Procurement and supply management involves buying the goods and services that enable an organisation to operate in a profitable and ethical manner. Procurement is often responsible for up to 70% of companies’ revenue, so small reductions in costs can have a huge impact on profits. (CIPS).
Procurement procedures and processes vary between organisations, with factors such as delivery time frames, product quality and profit margins being a major consideration in the procurement cycle.
The procurement procedure starts with the procurement department attaining relevant suppliers and agreeing terms to achieve the best possible purchase cost price for the business. When a business has a requirement for a specific product or service it initiates requests for proposals (RFP), either through direct negotiation or a head-to-head auction.
A typical procurement process includes:
- Identifying the needs of goods and services
- Finding suppliers
- Requesting proposals/quotations (RFP/RFQ)
- Negotiating with suppliers
- Agreeing terms with suppliers
- Arranging and receiving products/services
- Performing quality assurance
- Analysing results and margins
Whilst Procurement can often feel very ‘public sector’ focused (because legislation defines how the public sector purchase) there are many common processes even though private sector businesses do not have to follow procurement rules within a legal framework.
So, what is the role of the Procurement Team?
The primary role of the procurement function is to:
- Provide professional, qualified procurement expertise, advice and services
- Provide strategic procurement advice
- Ensure that business needs are met through its procurement of goods, services and works
- Contribute to the aims and objectives of the organisation, as detailed in its corporate plan
- Pro-actively manage and develop the supplier base, including small and medium-sized enterprises (SMEs) and third sector and voluntary sector organisations, identifying and managing any supply risks or value add opportunities
- Ensure that value for money is achieved, including through implementation of national contracts
- Advise, guide and support the development of and adherence to procurement policy, best practice and law
- Develop, promote and implement appropriate procurement strategies and procedures
- Establish and address training needs, utilising national/sector specific training opportunities or contracts where appropriate
- Assess procurement competencies across the organisation, using tools such as the Procurement Competency Frameworks
- Support sustainable policies through procurement processes
- Comply with and, where appropriate, promote equalities legislation and policy; and
- Promote and engage in the implementation of relevant technology solutions, including e-procurement, to minimise purchase to pay costs.
The Primary responsibilities of the procurement function encompass the following activities:
- Act as the interface between the contracting organisation and the external marketplace on commercial matters
- Determine requirements and establish specifications in collaboration with end users
- Challenge the organisation’s/end-users’ requirements critically for need and cost effectiveness, taking account of whole life costs and corporate social responsibility/sustainability issues
- Conduct market engagement and research
- Manage supplier relationships, including responding to suppliers’ enquiries and complaints
- Manage commercial relationships
- Manage procurement competitions
- Manage the award of contracts
- Contract management
- Establish a comprehensive contract register
- Establish arrangements relating to authority to procure
What is the route for purchasing technology?
G-Cloud is a very common route for public sector organisations to procure new client hosted software. The Digital Marketplace, and all the frameworks included in it, is managed by Crown Commercial Service (CCS). CCS is an executive agency and trading fund of the Cabinet Office of the UK Government. Their role is to improve the government’s commercial and procurement activity. The framework was first open in 2012 and is now in its 12th iteration – G-Cloud 12.
G-Cloud works just like a catalogue of suppliers with their capabilities and price lists available online, buyers can shortlist and then make contract awards through G-Cloud as approved suppliers to the public sector.
Our advice is simple – procurement processes add huge value to the system selection process for HR and payroll technology – work with your procurement team as partners or contact us if you would like our support as your pre procurement partner.
This blog has been written by James Proctor, Director of Consulting & Services at Phase 3.