In time past, and until now, procurement function has always been viewed as relating only to negotiating with suppliers for best pricing. Even presently, procurement is still seen as a mere harp on organization’s economies of scale. However, it is worthy of mention that, due to global business trend, modern technology and supply chain challenges, especially in the information technology space, we are seeing the emergence of procurement as a true value added business function – A procurement system that looks at factors other than price, quality and expertise but employing full business capabilities as a way to add value to the business year after year while ensuring cost kept at bay.
No doubt, increased globalization has brought about increased risk of supply disruption in the face of stiff business competition amongst OEMs, service providers and telecommunication companies amongst others. The global expansion of organisation’s footprint, constant innovation, economic realities, currency movements, government regulations, or access to existing logistics networks and the decline in ‘cheap’ labour costs are profoundly influencing where companies source, produce, and the complexity of their processes and operations. In addition, regulatory requirements such as the increasing complexity of logistics and supply chain regulations; protectionist policies; product regulations; compliance to customs; trade restrictions; local content issues; forex issues; security requirements are a big part of complexity to the procurement function of information technology firms. But with the idea of change as a core necessity for success, procurement has evolved over time as a means of improving performance in other not to face demise.
These regulations render it more difficult to meet increasing customer requirements for reliable product delivery, and make it challenging to be able to plan using normal lead times, inventory requirements and scheduling. More insight has even revealed the complex and shifting nature of government regulations, making it more evident than ever that ‘the government is part of every supply chain’ as a way of regulating trade with a view to stabilizing the economy. The case of Nigeria is an example at hand. This has made outsourcing to be on the rise and, as this occurs, increased customization of delivery service and logistics service requirements are on the rise. Service companies are relying more on third parties not just to deliver products, but also for increasingly value-added activities. Therefore, in meeting and exceeding customer’s expectation, value added procurement centres on the value of procurement to the enterprise; how this value is delivered into the business in terms of the service mix – that is, how procurement performs, its level of capability; what level of capability we have today, or need to change; and how efficient and effective procurement is in the execution of its role in bringing satisfaction to both its internal and external customers most especially in an ICT driven environment.
Procurement as value added business function seeks to developing of strategic business capabilities while relentlessly in pursuit of innovation and operational excellence aimed at keeping businesses out of trouble with the suppliers, building flexible agreements/contract that change with strategy and the changing needs, handling of negotiations to the advantage of all, offering improvement ideas, building a strategic partner that: understands and is very close to your business; helps ensure suppliers are performing well; and, is focused on maximizing value for the cost (in contrast to just minimizing cost).
Author: Frank Assam
- On April 29, 2016
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