How to Evaluate a Procurement Solution
PurchTips Edition #444
The role of Procurement is to ensure the cost-effective, timely, risk-free, acquisition of Mission Critical Raw Material Inputs in support of Organizational Goals and Objectives. Procurement Functions are sub-sets of broader Supply Chain Mechanisms and must work in close synergy with Suppliers, Manufacturing, Logistics, Research and Development, Finance, Sales and Operations Planning, Marketing, and Customers.
The following are essential requirements for the evaluation of a Procurement Solution:
1. Problem Definition: A clear understanding of the Procurement Function issues and shortfalls that affect Competitive Advantage and Synergies. An effective Problem Statement is written that defines how long a set of Procurement Issues are occurring, the impact of the problems on customers and on the business. The Problem Statement also articulates the Fiscal Impact of the problems and which processes are affected by poor performance. A clear Definition of Customer Requirements and Specifications is formatted into a Customer Requirements Matrix (CRM) which underpins the entire initiative.
2. Gap Determination and Change Assessment: The Current State Performance Gap must be assessed for impact on Customers, Key Stakeholders, and Business Requirements. A complete Change Assessment to determine the Degree of Resistance to Change must be leveraged, as this will enable the deployment of Change Management Strategies to acquire essential Buy-in and success. Effective Current State Process Mapping to understand process steps, workflows, time elements, and decision points must be conducted.
3. User Case Scenario and Analysis: A clear understanding of how the Future State Procurement Solution is to be utilized by users must be documented. This Voice of the User (VOU), is a critical element of a Change Management Strategy. Understanding how a solution is to be used also requires effective Future State Process Mapping and simplification. The User Case Scenario Analysis is vital as it enhances leverage in terms of laser focusing Solution Requirements to only what is needed to cost-effectively solve performance issues. Care must be taken to collaborate with Suppliers and Customers to determine if solutions can be integrated with their systems.
4. Solution Selection Analysis and ROI Determination: The final draft of the Proposed Procurement Solution must be filtered against robust fiscal, technical feasibility, business, and customer requirements criteria to determine Return on Investment (ROI). The solution should be score carded against other solutions while leveraging the same solution selection criteria. A Solution Selection Matrix (SSM) should be designed for this purpose. Success Measures must be selected to determine the effectiveness of the Procurement Solution once it is deployed.