1. Staff Competence and Procurement Planning
Competency is defined as a capability, ability or an underlying characteristic of an individual which is casually related to effective or superior performance. Competence is a cluster of related abilities, commitments, knowledge, and skills that enable a person (or an organization) to act efficiently in a job or situation. Competencies indicate sufficiency of knowledge and skills that enable someone to act in a wide variety of situations. According to Russell (2004), professionalism in public procurement relates not only to the levels of education and qualifications of the workforce but also to the professional approach in the conduct of business activities. If the workforce is not adequately educated in procurement matters, serious consequences including; breaches of codes of conduct may occur. All levels of employees should be involved including the subordinates should be involved in preparation of budget so that they too can feel appreciated and acknowledged. If involved in the right way motivation for employees will be increased.‖ employees should be involved in the happenings of the organization so that they can be up to date with the daily operation of the
2. Top Management Support and Procurement Planning
The importance of top management support for successful procurement planning implementation has for a long time been recognized in the Supply Chain Management. The need for top management support is also well established among other practitioners. Top management support is identified as the most important facilitator for implementation of procurement planning. Despite top management support importance in implementation of procurement planning activities, the commitment for procurement planning issues from top management is however in adequate.
3. Enterprise Resource Planning (ERP)
Enterprise resource planning (ERP) is a cross-functional enterprise system driven by an integrated. ERP gives a company an integrated real-time view of its core business processes such as production, order processing, and inventory management, tied together by ERP applications software and a common database maintained by database management systems. ERP systems track business resources (such as cash, raw materials, and production capacity) and the status of commitments made by the business (such as customer orders, purchase orders, and employee payroll), no matter which department (manufacturing, purchasing, sales, accounting, and so on) has entered the data into the system. ERP facilitates information flow between all business functions inside the organization, and manages connections to outside stakeholders.
Functionally, an ERP system primarily supports the management and administration of the deployment of resources within a single (though possibly multi-site) organization. These resources can be materials, capacities, human labor, capital, etc. ERP systems current contribute to this by providing various types functionality. An engine for transaction processing which allows for the integrated data management throughout the organization; Work flow management functions controlling the numerous process flows that exist in the enterprise, such as the orderto-cash process or the purchasing processes; and Decision making support functions, assisting in the making of policies for example, by doing an MRP run, and processing specific orders of the customer. Higher quality ERP software with a strong manufacturing components, provide information required to increase production efficiency and reduce or eliminate re-work. It leads to timely revenue collection and cash-flow by giving organizations the power to proactively examine accounts receivable before problems occur instead of just reacting and hence improve cash-flow of the company.
4. Budgeting Procedures and Procurement Planning
A procedure is a system of sequential steps or techniques for getting a task or job done. They are formal arrangements by means of which policies linking strategies are implemented. It is further clarified that a cluster of reliable procedures, each comprised of a number of operations that together, provide information enabling staff to execute and managers to control those operations, is called a system. Procedural procurement is vital due to considerable amounts of money spent annually in the public sector. They say, the procurement department should observe procedural transactions for the good of the population given the fact that expenditure incurred is the taxpayer’s money. This implies that public sector purchasers are accountable to the public whose money is being spent,
including disappointed tenderers and potential suppliers. They must produce procedures and practices which will stand up either to scrutiny during government audits or to the challenge through the courts of any purchasing taxpayer‘s money.
Planning scope refers to the period in which the budget will cover. The planning scope will be crucial in how the budget is drawn that is if they are budgeting for long term project or short term. It will assist in planning for activities and ascertain how next year might change and steps to be taken to respond to the changes. Purchasing budgeting procedures involves various steps before the final budget is arrived at. The process usually starts at various departments depending on the department needs for the coming financial year. The budgeting process is then developed to a master‘s budget that is developed by the management.
5. The financial environment
The financial environment which includes economic performance – has a major effect on how buyers conduct their procurement operations. One of the main challenges the financial environment poses to businesses is currency fluctuation. Buy at the right time and return on investment can be huge; invest at the wrong time and you may see yourself losing money. Financial policy of the Banks also has ramifications for procurement departments, as this governs inflation and investor behaviour, which affects cash flow. Meanwhile, the lending activity of banks can constrain procurement activity and put a greater emphasis on cost cutting if it becomes difficult to secure finance. Similarly, a credit squeeze can often make smaller suppliers vulnerable thereby increasing buyer risk.
6. Political change
A change in government, policy or international politics can massively influence who buyers do business with and how.
At a domestic level, changes in government and policy can see regulatory reform and changes in business support packages and representation. This impacts upon how companies structure supply chains, how they comply with employment, tax, health and safety, ethics and quality control regulations, and how they grow. Internationally, cessation of relations with supplier nations can massively affect trade dynamics, while the opening up of a country to the free market can create new opportunities and challenges. Similarly, changes in government or policy in foreign countries, regions and territories create compliance, financial and supplier management challenges for businesses, not to mention supply chain disruption in instances of political collapse, disjoint or revolt. Procurement departments need to keep abreast of political events globally and act swiftly in order to minimize risk and make the most of opportunities.
7. Technological advances
The technological landscape is constantly changing and customers have come to expect businesses to operate faster, be more connected and offer them the latest advances because of it. Organizations need to keep on top of changes in the technological environment and how this affects their business. From the products and services offered, to the way buyers collaborate with suppliers, technology has a massive impact on procurement.
8. Socio-cultural change
Businesses that ignore socio-cultural external factors will do so at their peril. Procurement departments need to understand how social and cultural factors affect customer behaviors and expectations.
9. Environmental fluctuations
The environment is one of the greatest challenges for supply chains. Whether it’s resource scarcity or natural disasters, procurement departments are at the mercy of the environment. In 2013 the Carbon Disclosure Project found that 70 per cent of businesses believe climate change has the potential to affect their revenue significantly. Organizations are aware of the threats and recent natural disasters have served as a testament to how freak incidents can devastate the supply chain. Procurement departments need to plan ahead to manage resource scarcity and spread out their suppliers to minimize the disruption in the event of a natural disaster. Avoiding high risk zones is also advised.