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In this guest post, Procurement Leaders invites vice-chancellor of The University of Northampton and chair of Procurement UK, Nick Petford, to examine Higher Education procurement practices and the lessons they offer for the private sector.
Efficient procurement is a business critical issue. Achieving value, in both financial and strategic terms, is now an absolute must for all procurement managers. The Higher Education (HE) sector faces many of the same procurement challenges as private business. We are equally obligated to our stakeholders and have to justify every pound we spend.
Like large businesses, we have tremendous purchasing power, with universities in control of £10bn worth of spending annually – the second largest part of a university’s budget after pay. The reality is that efficiency has become a key focus for all sectors post the economic downturn. While the economy looks to be picking up, businesses must remember to remain resourceful.
For the HE sector this renewed focus has forced us to consider three key aspects of procurement practices:
Over the past couple of years, universities have worked hard to increase their collaborative purchasing power. The success of this approach has been seen across the country and as a result one of the recommendations of the 2011 Diamond Review, a report into the efficiency of the higher education sector, was to increase the amount of collaborative spending by 30% in the next two years.
I would encourage private businesses to learn from this approach. Collaboration is often dismissed as simply an option as it is seen as working with competitors. In reality, having joint purchasing agreements can help businesses save costs and be efficient. In the airline industry, for example, many companies have joint purchasing agreements for engineering and maintenance services. Similarly, small businesses tend to share the same caretaker or cleaning service. Exploring collaborative purchasing should be a priority for all procurement managers this year.
In order to achieve a successful procurement model rather than just an adequate procurement model, businesses need to upskill all their employees.
It’s not only those who work in procurement that are important to win over. It is necessary to communicate procurement attitudes to all employees in an organisation to breed better understanding and effective decision-making.
Having the right reporting mechanisms to help raise the profile of procurement is also important. An example of what the HE sector is doing to this challenge, is our commitment to ensure all members of Universities UK (the HE trade body) have undertaken a Procurement Maturity Assessment by 2016. This helps to analyse the current efficiency of a university and develop action plans for the future.
The HE sector’s Leadership Foundation, which has incorporated a procurement and efficiency element to its future leadership course – aims to improve understanding with senior level managers on how procurement can develop stronger universities for the future.
Public and private sectors alike have a responsibility to the communities in which they operate. More and more, companies are evaluating their role in society and are seeing social value as part of the criteria in decision making processes, including for procurement practices.
Social procurement is something that universities across the country, encouraged by the 2012 Social Value Act, are consciously pursuing. The HE sector has assessed the barriers for social enterprises in procurement systems and identified the need to break down larger contracts into smaller elements. This in turn will also create a larger supply chain. Businesses will benefit from this increase in their pool of suppliers as ultimately this leads to more competition between companies, reducing the cost of service, yet again helping to achieve effective procurement practice.
In my mind, further collaboration both in terms of actual procurement and in terms of sharing best practice is key to achieving an effective and efficient business model for any business.
Read Sammy Rashed’s guest blog post on upskilling here.
Members can access a Thought Leaders article on ’Improving synergy through social capital’ here.
Nick Petford is vice-chancellor of The University of Northampton and chair of Procurement UK.