APSCo Forum finds success in complex procurement relies on balance
APSCo Forum finds success in complex procurement relies on balance between analytical and emotional intelligence
APSCo’s Focus on Procurement event, which was hosted in conjunction with Ernst & Young and the Chartered Institute of Purchasing & Supply (CIPS), has found that although there are distinct advantages to complex procurement models, the success of complex arrangement performance depends on the effective management of both contractual and relationship governance.
Guest speaker Mike Lewis - Professor of Operations and Supply Management at Bath University’s School of Management – explained that complex procurement models can allow businesses to focus on core competencies, leverage external exposure, access new capability innovations and work with greater technological complexity. Outsourcing additional services can also enable organisations to take advantage of global trade liberalisation.
However despite these advantages, there are three fundamental dilemmas associated with complex procurement arrangements:
- Organisations must understand what they are buying. As a business’s design and make capability falls, its buying capability increases. There is a transitional challenge at the crossover point where we need retain enough expertise in-house to understand what we are buying.
- Resources and requirements shift and the idea of value changes over time. For example, during a five year contract technology will advance rapidly – a laptop which cost £1000 in 2007 will be worth £300 today. Functionality also develops swiftly, and expectations shift to accommodate this. Writing a contract that accommodates these changes can be challenging. Benchmarking protocols can be a real dilemma and there is no simple solution.
- Businesses also face the dilemma of complex co-ordination. In a complex environment, there are an infinite number of scenarios to allow for contractually. Situations inevitably change, move and shift, and procurement professionals must find the balance between using contractual and relationship leavers - the key is deciding which one to pull.
Contracting and relationships are important at different times in the procurement lifecycle and the success of partnerships depends on the overarching contractual framework coupled with individual relationships.
Commenting on the event, Ann Swain, chief executive of APSCo said: “The procurement supply chain has matured exponentially in the last decade. Historically, buying professionals and recruiters have not worked together as closely as they could, but with APSCo and CIPS developing a programme of events to stimulate open dialogue, encourage learning and drive best practice we are well placed to ensure the relationship is beneficial to both parties.”