. The Procurement Officer should have the sole authority to make these legal commitments on behalf of the organization.
    Large procurements must go through the Procurement function.
  • Procurement activities and transactions should be conducted by the appropriate staffed and skilled procurement function and its procurement officers. It should not be undertaken by non-procurement staff located either in central structures or employed in other (e.g. operational) sub-sections of the organization.
    Procurement must be done by procurement personnel with the skills.
  • In some cases internal business practices inadvertently facilitate the ease of unofficial buying. All organizations should review controls and practices with this in mind.
    Processes must be reviewed to insure that they do not facilitate maverick buying.
  • Where the procurement of low-value goods or services creates anomalies in administration cost versus value procured, then alternative methods such as payment on receipt should be developed and introduced within the principles of full procurement and financial controls.
    A buy that costs money is not a good buy. A buy should reduce costs.
  • A business conduct guideline document should be developed and issued for all of the Public Sector.
    Standard procurement processes should be developed, clearly documented, and distributed.

Procurement Mastery in 2015

While far from a complete picture of what Procurement Mastery will look like in 2015, Accenture’s outlook for 2015 in their recent Compulsive Contributors report, identified three areas of emerging excellence which are among the foundations of Procurement Mastery for any organization that wants to make it to Next Level Supply Management. In brief, they were:

  • Excellence in Risk Management
    Disruptions are becoming more common by the day as supply chains increase in length and complexity. If there was ever an appropriate use of the term “the new normal” (there isn’t, by the way), this would be it. Masters have to be very adept at identifying, predicting, detecting, and mitigating risks before they turn into full blown, costly, disruptions.
  • Closed Loop Spend Management
    Leading Procurement organizations work closely with finance, manage supply and demand, and “close” the loop on the end-to-end spend cycle.
  • Analytics
    Using data to understand what you are spending, with whom, on what, from where, what is being obsolesced before it is used, and what might not even be needed in the first place. Using data to understand supplier performance. And using data to predict what might happen next. The masters will embrace, and get value from, predictive analytics long before the contenders.
  • A Transformed Workforce
    There is a talent management process in place that manages the full lifecyle, from recruitment through development to retirement. And the caliber of the talent, as a result of this program, is above the norm.

What Defines a Procurement Master?

In their recent piece on “Compulsive Contributors”, which reported the results of their 2011 Procurement study, Accenture defined their hallmarks of procurement mastery. Briefly, they were:

  • A formal procurement strategy integrated with the corporate strategy.
    77% of masters have this, 88% have procurement governance processes in place, and 90% provide innovative value above cost savings as a key element of such strategy
  • Effective integration with supply networks.
    66% of masters look beyond first-tier suppliers for collaboration opportunities (and 60% of masters actively monitor supplier performance)
  • Sourcing and category management excellence.
    Coupled with a push for better demand management as part of a long-term category strategy that drives continual cost improvement. Nearly 75% of masters have resources and processes in place to ensure compliance and nearly 70% of masters have structured sourcing processes.
  • More spend under management (SUM).
    And better visibility to boot (by way of a melding of process and technology). (81% of masters have an integrated end-to-end source-to-pay process and 73% have a master data strategy.) In fact, they manage 15% more indirect spend and 12% more direct spend.
  • They do more to retain and attract the best talent.
    While they need to do more, and recognized this, masters are ahead of contenders in terms of talent development programs. In addition, 67% of using balanced scorecards and KPIs.

These insights, which echo what many Procurement thought leaders have been preaching for some time now, are good as they validate what the experts know. Talent-focussed masters go beyond three-bids-and-a-buy. Taking the strategic approach, they look for value across the board — and deliver that value like no other function can.