Procurement Tip

 

An ongoing series of tips provided by
experts  in the procurement arena


.

.

YES! Send me the Procurement Tips newsletter ...



PRIVACY POLICY

Process-Mapping: A Valuable Procurement Tool

As a procurement manager, do you know what it costs you and your people to run a competitive procurement process and manage the resulting contract(s)? As a project manager, do you know what it costs to undertake and complete a project? On what part of the process do you and your people spend the most time? Where are your highest costs – and, by extension, your greatest opportunities for savings? Are some processes needlessly duplicated? Could your group do that work more efficiently and for less cost?

These days, managers of all kinds are dealing with significant pressures from above and below as their organizations try to increase their competitiveness by streamlining processes and reducing costs. Every process and activity is being scrutinized, to ensure that it makes a positive contribution to the value of the organization.

As a manager, you may be asked to help establish pricing models, contribute information to business-case analyses, or identify and eliminate non-value–added (NVA) activities within your program area. Your expertise may not lie in business analysis, so how can you do that? “Process-mapping” can help.

What Process-Mapping Is

In process-mapping, we record and chart, in detail, every resource-consuming step in the production of a good or service, and then analyze and label each step as either value-added or NVA.

The NVA activities that we identify during process-mapping can help us understand where underlying problems cause inefficiencies or create unnecessary work. NVA activities often start with “re” – such as “rework,” “reschedule,” or “reconcile” – and are usually:

  • performed downstream because of upstream inefficiencies,
  • duplicated in other areas of the organization,
  • the result of unsatisfied customer requests, and/or
  • activities for which customers are not willing to pay.

Ideally, following a process-mapping exercise, we can then reduce or eliminate NVA steps to the greatest extent possible. But in some cases, and for a number of reasons, it may be difficult or even impossible to eliminate all NVA activities and their related costs (e.g., activities outside the control of the organization, such as those required by legislation or a regulatory body).

In any case, it is better to understand why you are performing NVA steps than to not know you are performing them in the first place.

An Illustration

Let’s say you manage a large purchasing department that routinely undertakes complex procurement projects on behalf of all other departments in your organization. In working with your client departments and the vendor community, you and your staff will perform a multitude of processing steps over long periods of time, and you will repeat these for each new procurement project. The larger your organization/department and the higher the volume of procurements you manage, the more important it will be for you to ensure that your processes are as efficient as possible.

To map your process, you will need to list and quantify each type of process step in the order in which it usually happens (e.g., preparations, approvals/decisions and delays, to name a very few). What is the step? How long does it usually take? Which staff member(s) and/or departments are involved? What is the nature of a particular delay or wait period?

Well-designed process-mapping software, which is readily available off the shelf, uses standard symbols to make recording and displaying the results of process-mapping both telegraphic and easy to understand.

Benefits for Procurement and Contract Managers

Quite often, organizations use process-mapping as a key part of Activity-Based Costing (ABC), which is a formal business-analysis tool. However, organizations also frequently use process-mapping by itself.

While organizations can use ABC to help understand product costs in general, process-mapping and analysis in particular can help procurement and contract managers:

  • make procurement processes more efficient, by allowing them to identify and create checkpoints in the planning and solicitation process, to ensure that legal and risk-management experts are included when they need to be,
  • effectively manage service-level agreements, by allowing them to identify and match key performance indicators to specific activities, and
  • establish a basis for continuous improvement, by allowing them to reduce or eliminate NVA steps, and to introduce new and innovative steps to improve process efficiency overall.

Do Your Research

Process-mapping is not a magic bullet for achieving precise insight. It requires a significant commitment of time and effort, and it can be particularly difficult in large, complex organizations that produce multiple goods and services. That said, it can be a powerful tool.

If you do decide to explore process-mapping, first ask some basic questions:
Do you have the knowledge and skills to conduct the type of analysis that is needed, or will you need to find expertise from elsewhere within or even outside of your organization?
Is your organization willing to act on the results of your analysis?
Will it provide the senior-level support to implement any changes that you may recommend?

Finally, be prepared to do your research, to make sure that you tailor your approach to your particular sector and type of organization. A great deal of reference information is easily accessible in the public domain.

Reprinted from The Legal Edge Issue 80, July - August 2008
www.neci-legaledge.com


 

.

  About Summit MagazinePrivacy PolicyContact UsThe Summit Group