"Once the business and procurement are working together with a strong strategic relationship, that's when you start to discover the next level of procurement."
Those are the words of Procurement Co Director Heath Jess. Working towards a strategic partnership was recently discussed by Procurement Co's Co-Director, Ryan Jackson, but what's involved in this 'next level of procurement' Heath speaks of? We sat down with the both of them to find out.
What outcome are you seeking to achieve?
The next level can be thought of like this: in order to get the desired outcome for a procurement process, you need to ensure you're choosing an evaluation method that's fit for purpose.
As Heath explained, "there are sometimes basic procurement templates that are straight down the line and used without considering what's being purchased. No thought is given to, 'what are we actually after here and therefore should we have a different focus for the evaluation method to achieve that outcome?'”
The evaluation method, in other words, needs to take into account the procurement goal or outcome and shape itself around that. Ryan described this process as, "asking the right questions and targeting your evaluation on the attributes that a supplier or a service provider can offer to fix a problem you're trying to solve."
All well and good - but what might this look like in practice? Heath provided an example:
"Every procurement project will potentially have a different focus. It could be 'let's get the lowest priced item that will comply with the technical requirements' - in that case price becomes very important. Other times it could be 'we need this delivered within four months' - the schedule they're tendering then becomes very important and price can take a back seat. And finally, when you're looking for something in a niche market, you're really looking for the expertise of the individuals that are going to do the work - the experience is therefore going to be potentially more important than price or schedule."
"If you just continue to use the cookie cutter method, you can get to the end of the process, and it can tell you to go with supplier A when everyone on the team knows supplier B is better." If this occurs, the culprit is usually a poorly structured evaluation process that hasn't had the outcome in mind as its guiding focus.
The importance of choosing the right evaluation methodology
This focus on keeping your outcome in mind applies to the evaluation methodology you select. As Ryan said, "often procurement's main objective is to get something for the lowest price - but that might not necessarily meet the business's or project's objective of getting something done in a short period of time or getting something done to a level of quality that's not achievable with a low price."
There are a number of different evaluation methodologies you could use, for example:
- Lowest cost technically compliant - choosing the product that costs the least but still meets minimum technical requirements.
- Value ratio - ranking is based on a combination of weighted technical score and pricing. The advantage with this is you get a compromise between an option that's cost competitive and performs well technically.
- Weighted scoring (including price) - evaluation criteria is weighted out of 100%, with each evaluation element provided a weighting depending on its relative importance in achieving the business objectives.
Each of these options has their merits, depending on what the objectives of the procurement are. The key is to make your choice carefully based on the desired outcome, rather than choosing any one 'best' method.
To bring it full circle - these kinds of outcome focused evaluation methodologies are only possible when procurement and the other business units work together in a strategic partnership. To learn more about how Procurement Co and their procurement services can help you get there with your business, get in touch with a member of the team today.