4 project management principles every procurement team should embrace
Today’s procurement professionals are quite different from the administrators of the past. Through professional, technological and organisational advancement, the most effective procurement professionals are leading business-critical supplier relationships from start to finish, whether through category, product or supplier focused approaches.
But this isn’t always the case…
Historical perceptions remain about the role of procurement, particularly across people who do not actually work within the function – with serious repercussions for the effectiveness of any procurement team and its relationship with other departments.
For example, it’s not uncommon for non-procurement people to be the ones specifying the requirement for a new product or service, finding the supplier and negotiating the terms - only to involve procurement when a Purchase Order is required. And this late involvement of procurement can lead to delays and frustrations from all sides of the equation.From the outside, procurement professionals are often characterised as “people who buy things”. While this description is fundamentally correct, it overlooks many additional components involved in procurement excellence – for example the ‘what, how, who and when’ of purchasing. When procurement have not been involved throughout the buying process, these crucial areas do not get the proper consideration they merit and the consequences can be disastrous.
Getting ‘procurement’ wrong can lead to broken internal stakeholder relationships, lack of understanding of ‘what procurement do’ and a serious lack of ‘value adding’ activity from the function generally.
When other functions simply include procurement in the administrative part of the process, they put the entire process at risk; leading to delays, challenges to operational delivery and broken functional relationships.
Not the best basis for enhanced operating performance – in any organisation.
So how do organisations get procurement involved across the end to end process consistently?
The Procura Consulting team make a distinction between two key types of activities that procurement professionals get involved in;
- Business as usual / operational activities
- Project work / strategic activities
Pareto's Principle suggests that we spend 80% of our time on activities that deliver 20% of the value and this often rings true in many procurement functions today.
Examples of common activities that can be grouped as time consuming administration, or low value-adding activities include the raising of Purchase Orders, managing work queues, checking ‘3 quotes’, arranging NDA’s and managing invoice mismatches.
This clearly needs inverting, so high cost procurement professionals are spending more time on key value adding activities.
The use of effective Project Management plays a crucial role in enabling this – with 4 basic, yet fundamental, principles underpinning the success of many high performing procurement teams.
The 4 Principles of Effective Project Management
Principle 1: “What is a Project?”; According to the APM (Association of Project Management), a project is “a unique, transient endeavour, undertaken to achieve planned objectives, which could be defined in terms of outputs, outcomes or benefits”.
Principle 2: “The Iron Triangle”; Projects are constrained on 3 conflicting criteria;
- Time – how long the project will last
- Cost – how much the project will cost
- Quality – achievement of specified quality requirements
Principle 3: The need for a Business Case; When deciding if and when to start, or continue a project, a business case should be created which lays out the pros and cons of delivering the project - with common items for consideration including:
- Summary of project
- Options appraisal
- Link to business strategy/vision
- Decision making rationale
- Resource requirements
- Cost requirements
Principle 4: Stakeholders and Requirements; The above requirements come from stakeholders, which the APM describe as ‘an individuals or group with an interest in the project, programme or portfolio because they are involved in the work or affected by the outcomes’. For good for bad, stakeholders hold the key to projects and project success – so must be managed.
So just how can the 4 Principles help procurement teams?
The case - for a business case
Most sourcing initiatives still don't have a clear business case
within their procurement teams
Most sourcing initiatives still don't have a clear business case
Tom Edwards Senior Consultant @ Procura
It’s rare, in fact extremely rare, for most sourcing initiatives to have a Business Case - with the following questions remaining unraised:
- Before engaging an RFX have we considered how long it will take, what it will cost, is it worth doing?
- If a Business Case is created, will it be maintained and regularly reviewed?
- At the end of the process, do we review if key assumptions of time, cost and quality were achieved?
- Indeed, do we even differentiate our procurement tasks as ‘business as usual’ or ‘project based’ at all?
Let’s bring this to life for a moment with an example of a contract that is coming to the end of its validity. What discussions are had?
Does the supplier still align to the business strategy? It may be that extending is the right choice at the time, reflecting only a small ‘business-as-usual activity’…or it might be that retendering is the right choice, while being a longer project commitment in terms of resource.
But how do organisations understand what is the right thing to do?
The answer lies in Programme Management
Once you understand the various projects that are competing to be run, you can start to manage your procurement programme; “the process of managing several related projects, often with the intention of improving an organisation's performance”.
Said differently, the theory is that a number of discrete but related projects will form part of a wider programme of works that has a specific strategic aim. Should one of the projects fail, the programme will, in part, miss its goal.
Programmes are often longer term than projects and the projects required to achieve the programme goal may change - as the programme continually aligns itself to the business strategy. In some cases, programmes will simply stop, when the strategic link is broken.This is where success of the projects and programmes can start to be secured, because without managing the programme, you cannot know if you have the resource available internally to do all you want to, or indeed if related functions have the resource available to do all you want to do! You also cannot see if all projects are pulling in the same direction and will “together” help the organisation achieve its strategic goals; as implied above, if they don’t, why are we doing them? A consequence of this “programme view” is you’ll start to see ahead of time the resource shortfalls and you’ll need to agree a prioritisation process for which projects get done; not all projects are equal. You’ll start to focus resource on the areas that are planned to yield the biggest results (help the business achieve its strategic goals). You can also ‘outsource’ simpler procurement activities or projects to other parts of the business, or to less specialist resource, to help free the more specialist procurement resource. This might not be a populate process, with some projects being left behind, but for the collective greater good, this must be done. If we take this a step further, how proactive are internal procurement professionals in managing internal stakeholders? If stakeholders define our requirements, then surely we should have a plan for managing our stakeholders and together outlining their sourcing requirements. It also allows us to make decisions on what activities we “can” and “should” be supporting centrally and what activities we can empower others to do themselves. This final piece also answers the question on how you bring procurement into the start of the sourcing conversation, instead of being the final administrative hurdle at the end. Through active stakeholder management you open communication lines with key stakeholders and half the battle is won. Whether through formal or informal media, the key is to engage the right people.
Project Management will not be the golden ticket in helping increase the effectiveness of your procurement department, but it offers some simple principles which can go a long way.
If you would like to discuss transforming your procurement function, please call: +44 (0)203 693 7275 or click here to email us