By December 5, 2009 0 Comments Read More →

Who should be responsible for purchasing decisions? – You or the Procurement department

Who should be responsible for purchasing decisions? – You or the Procurement department

If you are responsible for your budget, responsible for results and manage the supplier for the duration of the contract, you should be the one responsible for purchasing decisions, as long as they are conducted based on your company’s procurement policies.More and more, I’m seeing the Purchasing Manager or Purchasing Department taking ownership of the decision process, which is driven by cost reduction pressures. In the ideal situation, the purchasing department supports you by providing a professional procurement service - putting together a great RFP with the right contractual terms, establishing good evaluation criteria and processes (not just low price), integrating the scope/specifications effectively, vetting the bidders and running the actual procurement process.

Based on my experience both receiving services from suppliers and delivering services to customers, it’s clear to me that low initial price (the bid price) is not necessarily the lowest total price over the term. Services have to be handled differently from commodities like office supplies or products. In the case of 'low price wins', it may drive behaviors that you may not want - and no matter how iron clad you think your contract terms and spec are, they know more than you do about the business. This may result in additional costs or lower service levels – it may even affect your overall production or your company’s success.

I’ve seen that many procurement groups have the mandate to cut initial costs (and often have their bonuses tied to how much they save) yet obviously don't have any stake in the future performance after they've done their job or what the total cost actually is over the life of the contract. They are simply following orders and they know how to do their job very well.

So, it's important that the decision making process is ultimately yours, with support from the procurement professionals you rely on. You need to position the requirements to fulfill your overall needs, not just initial bid price. Your procurement support makes sure the process is fair, professional and effective. Then, the decision should be made by whoever has the responsibility after the contract is signed – you.

About Michel Theriault

Michel is the founder of Success Fuel for Managers. He is an author, speaker and consultant focusing on topics relevant to Managers and aspiring Managers in businesses of all sizes who want to get results, get attention, and get ahead. He is also a contributor to Forbes and AllBusiness Experts . Michel is available for speaking engagements, training and consulting. Connect with him or send an email.

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