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Procurement

Procurement Perspectives: Procurement requires attention to the bottom line

No organization can afford to squander its resources, especially during the pandemic.

It is often said the purchasing departments are the gatekeepers for making sure everyone is adhering to the policies and procedures that need to be followed to watch over spending trends.

During the London Blitz, there was a story that made the rounds of an old lady whose house was destroyed by a German bomb. While the fire department was digging the lady out of the rubble, one of the lads found a bottle of brandy hidden in a cupboard behind the staircase — virtually the only part of the house that was not damaged. After the old lady was freed, he poured her a drink from the bottle. Seeing what he was doing, she reprimanded him, “Hold on Now. That’s for emergencies.”

Perhaps it is excessive frugality to deny the existence of an emergency, and so justify the non-use of a resource at the very type of moment that the resource was purchased to service. But far too often in our society there is an insurmountable temptation to behave in a profligate manner.

Procurement needs to pay great attention to be self-sustaining. Every organization must cover its costs of operation. Few companies can long survive without generating a surplus over those costs. Thus, it is necessary for every CEO to pay attention to the bottom line.

This is not to suggest that the bottom line or profitability of an organization should always be the driving consideration in decision-making.

It is to suggest that the potential profit or loss (benefit and loss) derived from any given venture can never be ignored. The leaders of an organization occupy a position of trust.

They must not allow the position of the organization to erode. Even vision and drive without bottom line management are more likely to endanger the organization than secure its future. Very frequently, unless there is a profit margin, there can be no mission.

Improving the bottom line is not a once-and-for-all thing. It requires an ongoing effort. Continuous improvement is challenging. It requires the ability to see things as they are, to recognize the strengths and weaknesses of one’s team, one’s competitors and oneself, while not being constrained by them.

It demands an imaginative view of the future, unbounded by the restrictions of the past. Improvement to the bottom line is about identifying and taking advantage of the opportunities of tomorrow as well as those of today.

One defining quality of company leadership is the ability to improve consistently with what we do and how we do it. Day-to-day management of any organization, public or private sector, should be seen as an opportunity for refinement and fine tuning.

The goal is not to point out errors but to improve the process. In the words of Henry Ford, “Don’t find fault. Find a remedy.”

Even when improvements are made to the point that all the problems originally identified have been resolved, great company leadership teams still seek to improve continuously.

Attention to the bottom line is a result of the decision-makers. A key area of concern in the leadership development is the process by which decisions are made. The need to make the decisions is an inherent element of the role of senior management.

In the procurement process, decisions must be as planned and deliberate as the circumstances permit and should be based on proper consultation where possible. Once a decision is made, however, it should not be second-guessed.

Many of the types of problems that are likely to arise can be planned for. The range of options open in such cases can be anticipated and the implications of all options considered.

The purchasing department contributes to the bottom line with every purchase.

 

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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