How Procurement Can Go “Back To School”

How Does Back-To-School Thinking Apply To Procurement?

PurchTips Edition #383

By Charles Dominick, SPSM, SPSM2, SPSM3

Ah, late August. It’s that glorious time when kids go back to school.  Time for them to refocus on improving skills related to the “three R’s” of education:  Reading, ‘Riting, and ‘Rithmetic.

It might also be a good time to pay attention to the reading, writing, and arithmetic involved in your procurement. Here are ideas for what you can do in each of these areas right now in this back-to-school season.

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Reading.  Re-evaluate the legal protections that apply to each strategic supplier relationship.  Are you using contracts?  Purchase order terms and conditions?  No terms and conditions at all?  Read each legal document in the context of how it applies to each supplier.  Are you using standard terms when custom terms may be more appropriate?  Are there any gaps in how your organization’s risk is managed?  Are any agreements expired and in need of renewal in order to maintain the desired legal protection for your organization?

Writing.  Look at all communications and instructions your procurement department provides to internal customers and suppliers.  Think about things like your procurement manual, your procurement department’s website, internal training videos, etc.  Are any elements of those communications outdated or incorrect?  Are all of those communications as clear as they can be?  Is there new information that should be added to reflect recent changes in your procurement practices?

Arithmetic.  Are there supplier relationships where you’ve historically trusted suppliers to raise their prices proportionally to their cost increases?  If so, consider applying fair index-based price adjustment formulas to those relationships.  Do you calculate and report your cost savings based on assumptions made at the beginning of the year, like estimated purchase volume?  If so, it might be a good time of the year to see if actual data is consistent with your assumptions or if recalculations are required.

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