LECTURE TO MSC IT MANAGEMENT STUDENTS
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THE PROCUREMENT MANAGER GIVES A LECTURE TO MSC IT MANAGEMENT STUDENTS 

ON   BEST PRACTICES IN PROCUREMENT

 

SESSION OBJECTIVES

The participants will be able to

  • Understand the guiding principles in  Public Procurement in Kenya
  • Understand benchmarking in pursuit of best practices
  • Understand the concept of best practices
  • Appreciate some  best practices in Procurement
  • Note some benefits associated with adoption of best practices
  • Understand the Challenges in benchmarking for best practices
  • Highlight some Solutions to the challenges

GUIDING PRINCIPLES IN PUBLIC PROCUREMENT IN KENYA

All those involved in the procurement process must apply prudence, probity and transparency at each stage of the process. The Procuring Entity (PE) and its staff will be held accountable for non compliance with the general principles as stipulated in PPOA’s Public Procurement and Disposal General Manual.

  • Strict compliance to the regulatory framework
  • Achievement of economy and efficiency by encouraging fair competition in the bidding process.
  • Good practices and linkages that promote budget preparation, its execution and procurement planning.
  • Ethical practice in the procurement process by avoiding collusion and conflict of interest.
  • Promotion of Transparency and Accountability by ensuring proper documentation and required authorizations  at all levels.
  • Responsibility and Authority by ensuring clear segregation of duties in the procurement process.
  • Promoting Safety and environmental protection especially at the point of disposal.

 

WHAT IS BENCHMARKING?

Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match them and even surpass them at it.

This definition captures the essence of benchmarking, namely learning from others. The core of the interpretation of benchmarking is:

  • Measurement of own and the benchmarking partners’ performance level.
  • Comparison of performance levels, processes, practices, etc.
  • Learning from the benchmarking partners to introduce improvements in our own organization.
  • Improvement - the ultimate objective of any benchmarking.

The process of Benchmarking enables organizations identify ‘benchmarking partners’ and pick from them only the ‘exemplary and best practices ‘.

UNDERSTANDING THE CONCEPT OF ‘BEST PRACTICES’

Best Practice’ is defined as the policy, systems, processes and procedures that, at any given point in time, are generally regarded by peers as the practice that delivers the optimal outcome, such that they are worthy of adoption.

Best practices are used to maintain quality as an alternative to mandatory legislated standards.

Best practice is a feature of accredited management standards such as ISO 9000 and ISO 14001.

"Best practices” is about

  • Understanding our operations and  costs thoroughly.
  • Getting the best return on investment.
  • Satisfying our customers and.
  • Understanding that we are never done with the job.

"Almost 50% of best-in class enterprises that source strategically using best practice strategic sourcing techniques report more than four times greater procurement cost savings, better supply performance, and greater profitability than industry peers." (Aberdeen Group, 2005)

 BEST PROCUREMENT PRACTICES

Best procurement practice is a key contributor to any organization’s strategic goals. Generally; it is required for application at all levels of management:  Organizational, Strategic and Tactical:

Ensure compliance with procurement laws and regulations

Ensure that established contracts are used in order to discourage maverick, off contract spend. This is crucial to ensure that all public money is spent legally and transparently.

Cooperative supplier relations

Leading companies realize that suppliers offer value that is not present in their own companies.

Ensuring effective contract and supplier management

The procurement team must work closely and continuously with their customers and suppliers.

Strong Liaison with the user departments

Should keep clients informed and involved, and in order to develop responsive, creative and flexible procurement strategies, their departmental needs must be understood, as well as their specific technical requirement. Feed back mechanism should be encouraged.

Ensure adequate expertise in SCM

Skills - to be the best we must get the best out of our people. We must view procurement as a professional discipline with a clear training path, and track progress along that path.

Cross-functional approach

To function at an optimum level, supply management must include not only the procurement group but other corporate functions that can add value through interacting with suppliers, such as ICT, Finance, HRM, operations, research and development, to name a few.

 Effective communication

Being very precise and clear in communication is necessary in the procurement process. Specifications should be clear with no ambiguity, and be easily understood by all parties. For example,’.... momentum creating device’ when sourcing for a simple hammer!.

 Ensuring productive stakeholder and customer relations

The procurement team must be visible and accessible within their organization, understanding their customer's needs, and offering clear, user-friendly professional and legal advice.

Maintain Confidentiality

All procurement information that is of a confidential nature, including bid information, should be kept in a secure and confidential manner.

Continuously improving performance and innovation

Procurement staff should seek out opportunities to improve their internal operation and the level of service they provide.

Embrace modern technology

Use technology to propel yourself ahead of your competition.

Develop and nurture strong negotiation skills

On going training and organizational development

Maintain Records and ensure they remain updated

Keep files up to date for reasons of good management, access to information requests as well as for audit purposes. For example, it is a statutory requirement in Kenya to keep documents for at least 6years

Use Standard Documents in the procurement process

Should use only the templates available on the PPOA website  (Standard Procurement Documents).

Rationalize the supply base

Work with a reduced number of suppliers to promote supply collaboration and visibility in the Supply Chain.

Embrace Green, Socially Responsible and Sustainable Procurement

The objective of the policy is to advance the protection of the environment and to support sustainable development by integrating environmental performance considerations into the procurement decision-making process.

Ensuring competition through market research

Competition is the cornerstone of procurement best practice where public funds are being used and should be based on market research.

Obtaining competitive bids

The number of bids should be sufficient to obtain a reasonably-sized sample of the market, without creating an excessive amount of work in considering the bids.

Separation of Duties

Separation of duties in the procurement process is an important financial control principle and ensures that no one individual in a procurement process should be responsible for controlling most of the activities.

BENEFITS IN ADOPTING BEST PRACTICES

Best Practices will deal with solutions to the main difficulties encountered in the public procurement process:

  • Ensuring access to relevant information
  • Improving quality  and Reduced lead times
  • Enhanced cross-functional teams
  • Alleviating administrative burden
  • Putting emphasis on value for money rather than on price
  • Ensuring payments on time to avoid litigations (from suppliers)
  • Sets a mechanism for Compliance on statutory requirements
  • Eliminating wasteful investments of time and resources
  • Increased internal productivity and quality of communication
  • Reduced duplication of effort and improved risk management.

CHALLENGES IN BENCHMARKING FOR BEST PRACTICES

  • Finding benchmarking partners
  • Identifying companies that seem to be comparable in terms of size, market conditions, industry, etc
  • Resistance to change (cultural issues).
  • Lack of business process understanding.
  • Comparability of companies and processes.

SOLUTIONS (TO THE ABOVE CHALLENGES)

  • Applying a systematic procedure whereby a large number of potential benchmarking partners are scanned for relevance and high performance.
  • Seeking aid and support from sources and institutions that might be able to point to and convince potential partners, e.g., industry associations, area experts, media, etc.
  • Requesting initial performance information about the process in question before selecting a benchmarking partner, to make sure the performance is sufficiently good to offer new insights.
  • Crafting strategies for change management(e.g. champions to work as change agents)
  • Continuous training on attitude

CONCLUSION

Modern supply chain management requires businesses to examine every process in their supply chain and identify areas that are using unnecessary resources. This will improve the company’s competitiveness as well as improve the company’s overall profitability.

Overall, adopting a few key best practices for business's procurement strategy can truly make the difference between success and disappointment when it comes to implementation

 

“If I have seen further, it is by standing on the shoulders of giants.” The best learn from the best. (Sir Isaac Newton)