Company A is in a project oriented business, making a “one off” specific product for a given customer. For a long period of time the project managers were working independently to deliver according to their own customer requirements. When a Component or Equipment had to be procured externally, project managers were going directly to the supply base to set up a contract. Specifications and Negociation would be managed by either him or team members and the relationship would be also established for the next time the project manager would be needing this supplier.
Unfortunately for the project manager, the Company has now decided to set up a dedicated procurement team to improve the negociation lever (with potential multi-project ordering) . Another goal of the centralised organisation is to improve efficiency when monitoring the supplier and not to have 5 different interfaces from Company A giving 5 different priorities.
Complaints are soon raising from the different project managers about this new departement and compare with the “old way”, doing everything internally as oppose to externalise the Procurement to this centralised department, such as:
- The Procurement staff doesn’t unterstand the technical content of the specifications, which requires engineers from the team to participate actively in the dscussion with suppliers. So there is no added value and it doesn’t reduce the hours spent by the project when monitoring the supplier
- When the project manager wants to know the status of its products, he has to get hold of the procurement team and when most of the time unsuccessful, he goes directly to the supplier and complain about the lack of visibility of reporting.
- The Customer specific requirements are to deliver data in a specific format and in a specific way. The procurement team has but used another format for all the projects and therefore data don’t comply to the requirements. Either Project office has to reword it or this is adding cost and delays for the supplier.
- Components are now taking longer to receive. Lead-times are increasing.
- The new contract negociated with the supplier is x % higher thant previousely negociated by the project.
To summarise, the project manager is not happy.
You have probably witnessed the same comments in your company, why then, would a given company set up a Centralised Procurement ?
- Single Voice toward a Supplier in order to have a comprehensive view of schedule, cost an lead time and not to play priorities against each others
- Standardisation of requirements and standards of works between projects…
- Industrialisation of processes
- Use expertise in business, procurement and supply chain instead of had oc Procurement from engineering department.
What’s your opinion ?