20 Thought-Provoking Questions

I wrote this list some time ago for Finance executives to ask their Procurement staff to test whether or not they were getting value for money from that function.

What answers would you give?

1. What cost savings have you achieved in the last year - 20%, 30%, 50% or more?
2. Have you made any radical changes to your supply chains in the last 12 months? How as it improved service and/or lowered costs?
3. How do you challenge your suppliers’ prices? Are negotiations and competitive tendering your only tools?
4. Do you systematically and regularly collect data on the total cost of acquisition and use of the things you buy? How do you use this infomation?
5. How does the rest of the organisation view the procurement department? Do they see it as adding a true competitive advantage?
6. What do your suppliers think of the way you deal with them? How do you capitalise on this?
7. Are you the first organisation that your suppliers come to with new ideas? What radical innovations have they brought to you in the last 12 months?
8. What % reduction have you achieved in your supply base this year? How does this support your business strategy?
9. How many people are involved in procurement in your organisation? Is this too few, too many or just about right?
10. Does anyone outside the Procurement department commit your organisation to expenditure with suppliers? if so, how do you make sure that money is spent wisely?
11. How do you know if your procurement people have the right mix of skills and experience for your business? Do you benchmark roles, responsibilities and abilities?
12. How do you go about updating the skills of people in procurement? Do you have a programme in place to meet the requirements from a training needs analysis?
13. It has been said that the best form of buying is not to buy in the first place. How do you challenge demand for purchased goods and services in your organisation?
14. How do you challenge the specification of the things you buy?
15. Do you have a structured process in place to systematically improve your supply base?
16. Do you know where all of your supply bottlenecks and risks are? Do you have a disaster recovery plan in place?
17. How do you measure the improvements your people make to business performance? Do you benchmark this and identify any gaps?
18. When was the last time you reviewed your processes and procedures? Do they still support the ways in which you need to work? Do they ensure that “best in breed” ideas and practices are applied consistently by all buyers?
19. Is your IT system capable of giving you all the information you need to manage Procurement/
20. You have Procurement under control. Quality and delivery are good and costs have been reduced. What do you do next? Do you have a vision and plan that has been agreed by the business?

How well do you think you and your colleagues would fair if your Financial Director asked these questions of you?

Measuring buyers

For many years, one of the key measures for communications and network companies has been ARPU … the Average Revenue Per User (or Unit). It’s often used to track growth and the contribution of revenue sources.

You calculate it by dividing the total value of the revenue you receive from a sales channel and by the total number of customers in that channel.

But like all averages it has its dangers. If customer A spends £120 a month and customer B spend £80 then the ARPU is £100. Decisions made about the relative merits of each customer might lead to the wrong conclusion.

Still, it has a certain merit in that it gives you a basis to compare different strategies and is easy to calculate.

So, could it be used for Procurement? Would the average spend per supplier , buyer or employee tell you anything useful?

Perhaps not in itself … but used as a benchmark to compare organisations in the same sector it might be of value. If two Local Authorities has spend of £20m per buyer and £50m per buyer, would this prove a useful starting point from which to investigate differences in practices, systems or approaches?

What do you think? Please post your comments and suggestions below.