The importance of having a strategic procurement plan - Essay Example

Introduction Procurement planning as d by Sanjay (2000) is a dynamic process that needs input from different groups of professionals. Therefore John recommends that strategic procurement and planning in an organisation should be performed by a multidisciplinary team established particularly for the duty, with involvement of various technical and management professional who are experienced in procurement and supply management of strategic health supplies. Where necessary, the procurement planning team might request expertise and advice from certain advisors. The multidisciplinary team is established to make sure that the planning process is not interrupted. The responsibilities of the team is not merely limited to planning of the products, rather it as well involves monitoring, evaluation and implementation of the strategic procurement plan. This paper examines the importance of having a strategic procurement plan in place not only for an organisation but also sister organisations within the health sector. The paper will specifically focus on importance of “collective” procurement planning and the benefits it can bring to driving down costs and realising savings. The objective of such a strategy The procurement of health products such as medicines in a health care organisation requires full knowledge of the supply system, the sister organisations and other institutions involved. To make sure that there is continuous availability of products within the organisation, the procurement planning team of the organisation, has to formulate, coordinate, carryout and monitor the entire procurement process. The team should perform a quick situation evaluation of the supply system to establish possible problems and bottle-necks that could negatively impact the availability of products within the main organisation and sister organisations. As explained by Sanjay (2000) medicines supply system is cyclic in its nature whereby each task is supported by the past task and leads systematically to the next. Supposing each task is carried out independently of one another instead of being an element of an integral system, the result are increases in costs, frequent stock shortages and deterioration in quality of patient care. A good example of this aspect can be viewed in the needs estimation process, when there is accurate, well-written and regularly updated epidemiological accounts and information on the use of the product and purchases might become more accurate, efficient and timely. More so, a proper planned procurement process enhances product storage as well as timely availability of products to users, therefore allowing continuity in supply process. Objectives of collective strategic procurement are to ensure that they are aligned with approved vision of an organisation. Emphasise on value for money that the organisation use while in the purchasing process. The organisation aims at reaping high profit and making sure that those in charge are accountable for all outcomes of a purchasing process. Enable organisations to get best suppliers for goods and services because those in management team will analyse a number of suppliers before choosing the most appropriate supplier. It aids an organization in effectively managing its supply market and effectively manages all risks that are associated with purchasing activity (Sanjay 2000). Strategic procurement plan focuses on encouraging sustainable competition in the supplier market. This implies that a number of suppliers are in a position to supply full range of goods and services that an organisation requires. This result to a sound competition to exist between suppliers and hence determines products that they supply to an organisation enabling to obtain value for money they spent in the purchase of products. Because of competition, the procurement strategy enables an organisation to gain flexibility and seek for innovation from its suppliers. It aims at guiding all business groups in the organisation while formulating their yearly strategic procurement plans. It helps in improving procurement efficiency across all organisations and ensures that procurement activities run with broader objectives. Further, the procurement strategy must ensure that suppliers of goods and services develop an interest in operating their business with these organisations. This will enable suppliers to prepare well to meet requirements of these organisations and thus they get proper drugs and other products that they need for use in their operations (Sanjay 2000). It ensures the procurement planning aligns with the organisations and it focuses on plans that reflect core values, corporate aims as well as objectives of organizations. Further, it ensures that an organisation achieves corporate ownership. This implies that elected members and officers in the entire organization are committed and enhance improved procurement procedures. This also enables an organisation to focus on procurement and thus assist in coordinating procurement activity and help in optimum allocation of resources without using much effort. It ensures that risk management practices are effective by ensuring that risk is managed well and all procurement procure plans remain legal covering all priorities and visions of organisations. It aims at meeting established economic and sustainability targets by reducing the cost of procurement process and obtain best value for money that they spent on all purchased outputs. They also identify barriers to competition and required steps that they need to use to minimize effects of these barriers. Plan the forward procurement programme to enhance their steady operation in the market (Sanjay 2000). Lastly, it encourages the development of a number of suppliers and providers that makes a positive contribution to economic growth of the local economy. Assessment of the internal environment (tools used) For every procurement activity, whether its scope is small or big, it has an impact to environment in which the organisation operates. When organisations come up with a strategic approach to buying of required goods, the organisation in return increases the likelihood of getting best value for money that they use. Those who implement a strategic plan must ensure that it covers specific objectives by planning it well, reviewing and consulting over the same from time to time. To help in understanding of the environment, those in charge for all procurement activities must include the process of coming up with and understanding the objectives of the activity, relevant market to supply goods, risks that are associated to the process as well as quality of goods and services they need to purchase (Sanjay 2000). While coming up with a procurement strategy, the organisations must evaluate value of money that they will need to spend in the given procurement procedures. They also consider how outcomes of their procurement process will influence goals and vision of an organisation. Develop a framework for measuring and monitoring performance of procurement results. Those responsible fro procurement process must review internal procedures to ensure that the implemented strategy operates an efficient procurement function. The organisation must evaluate its bargaining experience in terms of strategic relevance of buying decisions as well as being in a position to apply cost of accounting in the negotiation process. For a strategic procurement to be effective, the organisation must get all information regarding supplier market. It must know what the market supply to aid them can make fully informed decisions about the best mechanism to obtain value for money. The organization must take into account a long-term view of achieving market sustainability, encourage competitive market and do away with barriers to encourage supplier growth. The plan must put into consideration market conditions that change over time (Sanjay 2000). It should be in a position to address long-term and short-term trends that are likely to be experienced in the market. This ensures that an organisation is in proper position to respond appropriately to possible influences in the market as well as responding to its requirements that change. Effective communication strategy for stakeholders Communication is a very vital tool of delivering value for money for an organisation while implementing a strategic procurement plan. When organisations communicate with suppliers, they have to do it in a planned and managed professional way to ensure they realise value for their money. The organisation must document the communication plan as agreed with the respective stakeholder groups. The communication plan has to be strategic in nature and therefore it should restrict usual business interactions of organisation. To manage the contract effectively, both parties must encourage open and effective communication to ensure that suppliers meet their commitments on time and the organisation as the purchaser has to act in accordance with the contract (Sanjay 2000). Appropriate successful measurement tools to ensure the strategy has been successful The evaluation of critical areas within the supply system established weaknesses in the procurement system, its effectiveness and efficiency. Where the system is characterised by several or parallel programs as well as sources of financing, it is necessary to find out what type of invention is required to improve the performance of the whole system. For instance, can the system be improvement by strengthening or establishing coordination systems between sister companies or should the procurement and the supply sister companies be further integrated? Improving procurement system performance could call for implementation of limited measures, focusing on one aspect of the procurement process, or carrying out major changes in structure and the management of the entire system. Procurement of medicines and other supplies may be carried out yearly, according a particular schedule of the organisation, on regular basis, or a combination of the above. At the same time, contracting and contract particulars, for example contract period, quantities of supplies, frequency and where to supply the medicines and the supplies among other aspects, all these are closely linked to storage and distribution needs of the organisation. In a number of cases, using varied purchasing periods or intervals and contracting types according to specific types of medicines and supplies may result in improved in performance of the procurement. Developing successful measurements tools to ensure that the strategy succeeds is important in developing cost effective and efficient distribution system to the organisation. The logistic unit is one of the tools that can be used, and should comprise if qualified staff working together to make sure that distribution of strategic health supplies to sister companies. The logistics team has to carryout the following duties: Defining distribution channels as well as determining whether distribution should be managed by the organisation of outsourced to third party. To dispatch the received supplies to the warehouses and sister companies Developing delivery schedules To evaluate and supervise the logistics systems Successful measurement system will ensure regular supply of medicine while ensuring that product quality is maintained. It will as well reduce product loss through damage and expiration when in transit and will generate vital information to be used in future product projection. While coming up with a procurement strategy, the organisations must evaluate value of money that they will need to spend in the given procurement procedures. They also consider how outcomes of their procurement process will influence goals and vision of an organisation. Develop a framework for measuring and monitoring performance of procurement results. Those responsible fro procurement process must review internal procedures to ensure that the implemented strategy operates an efficient procurement function. The organisation must evaluate its procurement plan in terms of strategic relevance of buying decisions as well as being in a position to apply cost of accounting in the negotiation process Conclusion The procurement strategy plan shows in details how organisations will monitor the outcome of the value for initiatives of money and an approach that continues to evolve to ensure that they continuously realise the best value for their money. Organisations must have a clear understanding of current and future procurement programme for a minimum period of three years. This is all about understanding what an organisations intends to purchase and reasons that accompany that decision. The organisation must buy commodities that are in line with strategic priorities of an organisation. Strategic procurement plan has an objective of ensuring that an organization meets its value for money. The organisation draws all desired information about the outcomes and characteristics of procurement environment as well as programme. Those in charge of procurement process must ensure that the plan they come up with focuses in core values and priorities of an organisation. Further, strategic procurement plan enables suppliers to have sound competition with each other that has a positive influence on organisations. This is because they venture into innovative activities and come up with new products that are beneficial to organisations . Finally, communication is vital in the entire process because it enable suppliers to understand what the organisations needs. The implementers of the plan must communicate in a professional way to enable an organisation realise value of its money. Bibliography Sanjay, U (2000): Strategic procurement management for competitive advantage: Oxford University Press Read More