Top 7 recession-proof tips for successful procurement in New Zealand

Procurement is the acquisition of goods or services at the best possible price for the term of use, delivering the best ’total cost of ownership’, in the right quality and quantity, at the right time, in the right place and from the right supplier. It is not the ‘lowest price’.

Procurement in New Zealand can be challenging. Even the savviest operator needs to keep on their toes, especially during these challenging economic times.

It is not all about price

Price focused procurement misses the point. Too often people negotiate and focus on price, without understanding the ‘whole of life costs’ and ignoring the question of ‘value’ to the organisation. Smart procurement will take account of these factors and will select the opportunity with the biggest net benefit to the organisation.

Allocate the right resources

Best practice procurement will undoubtedly deliver benefits to your organisation significantly improving your bottom line. But achieving maximum procurement savings will depend on the allocation of appropriate resources in the right areas.

Resources need to be targeted on the strategic spend areas for your organisation and have the requisite expertise for the categories they are sourcing.

Understand your spending habits

As the old adage states, ‘you can’t manage what you can’t measure’. Undertaking thorough spend analysis allows you to improve your procurement on a number of fronts, and can include supplier rationalisation. This in turn allows you to increase your leverage with your remaining suppliers in order to get superior pricing as well as improved terms and conditions.

Know your suppliers

It can be a powerful exercise to map each supplier according to how much you buy and their risk to your business. This means understanding the value of the relationship in order to forge the correct strategy for managing the supplier base.

Organisations often focus on sourcing, but have too little time actually measuring performance. It is important to develop KPIs that focus on measurable outcomes for both you and the supplier. These KPIs should be analysed and incorporated into a regular programme of supplier reviews and used to inform future tender/negotiation processes. Work with your suppliers – they will often have great ideas on how you can save.

Leverage your buying power through group buying

For products and services that are essentially common commodities it makes sense to consider opportunities to join buying groups and leverage the volume of other organisations. This can allow an organisation to take advantage of better pricing and more attractive terms and conditions that smaller operations might not be able to access on their own.

Using the right tools for the job

The deployment of the most appropriate procurement tools can be key to determining the right result. Effective procurement professionals should consider when and how to use spend analysis, e-tendering, reverse auctions, e-procurement, automated contract management, and other tools. Organisations should take a holistic approach to selecting tools to ensure the desired result is achieved.

Learn from the expertise of others

The use of external experts can save a considerable amount of time and reduce risk. Procurement remains a relatively new profession in New Zealand, in the past this responsibility was often something hastily tacked on to a job description. Organisations often lack staff with sufficient ability to deliver the potentially high returns of the procurement function, due to a lack of any formal procurement training and development.

-written by Peter Royle, GSB Supplycorp

Peter Royle is the Chief Executive of GSB Supplycorp the country’s largest procurement organisation, with 3,000 member organisations, including central and local government bodies, state-owned enterprises, crown research institutes, district health boards, education providers and qualified private sector businesses.