Supplied by the lowest bidder
US Senator and well-known astronaut John Glenn was the first man to orbit the Earth in 1962 in a one-manned spacecraft on the Friendship 7 mission. During the mission John thought to himself, “As I hurtled through space, one thought kept crossing my mind - every part of this rocket was supplied by the lowest bidder”.
Despite his anxiety, the mission was a complete success. This made me think about the buying and procurement function of business in more recent times.
Through the work we do at Scotwork, we have seen a significant increase of new procurement divisions within medium to large businesses over the last 10 years. It makes sense to professionalise and centralise the buying functions in some businesses to improve operational costs, however we have seen that it can come at a great cost. We see that procurement can be measured against cost savings alone, which looks good on the P&L, but can adversely impact a business in how they deliver their quality of service or product. Procurement's internal discussions and negotiations need to be just as important or more important than their external negotiations. Fulfilling the needs of internal stakeholders will lead to increases in quality, efficiency and/or productivity at the business unit level. This then has a flow-on effect to what the business can deliver to its clients and consumers, leading to potential sales and higher customer retention rates.
A great procurement or centralised buying function should see its internal stakeholders as their clients, delivering the best solutions for them with the right external parties. Returning to the NASA example, they met costs within budget as well as prioritising a well-functioning and safe spacecraft. The buying team, with proper internal alignment of priorities, delivered a job well done within budget.