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🎣 The Catch Up

Dear Readers,

3 things before I get into the meat of the content this week:

1. Reader Survey : I want to hear from you.

2. Premium Subscription Prices are Going Up Soon!

As I mentioned earlier this week, the price for premium subscriptions will be going up to 80$/year or 9$/month on January 1^st 2024.

If you’ve been thinking about getting a premium subscription, now is the time. Get one while they’re still 35$/year or 5$/month (you secure pricing forever).

As a reminder, here’s what a premium subscription gets you:

• No Ads

• 12 monthly “deep dive” guides to walk you through the implementation of a Procurement process or tool

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You can even get a 7-day free trial to go confirm the premium content is worth your while.

3. My Procurement Policy Template is now in the Pure Procurement Store.

In tonight’s note, I’ve identified 5 guiding principles you should follow when writing/editing your corporate Procurement policy.

I’ve also put together a Procurement Policy template you can download and use to put these principles to use while following along with my ULTIMATE Procurement Policy Authoring Guide

If you’re a premium subscriber, I’ve left a code at the bottom of this email so you can redeem it for free. For others, you can purchase it separately if you just want the policy template, or get it for free with a premium subscription.

Have a great week ahead.

Best,

Joël

P.S. In case you missed it, here was my most popular LinkedIn post of the week:
It's shocking that Total Cost of Ownership (TCO) is not more top of mind for senior management.

P.P.S. In all honesty, I haven’t been bowling in ages… But it’s in the plans for the holidays. I’ll let you know how it goes.

🌙 Sunday Night Note

5 Guiding Principles for Writing a Good Procurement Policy:

The Procurement Policy is the foundational document on which the Procurement function and all of its processes are built. It’s the cornerstone of good Procurement in your company. Unfortunately, writing a bad Procurement policy is very easy…

A bad policy creates red tape and dooms Procurement to the back office.

A good policy changes the game and enables Procurement to be a “value-add” function.

So here are 5 things to keep in mind when writing/updating yours to create a solid Procurement foundation in your business:

1/ Maximize Value

Procurement's job is to maximize value for each internal client to, in turn, maximize the value for the business' end customers.

Yes, sometimes that means savings, but the trap is thinking it always does.

The definition of value is different by department/internal client based on your company's overall value proposition to end customers.

e.g. The departments of a luxury brand will not define value the same way as a discount price brand or a public sector entity.

• Departments of the luxury brand may be willing to pay a premium for products with certain quality parameters.

• A discount price brand may be focused on the lowest total landed cost possible.

• Another example… Your maintenance department may value quick delivery and after-sales service more than the price of parts.

Everyone defines value differently. You need a good handle on how your stakeholders define value to write a good Procurement policy for your business. Don’t simply copy/paste.

2/ Minimize End-to-End Cycle Time

Procurement’s job is to ensure that purchasing goods or services is done as fast and efficiently as possible. The last thing you want to be is the bottleneck of the purchasing process for a stakeholder.

And this is true for the WHOLE, END-TO-END Procurement process. I don’t care if Accounts Payable reports to finance. It’s part of the process and Procurement needs to work to optimize it. The job’s not done till the supplier is paid.

Internal clients don’t care who reports to who. In their mind, any problem with suppliers = Procurement’s fault. Own it.

3/ Respect Laws and Regulations

Procurement's job is to respect the constraints set out by external regulatory bodies that are applicable to your business (governments, associations, etc.).

This one is pretty self explanatory… Respect applicable laws in your Procurement process.

4/ Minimize Risk, According to Risk Appetite

Depending on your industry and company culture, you’ll have a given risk profile. Procurement’s job is being aware of that risk profile (e.g. perhaps you have an internal Risk Management function you need to ‘buddy up’ with) and coordinating activities/safeguards in the Procurement process for the appropriate evaluation and mitigation of risks.

For example, if the organization has a low risk tolerance towards treatment of confidential, sensitive and/or personal information (e.g. because of applicable laws and penalties for being in breach), then including a Privacy Impact Assessment led by IT before all new software purchases will be a priority (regardless of cost).

5/ Consider Technology / System Constraints

The Total Cost of Ownership (TCO) of a purchase includes your ability to process the transactions related to the agreement. Take the time to understand your transactional system constraints and document contract negotiation guiding principles derived from these constraints.

For example, if your system doesn’t support scale pricing at the transaction level (e.g. 10$ for 1 each, 7$ for 3+ each, 5$ for 10+ each, etc.), then you have to calculate the cost of manually supporting scale pricing if you negotiate such a contract because it is more attractive commercially.

If supporting scale pricing requires an additional Full Time Equivalent employee (FTE), then it probably doesn’t make sense to negotiate scale pricing in your contracts even if it looks less expensive on paper. You may need to stop negotiating the “best” contract terms…

This point can evolve over time as you develop new IT capabilities.

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In short, when you add/change a business rule in your Procurement policy, you should consider these 5 questions:

• Will this rule translate to more value for the end customer (via the purchase for the internal client)?

• Will this rule reduce the overall Procurement process cycle time?

• Will this rule allow us to respect laws and regulations in place?

• Will this rule contribute to minimizing risk?

• Will this rule be easily supported by our current processes/systems?

The more ‘Yeses’ you have, the more certain you can be that you are heading in the right direction. Alternatively, it will give you the ‘to dos’ to get to ‘yeses’.

If your policy documents the above, you’re well on your way to having a valuable and good policy (regardless of how long it is). Does that mean that’s the document your should present to end users? No… You can probably condense what is important to different user groups in a One-Pager…

For a detailed step-by-step on how to write a good Procurement policy (and good communication practice), check out my ULTIMATE Procurement Policy Authoring Guide.

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