Red tape is an ever present burden for businesses.  Although it is promising that the Government has pledged to remove undue administration for SMEs under its Small Business, Enterprise and Employment Act, firms must take control of their own futures in order to drive efficiencies internally.

Time consuming red tape is particularly problematic within procurement. Buyers can find the process of using preferred supplier lists or putting a job out to tender extremely time consuming and restrictive. Streamlining these processes as well as implementing an online procurement platform to monitor stock levels can help drive cost savings and empower buyers to make smarter, more effective decisions.

Think smarter

When it comes to procurement processes, some companies are reluctant to enforce change because ‘that’s the way it’s always been done’. This can be dangerous, especially for businesses in the private sector that have more autonomy over the way in which they implement and manage the process. It is important to recognise the freedom that this gives them to tailor the way they approach procurement and drive efficiencies as a result.

Identify key issues

Some business owners choose to take the route of putting a supplier contract out to tender in the same way public sector organisations do. This can prove cumbersome and once a supplier is appointed, businesses could find themselves tied into a contract for a number of years with little room to negotiate if the service is not up to standard.

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Similarly, maintaining an ongoing list of approved suppliers can become a barrier to greater efficiency if not managed in the right way. Individual suppliers may only be servicing one or two requirements so, where possible, buyers need to take advantage of the opportunity for one vendor to provide a consolidated group of products and services. This can save time and money in the process.

Apply the right thinking

Private sector businesses that use either of these approaches are not constrained by regulators. As such, they have the freedom to amend unnecessary and inefficient procurement processes to better fit the needs of their businesses.

An interesting dynamic in the private sector is that suppliers usually secure a tendered contract because their service stands out, whereas in the public sector it is a case of eliminating the competition on the basis of meeting set criteria. This means that private business owners can choose a supplier that consistently delivers but also goes beyond the remit of their contract. Subsequently, where private companies wish to use the tendering process, they are at liberty to select criteria that tie in more closely with their individual needs. They can also choose which suppliers they would like to invite to tender and cut back on the administration of processing large amounts of applications.

Where a preferred list of vendors is in place, business owners should regularly implement reviews of their performance and challenge them to improve if necessary. Sometimes suppliers can become complacent if they have a formal contract in place which can increase the risk of service levels deteriorating and the needs of customers not being met. 

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Where this applies, suppliers should be given the opportunity to improve. However, if this isn’t forthcoming, business owners should not be sentimental. Instead, it is best to identify an alternative supplier that can better meet spontaneous demand and offer multiple products and services under one roof.

Implement the right tools

For buyers, there are electronic tools that can be used to help drive procurement efficiencies. One example of this is implementing an online stock monitoring system. This can provide timely alerts when certain items are running low. By granting shared access to suppliers, this allows for requirements to be better anticipated and met in good time. This system can also help businesses to closely scrutinise costs and focus their efforts on the best selling products.

Suppliers themselves should match this through their own efforts to improve service levels. Stock Keeping Unit (SKU) rationalisation is an approach to inventory management that can help determine the popularity of stock. By looking at the sales and profitability levels of individual items or product lines, the most unproductive ones can be phased out. This then allows suppliers to focus on the more profitable lines and improve the efficiency of their service. Suppliers also have more time to anticipate how the needs of buyers might change in the future and realign their efforts accordingly.

Cutting administration costs can also help to significantly improve the efficiency of the procurement process. By implementing an e-invoicing system, the time costs of manually processing invoices is eliminated. E-invoicing also reduces the likelihood of errors being made and increases the effectiveness of buyers’ accounts payable functions.

While it is fitting to select a formal process for appointing and managing suppliers, some private business owners forget that the process is more flexible than in the public sector. Keeping in mind the need to remain competitive, it is essential that this thinking is recognised and incorporated into the way that suppliers are appointed and managed on an ongoing basis. 

Further reading: Fostering success through strategic partnerships

PDSA on the rise

PDSA stands for ‘Plan, Do, Study, Act’, a circular model that can be used, say its exponents, to improve working practices and efficiency at any organisation of any size.

It sounds like some bizarre new management mumbo-jumbo, but this is far from a new concept and has been used for eons as a systematic approach to business. According to Jan Gillett, chairman of business consultancy Process Management International and an ardent fan of PDSA, the seeds of the idea were sown with the ancient Greeks. They were renowned philosophers but short on practical skills compared to the Romans, who were eminently practical, building aquaducts and the like, but spent less time theorising. Slowly, the idea of systematic evaluation developed, giving rise to science; PDSA is a scientific approach to business planning developed in the 1950s by W Edwards Deming, and seized upon and refined by many successful Japanese businesses.

How PDSA works

Despite being named PDSA, the first stage in the process is always study; look carefully at whatever the particular issue you’re tackling is, how wide-reaching the effects of it are and who and what it impacts upon. Obviously, the length of time devoted to this will depend on the scale of the problem you want to address, but it creates the foundations for taking action.

This involves some delegation. Allocate someone to lead the work, ensuring they understand the outcome of discussions in the study phase.

Next, of course, is the planning stage. The individual leading the project must ask him or herself some key questions: what are we trying to accomplish?; how will we know that any change is an improvement?; what changes shall we make that will result in an improvement?; and what resources will it require, in terms of people, time and money?

Once these questions have been addressed, a test has to be arranged on a small scale, to see if the proposed changes will be as effective as desired, rather than risking the changes throughout the organisation. Carry out the test and gather data and observations on the results.

This brings the circle back to study again. Compare what actually happened with what was predicted or expected. If the results correspond with predictions, then it is safe to put the changes into full-scale effect. If, however, the results differ from expectations, the original theory did not hold water and it’s time to go back to the drawing board!

So, depending on how the test turned out, the next step is to either implement the changes in full, look again at the original theory and adapt it, or perhaps even abandon the project if it doesn’t appear to merit further attention.

Stick to the facts

‘The process must be based on evidence,’ states Gillett, pointing out that it will fall down if those leading the process report back to you, the CEO, saying what you want to hear rather than what actually happened. ‘Data can be fixed, but this is obviously dangerous as implementation on the full-scale would reveal any flaws.’

It is also easy to skimp on the study process but, Gillett urges, ‘Don’t come up with decisions until you understand exactly what you’re trying to do. Otherwise it defeats the whole object of the exercise and you won’t benefit.’

After all, he says, ‘If you’re not basing your business model on something like PDSA, what are you basing it on?’