The general goal is to cut both time and cost involved when sourcing suppliers and contractors.
The main intent in this regard is to identify and correct all obstacles to optimal procurement. Since the optimal result is dynamic, the process of such improvement is ongoing. In other words, further improvements can always be made.
As with supplier performance monitoring, performance should be measured across a range of criteria.
Using the same indicative criteria that I have previously discussed in earlier articles some possible areas of measurement include:
- Timelines: Which departments suffer the worst “runouts” of necessary materials.
- Why and what can be done to correct the situation?
- Where do bottlenecks appear in the procurement process?
- What corrective measures can be taken and what are the costs implications of doing so?
- Quality: Is there a problem with the way that the specifications are prepared?
- Is the municipality under-specifying or over-specifying?
- What are the cost implications?
- What can be done to improve the situation?
- Quantity: Which commodities appear to be ordered most frequently?
- Is there a more efficient method of ordering those commodities?
- What steps have been taken to put more efficient methods into operations?
- What are the cost implications of doing so? What are the anticipated savings?
- Benchmarking is one of the more popular techniques for measuring the extent of acceptable performance.
It is a highly-respected practice in the business world which looks both inward and outward to find the best practice and high performance and then measures actual business operations against those goals.
Two types of benchmarks may be used: internal and external. Both internal and external benchmarking can be used in conjunction with other improvement tools.
Under an internal program of benchmarking, performance targets are fixed, current performance is assessed, methods are devised for improving the standard of performance to a target level and then a measurement is taken after a reasonable period of time to determine whether progress has been made towards reaching the targets.
Under external benchmarking, the performance of an organization in key areas is compared with that of its principal competitors. The goal of external benchmarking is to bring about continuous improvements in service delivery by:
- Identifying examples of best practices from other organizations whether in the public or private sector;
- monitoring process in making improvements against the leading organizations so identified;
- learning from those who have achieved excellence in selected areas; and
- setting appropriate performance measures and developing realistic targets for improvement.
The ultimate goal is to raise the level of performance at least to a par with the best competitor in each area.
One of the biggest mistakes made in settling upon external benchmarking comparators is to look only to organizations within the same industry. Such a narrow focus is unnecessary, since many business processes are common throughout industry.
For this reason, NASA employs the same fundamental human resources requirements for hiring and developing employees as does American Express, and British Telecom is able to use the same customer satisfaction survey process as Brooklyn Union Gas.
One attraction of benchmarking is that it can provide the basis for an ongoing program of review. A mistake frequently made in corporate strategic planning is to assume that all past initiatives have generated an improvement over the prior situation.
Since even the most well laid plans will sometimes result in no progress at all, and may occasionally actually worsen the situation, this is far from the most sensible assumption to make.
Any review of performance should consider the effectiveness of prior corrective measures. If they have not achieved the internal result then they too should be adjusted.
Partnering with the most qualified and best performing contractors and suppliers is critical to your company’s success.
Stephen Bauld is a government procurement expert and can be reached at firstname.lastname@example.org. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.