11
Dec
Using Total Best Value Sourcing to Measure Procurement Results
In many companies today, Purchasing is often seen as, at best, a necessary evil. Because there is no hierarchical conviction about the value of the Purchasing organization to the company, Purchasing is often understaffed or considered as an opportunity for outsourcing. In these companies, because price reduction is usually the only measure of the Purchasing organization’s performance, staff members are focused on making short-sighted, price-only decisions.
Despite the fact that most people in everyday life have learned the many negative consequences of making price only decisions, companies and Purchasing organizations continue to measure price only savings, make price only decisions, and add cost, waste and inefficiency to their company’s operations. As a result, Operations organizations are the ones that live with those awful results. In turn, Operations’ personnel do not view the Purchasing organization as a necessary evil, but instead as the enemy and the source of many of their problems. Renegade spending and poor contract compliance are just two of the many problems created as a result of the poor relationship between the Purchasing and Operations organizations.
Measuring and rewarding total savings, which includes both price and non-price savings, is essential for establishing the Purchasing organization as an organization whose effectiveness and efficiency at Total Best Value Sourcing provides a true competitive edge for any company, now and in the future.
