The primary aim of strategic procurement is to reduce the costs of operation through advanced planning, group buying initiatives, and scheduling. An organization experiences significant savings upon adhering to these strategies. An organization that does strategic procurement stands a chance of saving a lot. In addition to the savings, there exists other hidden savings in terms of increased efficiency in operations. Strategic procurement places an organization or an individual in a position to get the best goods and services at the best price deals. Having efficient tools of trade not only keeps a firm at par with its operation plans, but also and enhances its efficiency. Well-organized operations lead to increased output per worker in a period of time. This makes strategic procurement a fundamental tool for enhancing profitability and sustainability within various institutions.
Centralized procurement is the other imperative principle that the procurement committee needs to lay emphasis on. Central procurement involves taking all the procurement procedures of goods and services that may be related at the same time. The process of procurement begins with tendering. In order to realize the benefits that come with strategic procurement, the organization in the case study needs to perform its tendering process of all related goods and services together. Thereafter, the committee should hire technicians to install and configure the software within the environment. Buying a scheduling tool calls for trained and well informed experts to install and maintain the scheduling software. The processes of buying the tool and hiring the technicians to install it, training staff and students to use it up to disposal of old machinery and equipment are related.
Tendering begins with the procurement having round table discussions with the IT department to detail the goods and services required to make operations of the department efficient. Upon enlisting the needs of the department as outlined, the school starts strategic procurement by doing a centralized advertisement of the tenders. Placing tender notices on print media like newspapers attracts a fixed minimum payment. Deciding to do advertisement of the services and goods needed one at a time makes the process unnecessarily expensive. Centralizing the advertisements saves the institution from unwarranted expenses. Procurement committee receives the tender bids together and announces the dates of opening the bids for the different categories at the same time. After this, the institution analyses the tender bids carefully with a view to determine quality service delivery in addition to cost effectiveness.
Centralizing related processes ensures minimum wastage of time and resources. In some instances, the organization may have to hire conference rooms for opening and announcing awards of tenders. Doing opening of tenders and announcing tender bids for each commodity at a time makes the institution’s endeavors costly. In addition, time wastage by procurement and finance departments’ staff in multiple procurement processes becomes minimal. This reduces indirect costs by ensuring concentration of staff on procedures that add value to the institution. In addition, time wastage by procurement and finance departments’ staff in multiple procurement processes becomes minimal.
Group buying is the other strategic procurement procedure that saves an institution fortunes. From essential knowledge, bulk purchases and production leads to economies of large scale. The case presented within the study may not enhance bulk purchases due to the nature of goods and services involved. However, it is possible to reap the benefits of bulk purchases by conducting group buying of services and goods from a single service and goods distributor. The procurement committee needs to place strategic plans to obtain as much services and goods from the same supplier. This can be facilitated through thorough investigation and call for suppliers who offer numerous goods and services. Therefore, the procurement committee could have the same supplier of the software provide technicians to install and configure it in the organization’s environment. The developers of the software would most evidently have significant knowledge on the functionality of the software.
They would provide the best installation and integration of the software into the organization’s system. In addition, training and educating students and teachers on the working of the new system would be best driven from the system providers. This may not always be the case as software developers lack the staff to perform basic teaching and tutoring. Nonetheless, the providers of the software need to be involved in imparting knowledge of the system’s functionality to students and institution’s members of staff.
Strategic procurement would also require that supply of new servers and software to run the old project database be supplied by the same supplier who offered the previous supplies if possible. Tool usage experts to transfer knowledge to the student PMs about the use of the tool on the job for the first 60 days after going live would be best lent to the same company too. The firm could award all the contracts to the same firm with the exception of the removal and disposal of the scheduling tool software and hardware that are no longer to be used. This ensures that service provision dedicated towards running of new systems is coordinated and meets its goals.
It is also imperative that the organization takes the right pricing strategy during procurement. Fixed price with costs presents the best option for the firm to maintain low costs of production as it maintains high standards of delivery. Using this contract type, the supplier will be able to adjust its prices over the period of the contract as economic situations change. This keeps the firm on high alert on quality of commodities that resonate with the prevailing prices.
Croagler, J., & Froaderzch, K. (2011). Essence of procurement in cost saving. Boston: Longman.
Ibramovisch, P. (2012). The principles of strategic \procurement. Chicago: Zeal Co.