This interview with Tania Seary, CEO of The Faculty, focuses on Procurement and its advantages over traditional Purchasing. For background, The Faculty is a management consulting firm based in Melbourne, Australia and focuses on helping organizations identify and initiate activities to optimize procurement strategy.
In the interview, Ms. Seary discusses procurement as a process of developing strategies to achieve long term cost reduction, manage supply chain risks, and gain competitive advantage, a concept that is different from traditional purchasing which is mainly just acquisition. She stresses that the benefits of moving from a traditional concept of purchasing to strategic procurement can be felt by the whole company in the long run because it results in a more flexible supply chain structure that is more resilient to the shocks brought about by fluctuating currencies, unstable economies, and supplier production issues. She also discusses the role of procurement in the company’s adherence to its social and environmental policies, stating that the unique position of being able to closely monitor suppliers’ processes allows the company insight on whether or not their policies are being adhered to by their partners. This is important in making sure that company reputation and standards are protected and maintained.
While procurement is a process that seems suited for large companies, it is advisable for small and medium-sized companies to either engage the services of a procurement practitioner or develop procurement capability within their organization. In today’s uncertain economic and business environment, companies - whether small, medium, or large – would need to be cost conscious and should have the ability to manage supply chain risks.
As indicated in the title of the article of the interview, procurement is more than just purchasing. The difference of today’s concept of strategic procurement from the traditional way of purchasing is the focus; while traditional purchasing is focused mainly on acquisition of goods and services with price as the key determinant, strategic procurement encompasses a wider scope of activities that not only take into account price points, but also the development and management of supplier relationships, the measurement of performance of suppliers and procurement team, and the management of supply chain risks. Strategic procurement requires a broader and more long-term business outlook and planning. Instead of acquisition based on current need, the company focuses on ensuring that their supply chain – their own internal structure as well as the structure and processes of their partner suppliers – will be able to meet the current and future demands of the business with minimal cost implications.
Quality –wise, strategic procurement helps ensure that the goods produced by the company are within their standard of quality. Procurement involves a definite process of screening and evaluating potential suppliers on their compliance with production and ethical standards, reliability, innovativeness, and capability to meet supply demands. With this process, the company will be able to select the most capable supplier that produces materials that are within their standard of quality and therefore ensure that the goods produced by the company for their end users are within quality standards. Also, developing good business relationships with a select few suppliers gives the company the advantage of being more involved in the processes of said suppliers and help them maintain their production of good quality materials.
This article is a straightforward interview about strategic procurement as it applies to food processing. It directly illustrates the differences between strategic procurement and traditional purchasing, as well as gives a view of the benefits of strategic procurement in terms of product quality.
Seary, T. (2012). Procurement: more than just purchasing. Rretrieved from http://www.foodprocessing.com.au/articles/53984-Procurement-more-than-just-purchasing