Why We Must Rethink Purchasing
What’s wrong with the following scenarios?
- The facility manager of a suburban office building finds that she the building is getting low on paper supplies such as toilet paper and paper towels. She instructs her assistant to go online and order them from a major office supply retailer, the same one they have used in the past.
- The manager of a condominium complex needs disinfecting wipes and hand sanitizer for her custodial staff. Due to COVID-19, her regular supplier is out of stock. All he can do is place her on a waiting list. Seeking faster options, she goes online looking for other suppliers, finding that most are out of stock or the prices have gone up. Faced with few options, she pays the higher price.
- A facility manager ordered supplies for her facility. While they were what she ordered, building users found them unsatisfactory. She contacted the supplier, a local retailer, and asked if she could return them. The retailer said yes, but only unopened boxes, plus the return policy included pickup and delivery costs as well as restocking fees.
What’s happening in these three different situations is that these managers (and the companies they work for) are purchasing supplies. When we purchase supplies, we may not be getting the best prices possible. Further, if a supplier is out of stock, we may have to go online searching for supplies, which, with COVID-19, can be frustrating and time-consuming.
Additionally, we may be at the whim of the supplier – getting products delivered when they are available, waiting for others to come in, and paying more if they must be returned.
The way to turn this around is to go from purchasing to procurement. Many managers may be confused about these terms. After all, aren’t purchasing and procurement the same?
There are similarities. They both involve the ordering and delivery of goods and supplies. But with procurement, the door opens up to cost reductions, out-of-stock ordering options, and overall, assurance that supplies will be available and delivered when needed, as needed.
To clarify the differences, let’s define these two terms.
Purchasing is an action. We are buying something from a supplier; it is delivered and then paid for.
Procurement is a strategy. We are selecting products for our facilities based on their cost, performance, green and sustainability concerns, speed of delivery and supplier logistics. This last point can be particularly important. In some cases, a local distributor may be out of stock on certain items. However, if the distributor is connected to a national network of distributors, in most cases, one of those distributor-members will have the product and deliver it to the local customer.
For total transparency, we need to add one more difference between purchasing and procurement: procurement does take time, at least initially. However, once that is done, the cost savings and the assurances it provides usually make the initial time taken all the more worthwhile.
The Procurement Strategy from Start to Finish
Most facility managers have had experience sending out requests for proposals. Typically, these are for building services or specific supplies, such as copiers, computers or other electronic devices. Procurement involves the same process.
Among the steps are the following:
Create a scope of products needed. This will cover many products that are required to operate the facility, including cleaning products, paper products, food-service items, soaps, and more. The scope of products becomes the basis for the request for proposal (RFP).
Identify suppliers. It is best to find at least five qualified suppliers. Deliver the RFPs to these suppliers. In most cases, these will be janitorial distributors.
The RFP should ask if the suppliers use dashboards. While many distributors use paper catalogs in the product-selection process, some have access to online dashboard systems. The use of online dashboards has several benefits. Viewed on a computer screen, it is easier to compare products as to price, performance, delivery options, environmental considerations, and so on.
Plus, it is easier to develop a “Plan B.” A Plan B is having other sources to turn to in advance should a product be out of stock. Without a Plan B, managers may have to pay more for products in an emergency or select products they have never used before.
Evaluate RFPs. There are many steps in this process. First is the elimination procedure. Did the distributor deliver the RFP when expected? If they missed the deadline, that could be a bad omen going forward.
Analyze pricing. If product charges are too high or too low, it can raise red flags. Most facility managers have already learned this by experience. Typically, RFPs that have midrange pricing should be the ones considered.
Ask for a presentation. This is becoming commonplace in many industries. Before the manager hires a supplier, the top three contenders should be asked to give a presentation. Do not be concerned with how well a contender performs other than they look and act professionally. Also, determine which supplier may be the best “fit” for your organization. Further, while the presentation should provide you with some information on the company, ultimately, it should be about you. What are they bringing to the table that will most benefit you and your facility?
There are other steps to the process. Plus, there are other benefits. While a small facility may be able to continue purchasing products, if yours is a large facility, or one of many buildings, procurement will invariably prove the most beneficial. Further, look to see if the distributor is part of a nationwide network of distributors. If so, you are no longer working with one distributor … you’re hiring a team to help you operate your facility.
Michael Wilson is vice president of Marketing and Packaging for AFFLINK, a global leader in supply chain optimization and packaging, and developers of ELEVATE, providing clients with innovative process and procurement solutions to drive efficiencies in today’s leading businesses. He can be reached through his company website at www.AFFLINK.com.