Ensuring that the right quality of an item is ordered and delivered may seem a fairly obvious responsibility. However, as a practical matter, doing so entails a fairly sophisticated understanding both of market conditions and of user requirements. Successful materials management may require a counter-intuitive approach towards purchasing.
Much has been written in recent years of just-in-time purchasing, but it is an approach that frequently creates risk. Buying something only when it is needed is fine as a general rule. However, following that rule slavishly can lead to poor materials-management practice. Effective lean procurement of this kind requires careful coordination of customer and supplier operations.
One important distinction between manufacturing and government operations is that the latter are far more prone to seasonal variation – indeed, certain operations of a municipality may change radically from one season to another. For certain types of goods and services, annual requirement is less important than seasonal (or perhaps even more frequent) requirement. For instance, purchasing snow-clearing services and materials such as road salt and sand are obviously seasonal activities. However, the ideal season for purchase is rarely tied to the time of peak consumption. Very often, the only time when supply is available is during the summer, even though (except for municipalities in the extreme North) use will not occur until many months after the time when the purchase is made.
A failure to purchase in the summer may mean that the municipality is unable to secure such items when winter comes, or may expose the municipality to the risk of high spot prices. At the same time, it is wrong to assume that advance purchase is necessarily the best policy. Anything bought before it is required must be stored (which can be costly, especially for bulk goods) and may become obsolete before it is used, may spoil, is subject to shrinkage, and may be damaged.
In government as in private enterprise, procurement activity is intended to meet some determinable need within the organization. That need must relate to some duty that the municipality is obliged to discharge, or some other aspect of its operation. A purchasing-management approach to procurement involves a proactive approach. In the private sector, it has been determined that by fostering close working relationships with a limited number of suppliers, promoting open communication among supply-chain partners and developing long-term strategic relationships, suppliers and their customers are able to achieve mutual gains.
Benefits flow from enhanced supply management and improved customer responsiveness, leading to improved financial performance of the buying firm. The wider the degree of the arc of integration between suppliers and customers the stronger the performance improvement. The open, transparent and fair paradigm for public procurement in Canada substantially qualifies, if not excludes, the extent to which similar efforts can be undertaken at the municipal level. Nevertheless, a municipality should introduce prescribed procedures so that arising needs are brought to the attention of those officers and employees of the municipality who are authorized to procure goods, services, construction or other necessary items on behalf of the corporation.
It needs to train all staff of the municipality how to go about ordering what they need. Public procurement across Canada and elsewhere suffers to a significant degree from a larger percentage of "emergency" purchases that are made outside the normal rules and regulations governing public procurement. Almost always, the consequence of such purchases is to obtain a supply at above the prevailing market price. Thus a more effective method of anticipating and meeting the regular needs of a municipality has a high probability of generating measurable savings.
To as great an extent as possible, a municipal purchasing department should play a proactive role to assist client departments in identifying needs before they arise.
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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