The Hidden Inefficiencies In Procurement
There are a myriad of reasons why inefficiencies can occur in procurement, including supply chain fragmentation, clarity of contract, late payment, intra-supply chain relations, longevity of assets, innovation, design, engagement, risk management, cost of change, as well as the interactions between the procuring authorities and the supply chain entities.
Yet, a factor that incurs a high number of inefficiencies that commonly occur is the skills gap present. This procurement skills gap occurs within both the public sector procuring authority, as well as in supply chain organisations. Considering the number of entities that must interact for the finalization of a successful procurement, a skills gap is highly likely to occur.
In order for a project to succeed, necessary individuals or entities from all sides must have adequate skills for the definition, development, and implementation of an investment strategy. For the best project outcome, there is a need for skill levels of both clients and industry to match up with skills required for successful finalization.
The Seven Skill Sets In Project Procurement
In a simplified scenario where there is one procuring authority, and one supply chain entity involved, then there are approximately seven types of skill scenarios: skill levels of client or industry being lower than project needs, meeting project means, and when skill levels of the client or industry exceed project needs. Aside from when skills possessed are equal with project needs, there will be intrinsic inefficiencies. This results in either inadequate fulfillment of project needs, or innovations that are wasted by exceeding project needs or resources. As can be imagined, the majority of procurement projects occur with the involvement of more than two entities, and then the number of potential skill scenarios increase.
Skill gaps naturally occur since few entities on the side of procurement or the side of the supply chain have the personnel resources so as to ensure that at least one individual is trained in the actual procurement process. Unlike specialties such as law, finance or engineering, procurement does not have structured training or certifications. Since the economic impact of procurement is not well understood, most responsibilities, particularly within local authorities, are in the remit of personnel within various departments, such as road maintenance, parks or education. Individuals are not trained in managing efficiency within complicated procurement, such as construction, and the decisions made are rarely overseen by any individual with a higher level of expertise in the process. Some are successful in navigating their own way through the procurement labyrinth, but most get bogged down in unseen inefficiencies.
This skills gap is one of the main drain on efficiency on current procurement processes, as seen within ACE’s report, Procurement Landscape, which maps out this and other complex factors within the current process that require further research in ACE’s series on Procurement, subsequently requiring reflection and reform from both procuring authorities as well as supply chain entities.