Procurement may be defined as "the act of obtaining or buying goods and services." The Business Dictionary goes on to say that procurement is a process. "The process includes preparation and processing of a demand as well as the end receipt and approval of payment."
In times gone by (and, sadly, to some extent still today) this process has been prone to a considerable amount of graft and general corruption. For party of the first part is trying to persuade party of the second part to buy certain goods and services. Procurement officers are fiduciarily charged with getting the best deal for their companies. Sellers are taught to get the order. Less than sterling ethics on either side can corrupt the process and unfairly cheat one party, often the buyer, with inflated prices, shoddy goods or services and less than maximum value.
Modern software controls have eliminated some, but not all, of these opportunities to steal from the procurer. However, unethical people can find the means to game any system, no matter how good it is. This is particularly true when unethical intent rises several layers in the organization.
Others naively think such software monitoring will assure the best value is procured for the purchaser. Indeed, the software is getting better all the time, but there will likely always be improvements to be made.
One place where I see the human element to be particularly helpful is the good old fashioned "horse trading" that can be done by experienced human beings in the process of negotiations. This is not unethical per se nor illegal, either. It is the recognition of the negotiating parties that a slight variation in the description of the goods or services, a slight change in the scope or schedule of supply may be advantageous to both.
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An illustration: you would like to rebuild the press section on a paper machine by next fall. However, all the qualified workshops are full and in order to meet that schedule, the price is going to be extraordinarily high compared to other purchases by other players in recent times. Your people do a calculation and determine that delaying the project by six months will reduce your anticipated profits by $x. You ask the qualified suppliers what happens if you delay the project by six months. It turns out some of the qualified workshops have time available then and they will reduce their price by $x plus 1. This is skillful procurement strategy.
Someday AI (Artificial Intelligence) may help see these insights, but today I think it takes skilled procurement specialists to envision and pursue this kind of deal.
Unfortunately, most procurement departments are not encouraged to train for this type of thinking, nor are they rewarded if they successfully pursue it. So, they sit under their green eye shades and just process forms, electronically or through the age-old paper shuffle.
Where I have seen successful insights employed as I have described here has been by entrepreneurs themselves who run large companies. They have a sense of what is important financially to them, what kinds of risks they are willing to take and weigh these matters to get the best result for their company.
So, again, maybe it will be AI that can bring this kind of savvy procurement ability to all.
For safety this week, all procurement contracts should hold suppliers accountable for meeting current safety standards. Sometimes these are given short shrift--not acceptable.
Be safe and we will talk next week.
