EXECUTIVE SUMMARY
Australasia’s professional procurement landscape is in a state of flux as organisations grapple with
the challenges of delivering the important benefits that transparent and streamlined procurement
practices can offer enterprises of all scales, in all sectors. In late 2012, Financial Review Business
Intelligence conducted a survey involving 300 procurement professionals throughout Australasia.
This study revealed the following key issues and opportunities facing the profession today:
AUSTRALASIAN PROCUREMENT - A CHALLENGING ROLE
1.
Procurement professionals operate under multiple organisational frameworks – no single model
dominates the local landscape
2.
There are significant differences in terms of the roles and responsibilities of procurement
professionals, when compared across industries
3. Heightened expectations regarding transparency have spawned challenges for procurement
professionals who have to navigate the often narrow path between probity and pragmatism
RESEARCH PAPER
Welcome to the first in a series of research reports on procurement in Australasia,
from Financial Review Business Intelligence in association with TenderLink.
ONE SIZE DOES NOT FIT ALL
The survey revealed that the structure of the procurement function varies widely in Australasia, with no common patterns occuring across sectors.
Although 34% of respondents said
procurement staff were, or were mostly, in one team, 26% noted that procurement staff were not centralised but, rather, embedded in the departments they served.
One in five organisations assign procurement
responsibilities to staff who also have other responsibilities, while 13% report they do not have any dedicated procurement staff.
Some sectors in particular appear to have a fragmented organisational structure which
may place at risk the benefits associated with
dedicated and highly focused procurement practices. For example, almost a third of Government procurement staff have additional non-procurement responsibilities. That is in stark contrast to the electricity sector where 70% of respondents said procurement staff mostly worked in one team and only 7.7% reported staff had other responsibilities.
Clearly there is no benefit in taking a
“cookie-cutter” approach to procurement structures and it would be unhelpful to attempt to impose a single organisational structure on the function. However, whatever form the organisational framework takes, the diversity of procurement structures highlighted in this research show the need for tools and processes to encourage clear communications across
diverse organisational structures. 0% 25% 50%
Procurement staff operate within the departments or teams they
work with
26%
Most procurement staff are in
one team 20%
Procurement staff have other
non-procurement responsibilities 20%
We don’t have dedicated procurement staff, purchasing is
managed as required 13%
Procurement staff work on
purchasing tasks exclusively 8% All procurement staff in
one team 34%
ROLES AND RESPONSIBILITIES VARY BY SECTOR
PROBITY, TRANSPARENCY AND OTHER CHALLENGES
Just as the research identifies the lack of a single framework
for the procurement process, it also reveals that there is no single job description for a procurement professional. The survey revealed a broad spectrum of roles and responsibilities which procurement professionals are
expected to fulfil. Again, evidence of uniform best-practice
is lacking.
Overall, three quarters of respondents said procurement staff evaluate bids, and almost two thirds build supplier panels and use formalised pre-compliance systems. This, however, masks the deep differences uncovered in individual sectors.
For example only 35% of health and community
procurement professionals are involved in building supplier panels compared to a 61% average across all sectors. Also, while almost 80% of mining respondents report using formalised pre-compliance systems, only half of the transport sector follows suit.
Public sector procurement professionals, meanwhile, lead the pack when it comes to building supplier panels, with 73% of respondents in local, state and federal government acknowledging this as a key responsibility.
Finally, while 86% of construction sector procurement
professionals evaluate bids, only 55% of procurement staff working in education have this responsibility.
The roles and responsibilities of procurement staff vary widely across sectors, pointing to not only structural differences, but also the differing requirements that exist across the sectors surveyed.
77% 61% 62% 0% 25% 50% 75% 100% Does procurement evaluate bids? Build supplier panels? Use formalised pre-compliance system?
Some common roles and responsibilities
When invited to describe the most challenging aspects of managing the procurement function in their organisation, an unexpectedly high 70 % of those surveyed chose to respond to the open-ended question.
The insights they delivered are significant.
The second most often mentioned group of challenges were a perceived lack of planning and strategy for procurement, change management and other organisational issues, including access to skills and training.
Some organisations also noted the difficulties associated
DISCONNECT BETWEEN EXPECTATION AND REALITY
The chart opposite identifies the most significant
challenges faced by procurement professionals. These challenges are exacerbated by the fact that they occur within increasingly decentralised procurement structures, thus adding an extra layer of
difficulty to achieving optimal outcomes.
This is compounded by a perceived lack of senior management involvement in crafting or supporting the introduction and enforcement of an appropriate procurement framework.
Most procurement professionals understand that with the appropriate tools and management support,
devolved procurement can deliver flexibility and efficiency without sacrificing probity and economy.
Consequently there is little appetite to return to a centralised procurement structure. However, survey respondents acknowledge that they have yet to establish the robust framework needed to properly manage devolved procurement.
A perceived lack of management focus on the procurement function is also frustrating to many professionals. While they understand and acknowledge the complex balancing act which senior management has to perform, they worry that procurement is not receiving the attention it deserves, especially given the function’s ability to positively impact organisational performance. Without that focus and attention, respondents were concerned that staff engaged in procurement might themselves be less rigorous in their embrace of proper process and practice.
Other respondents noted that it could be challenging to establish the appropriate nexus between best-practice procurement processes and swift, pragmatic and cost-effective procurement.
There was also a perception among some survey respondents that senior management did not adequately understand or acknowledge the fact that
effective procurement could be a contributor to profit,
and should therefore not be viewed as a negotiable cost centre.
In the words of one respondent; “The biggest
challenge is ensuring executive buy-in to regulate procurement protocols, and the training and
education of staff on relevant procedures, thresholds and value-for-money concepts.”
Challenging aspects of the procurement function
0% 25% 50%
Lack of policy and strategic
planning, organisational issues 17.4%
Many staff involved in procurement, many don’t
under-stand issues 15.5%
Getting / keeping staff.
Lack of resources 14.6%
Lack of time to perform tasks 10.3%
Inadequate systems 8.5%
Meeting budget, cost,
timeframe requirements 6.1%
Difficult to meet compliance and probity
PROCUREMENT PRACTITIONERS
ARE VOCAL ABOUT THE CHALLENGES
The lack of enterprise level procurement policy and strategic planning is exacerbated by the wide range of staff involved in procurement who bring disparate levels of skills, experience or desire to achieve best practice procurement outcomes.
In some cases the problem of staff not following procedures is worsened by management failing to enforce procedures, or doing so selectively.
Only by introducing and adhering to more rigorous and centre-led procurement policies will it be possible to reduce the ultimately unhelpful ‘back door’ selling by suppliers, and ensure that good value, agility, transparency and probity can be assured.
Not surprisingly, the multiple challenges of wrestling with incomplete strategy, decentralised processes and inconsistent
or ill-defined structures, leave many
procurement professionals feeling frustrated that, despite their efforts, their profession commands less respect within their organisations than is deserved.
Respondents emphasise that, if armed with the appropriate tools and resources, they are able to provide rigour in purchasing, ensure good value for money and meet important requirements such as certainty of supply and quality. Instead, some describe
themselves as being viewed as “back
room pencil pushers”, even while they remain ultimately responsible for audit and compliance requirements – especially in
A RICH SEAM OF PROCUREMENT OPPORTUNITIES
This uniquely Australasian research, surveying a significant cross-section of procurement professionals, has identified key issues organisations need to negiotiate as they journey toward best-practice procurement. Organisations need to carefully consider whether:
METHODOLOGY
A quantitative survey of 300 procurement professionals conducted in August and September 2012 revealed important insights about procurement and the pathways to best-practice. Responses were collected from all levels of government, plus a broad spectrum of industry, including mining, education, health, community services, construction and transport.
Financial Review Business Intelligence, part of the Financial Review Group at Fairfax Media, specialises in research in the business sector and especially among business owners and senior decision makers. If you would like to know more about Financial Review Business Intelligence, please contact:
Beverley Uther,
Principal Analyst & Research Manager, 02 9282 2121,
[email protected] or visit www.fairfaxbr.com
TENDERLINK
Established in 1994, TenderLink has grown to become one of the largest web-based procurement systems in Australasia. TenderLink offers a variety of purchaser-and supplier-oriented services including:
• Web-based e-Procurement solutions
• Subscription-based tender notification services • Tender response education and training
Currently over 300 leading government, public and private sector
purchasers use TenderLink’s e-Procurement system to significantly
reduce their procurement costs, increase the speed of their procurement cycles and improve supplier relationships. And they achieve this within an externally audited system providing the highest levels of security, transparency and probity.
If you are a procurer of goods and services and are considering a shift to web-based procurement technology, then contact TenderLink.
Phone: (AU) 1800 233533, (NZ) 0800 698363
Email: [email protected]
Web: www.tenderlink.com
BUSINESSINTELLIGENCE
1. The structure of procurement in their organisation accords with purchasing needs.
2. Their processes and controls account for the increased risk that may be introduced when
using a decentralised model.
3. Management considers strategy for procurement alongside other key financial and strategic
analysis.
4. Management understands and measures the significant value and volume of
procurement-led transactions and therefore recognises the opportunities that improved probity and risk
management practices would deliver.
5. The correct tools are in place to provide the best procurement outcomes. Does management
understand the need to invest in best-of-breed software solutions to support procurement in
the same way as they appreciate the need for sophisticated finance or HR software?
As this survey has revealed, procurement professionals remain highly engaged and committed to the ongoing journey to best-practice. Armed with this more granular understanding of the procurement landscape, procurement professionals will be better positioned to engage senior management in the critical discussion about the value which can be liberated by proper investment in best-of-breed procurement frameworks, policies, tools and skills.
