In the procurement-focused world in which we live, we can often be caught following a process, be that in a sourcing or contract management environment, without necessarily questioning either its efficiency or effectiveness. So, when we are reviewing a procurement process, should we first review its efficiency or effectiveness before implementing it within our organisation? Firstly, we need to understand how they are very different terms.
What is efficiency?
Efficiency is best described in layman’s terms as maximum output from minimum input, or, to put it another way, getting the desired result without wasting time and energy.
What is effectiveness?
Effectiveness, on the other hand, is about doing the right things and getting the desired result. Therefore, do we need to explicitly define whether we want to be efficient or effective when adopting and implementing a procurement process – or can we be both?
Looking at sourcing processes
In breaking down a sourcing process, there is no one single process that fits all sourcing scenarios. The steps required in running a sourcing event for a $200k per annum service are vastly different to a $20m construction project. What underpins any strategic sourcing process, regardless of size, complexity or value, is a need to be effective in delivering the desired outcome, but also a need to be efficient in ensuring that the steps followed in delivering the outcome are efficient.
Reviewing your sourcing processes
Voltaire is credited with the expression ‘perfect is the enemy of good’. When reviewing your strategic sourcing processes, this is an excellent expression to have in mind.
- Do you need the same multistage procurement process for every strategic sourcing event that the procurement team runs?
- Can you look to drive procurement process efficiencies when sourcing an indirect service for a commodity (such as office supplies or computer monitors) where there is relatively low complexity?
- Do you need the same contract management process to produce an effective outcome?
So, whilst we are not looking for perfection when reviewing our sourcing processes, consideration must be given to ensuring that a bespoke sourcing process is not created for each and every sourcing event. Understanding where the majority of your sourcing events are, what spend, what category and what risk profile and focus on the effectiveness of these processes to drive the desired result.
In most businesses, the majority of sourcing events will not be strategic but tactical, where goods and services are bought either against a panel contract or where a number of quotes are required to ensure price competitiveness. In these cases, the efficiency of the sourcing process in attaining the quotes that meet the required specification or deliverable for the lowest price is often the sole consideration.
Going beyond just ‘having a process’
Regardless of value or the level of complexity, the process does not live in a vacuum. Often a procurement process will be documented and part of a wider procurement policy. However, just having a contract management process is not enough. Compliance to the process is the absolute key element, since risk is exponentially greater when a sourcing process is not followed. We have seen across many sectors where a lack of compliance to procurement processes can have significant negative ramifications for senior executives.
Ensuring processes are overarchingly consistent
Where a sourcing project sits above the threshold and is run by the procurement team, the process is often complex, and several additional steps need to be considered as core elements of the sourcing processes, such as legal, risk management, IP protection, supplier due diligence and financial delegation. Ensuring consistency of approach to these complex processes and procurement category management initiatives will drive compliance and due diligence to each element of the sourcing process that is both essential and non-negotiable.
Using Portt for both efficiency and effectiveness
Portt is an intelligent sourcing, contract and supplier management platform that gives your organisation the power to be strategic, effective and efficient in your sourcing and contract management activities.
Portt is here to enable the strategic potential of your procurement team, helping them to streamline the unnecessary, unlock opportunity and realise truly positive organisational outcomes.
Contact us today for more information.
Article written by: Stuart Hunter, Value Engineering Lead