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IRELAND SPECIAL Economics
serious about Value for Money this cannot
be allowed to continue. The integrated
approach to procurement and supply chain
has been advocated for over a decade now
and many organisations are striving to adopt
the concept. This time presents us not only
with challenges but also with the opportunity
to make those radical changes for effective
procurement into the future.
We will explore some aspects of
the integrated approach and how it can
influence VFM. Organizations that effectively
collaborate with their procurement and
supply chain partners position themselves
for success in 21st-century markets. When
focused methods, and tried and tested
techniques are adopted or transferred to
specifically address the objectives of the
Procurement and Supply Chain arena, the
results are always positive, by contributing
substantial savings, efficiencies and
benefits.
When these methods and techniques
are followed it means that you are working
to a set of practices and principles that
deliver benefits in a consistent manner.
There is a growing awareness that
Integrated Procurement and Supply Chain
management provides the extra edge for
greater efficiency and differentiate itself
from the competition. One way to achieve
this is for Procurement managers to look at
their operation from a holistic perspective
by adopting effective, proven methods
to increase the chances of success.
Conversely if you don’t manage your
purchases and supply activities in a planned
and structured way, and you continue to
do what you have always done, you will
continue to get what you have always got.
Even with decades of hands on
experience in the procurement and supply
chain arena, we at MRM-Global never cease
to be amazed at the number of different
ways roles have adapted. There is no single
method of execution, and that can lead to
The importance of
effective procurement
and supply is summarised
as “Provide continuity
of supply of goods and
services ’’
16 Link January 2011
difficulties when being held accountable
for efficiency improvements and/or cost
reductions against a common background of
expectations.
Without doubt effective procurement
can provide a vital contribution through
VFM and yet, too often, no clear vision or
integrated action plan towards achieving this
objective is present. Why is this? There
appears to be no clear answer. Excuses are
abundant as to why certain things cannot
be done. The sheer volume and complexity
of purchasing and supply activities for the
majority of public organisations creates a
scenario where there is usually little time and
fragmented or no data/information available.
This lack of consolidated data creates a
problem because of the many variables
associated with procurement and SCM. This
often results in ‘fire-fighting’ becoming the
order of the day. Planned areas of activity
are often focused only on a part of the
whole, for example inventory turns, leaving
other areas of opportunity untapped and
inadequately managed.
The importance of effective procurement
and supply might be summarised as follows:
‘’Provide continuity of supply of goods
and services at lowest cost and minimum
contractual risk’’. From a performance
perspective, in private sector procurement, a
1% saving is equivalent, from a profitability
perspective, to a minimum of a 10% increase
in sales. A similar analogy needs to be
developed for VFM in the public sector. This
puts procurement into a position of being
an important contributor and a strategic
necessity and not an order department. If
we take one element of supply costs for
example, inventory, a primary focus will be to
achieve optimum stock turn rates. Not only
will this support providing high service levels
when properly managed, but also frees up
valuable working capital. With coordinated
actions good inventory management will
influence how well warehousing operates
and, in turn, logistics.
By integrating these efforts on a cross
functional level VFM will be optimised
through integrated procurement. So how
do you achieve Integrated Procurement
and Supply Chain Management (IPSCM)?
We at MRM-Global believe the answer lies
in the design of the process itself. Some
processes work better than others and the
better ones tend to have a more holistic
approach. The processes that are not as
The Four Courts Dublin
good are more fragmented in their design.
From our research we have found that the
integrated approach delivers better results.
This is evidenced by results from a number
of organisations, providing substantial
improvements in efficiencies and cost
reductions. The process supporting IPSCM,
when it incorporates project and portfolio
based models, improves performances
even further. Project and portfolio elements
have been proven to provide substantial
benefits. Unless the process reflects
and complements cross functional interrelationships
from demand planning to
fulfilment, and the associated operating
procedures, the danger of a fragmented
process remains. We have studied these
areas and have integrated our findings into
the creation of a new process model. We
have developed a process that supports end
to end procurement and supply.
Whilst most practitioners will readily
acknowledge the logic to the process, too
often they are constrained in implementing
such a model due to work pressures. This
is one of the main reasons that integration