What is Procurement?
Procurement in facilities management is the strategic process through which management selects and purchases the goods and services they need to run and maintain their building (or buildings) effectively. The goal of this process is for facilities managers to choose a provider (or providers) who can meet their needs reliably over a set period, at a reasonable cost, and under favorable terms.
To achieve that goal, facilities management must thoroughly understand what they need to accomplish and the specific characteristics of the possible services that will be involved. This deep understanding allows them to make a more informed decision when they select providers.
Defining Procurement in Facilities Management
Procurement goes beyond selecting vendors. It also involves the negotiation of contracts and ongoing management of supplier relationships. These aspects are an integral part of choosing the best deal on goods or services while maintaining quality and compliance.
The steps of the procurement process in facilities management include:
- Determining what goods and/or services are necessary.
- Establishing a clear budget that balances cost with quality.
- Developing a detailed timetable to ensure that each phase of the procurement process is completed on schedule.
- Selecting a vendor (or vendors) who can provide the goods and/or services determined in step 1, within the budget established in step 2, and who can realistically complete the process in the timeline set in step 3.
The Role of Procurement
Cost Management
Procurement plays a key role in controlling the costs of facilities management. By negotiating favorable terms, managers can significantly lower their building’s operational costs by leveraging economies of scale.
Quality Assurance
A rigorous procurement process helps maintain both the functionality and the visual appeal of a facility. The reason why is that careful procurement ensures the facility only uses goods and/or services that meet or exceed quality and compliance standards.
Risk Mitigation
Careful procurement reduces risks such as supply chain disruptions, non-compliance, and poor performance. As a result, operations run more smoothly and efficiently with fewer interruptions. Smoother operations lead to more customer satisfaction and more productive staff.
Strategic Sourcing
Strategic sourcing in procurement focuses on finding and working with providers who offer the best overall value. During this process, managers evaluate various factors including price, quality, reliability, and service to ensure they choose the best provider for their needs.
Challenges in Procurement
Market Volatility
Fluctuating market prices for goods and services can make it hard to proactively plan your budget. To deal with this, try using strategies like flexible contracting, fixed-price agreements, or futures contracts to lock in prices.
Here are the definitions of each:
- Flexible contracting: This approach allows terms within a contract to adapt to changes in the business environment or market conditions.
- Fixed-price agreements: A contract where the price for goods or services is agreed upon in advance and remains unchanged regardless of changes in the market.
- Futures contract: An agreement that allows managers to buy a specific quantity of a particular good or service for a predetermined price at a specific time in the future.
Supplier Management
Maintaining strong relationships with multiple suppliers while ensuring they meet performance expectations can be challenging. You can make that easier by setting clear communication expectations and establishing a schedule for regular performance reviews to identify and address any issues before they escalate.
Compliance
Adhering to industry regulations and sustainability standards requires diligent oversight of procurement practices. Make sure that you include any required standards in your initial plan before you start selecting vendors. Compliance and sustainability requirements need to be a factor when you determine what goods and/or services are necessary for your facility.
Procurement Strategies for Success
Collaborative Relationships
Building collaborative relationships with suppliers can lead to better service, innovation, and problem-solving. When you collaborate with your supplier, they are more likely to understand your expectations and vice versa. Therefore, the chance of misunderstandings is reduced.
Data-Driven Decision Making
Use data analytics to help identify cost-saving opportunities. Once you have these insights, you can weave them into your overall procurement strategy. Knowing where your facility could save costs will help you establish a procurement budget that fits your needs.
Sustainable Procurement
In some industries and regions, following sustainability regulations is a requirement. Even if your facility isn’t required to follow sustainability regulations, doing so will increase your organization’s reputation. Seek out providers whose goods and/or services will help you meet such regulations or expectations.
Continuous Improvement
Regularly reviewing and refining procurement processes can lead to greater efficiencies and cost savings. Every time you successfully (or unsuccessfully) procure a new good or service, reflect on what went well and what didn’t. Use these lessons to guide your next procurement process.
Technological Integration
Staying up-to-date with the latest procurement technologies, like eProcurement systems, can significantly simplify the procurement process. Such technologies streamline various procurement operations, such as vendor management, market research, and contract negotiation.
Conclusion
Procurement helps facilities meet their organizational needs at the best value. However, this benefit cannot be achieved without the right strategies. Only well-designed procurement processes can enhance facility operations, reduce costs, and drive organizational success.
Therefore, it’s crucial for your team to plan ahead, anticipate common challenges, and utilize best practices to get results.