CRAFTING EXCELLENCE: ESSENTIAL ELEMENTS OF AN EFFECTIVE PROCUREMENT POLICY

There are different standards for what the sections of a Procurement Policy should contain. My suggestions below are guidelines that attempt to cover a few of the most important elements. If the procedures in your organisation require much more than these, please proceed to include as required.

RESPONSIBILITIES

A good procurement policy should define the roles and approval levels of the key players in an organisation who are involved in the procurement process. From the Board of Directors, down to the requester; every approving authority and user of the policy should be listed (by role and not by name!), and their duties regarding the procurement process should be mentioned. From setting up the policy document itself, to price forecasts, budgets, cost saving targets: to how the supplier database should be managed, when and how to evaluate supplier performance: to which documents should be preserved for audit purposes and for how long. There must be no ambiguity with regards to who should be responsible for certain processes, and the level of authority that person has within the process. This is the first step to having a process that is inclusive and helps everyone in the organisation know and play their part without fear of violating the policy.

PROCUREMENT STANDARDS

In every organisation, there are standards for everything. These refer to the minimum criteria that must be met for decisions to be made. Buying decisions are quite critical to the survival and growth of companies, and because Procurement is the main if not only pipe through which money flows out of an organisation, it becomes imperative that the rules for spending such money are laid out somewhere.

For instance:

What is in scope of the procedure document and what is not?

What is the requisition (RFx) process? How should requisitioners buy stuff? What process should they follow?

When and for what amount of spend should a Purchase Order be required?

When do you need a contract? Who should approve contracts?

What are the conditions for any of the above to be carried out?

Are there other policies linked to these, that need to be consulted for clarity?

Where are these other policies located?

Now you may think that your organisation is too small, or that decisions are made at the whim of your Boss; but what if you were to draft a document detailing these criteria and show it to your Boss for his review and approval? What if this document showed him/her how your organisation could be more audit compliant, and how it would make your processes up to date and how it could only be updated and approved with his input? Any good boss would want that and will reward such an employee. Of course, these procedures are more mandatory for companies that are listed on the stock exchange, but small companies grow, and my suggestions are for Procurement people who want to develop themselves and take their career into their own hands. This article and others like it, will help you grow, succeed within the industry, and save your company the headache of a failed audit.