The Added Value of Procurement
Heriot-Watt University
School of Management and Languages
Degree: MSc Strategic Project Management
Course: Project Procurement and Contract Management C11CM
Assignment: The Added Value of Procurement
Lecturer: Prof. Tom Chadwick
Student Reg. #: H00103391
Date: 13 Feb 2011
Word Count: 2732 (2535 excluding the reference list)
Table of Contents
1. Introduction 3
2. Impact on Projects 4
2.1 Impact on IT Projects – Personal Experience 4
2.1.1 Old Situation 4
2.1.2 Negative Consequences 4
2.1.3 Improvement 5
2.1.4 Positive Results 6
2.2 Impact on Construction Projects 7
2.2.1 Cooperative Procurement Procedures 7
2.2.2 Effects of Cooperative Procedures 8
3. Impact of Effective Global Sourcing 9
3.1 Quantitative Improvements 9
3.2 Critical Success Factors 10
3.3 Anticipated Benefits 11
4. Impact of the Effective Management of Indirect Spend 12
4.1 Importance 12
4.2 Strategies & Benefits 13
5. Conclusion 14
6. References 15 1. Introduction
Getting the best services and products at the desired time for the least possible cost has been always a key success criterion of every business since the beginning of human history.
Companies and organizations spend the greatest proportion of expenditure on acquiring resources provided by external suppliers. Procurement, which is the function of managing and administering this acquisition, is a fundamental business aspect that requires deep focus, constant monitoring, and continuous improvement.
A recent report (CAPS Research Benchmarking Team 2010) covering more than 18 different industries states that companies spend on average around 82% of their expenditure through Supply Management. This significant percentage indicates the importance of the role played by Procurement in business firms and hence necessitates the effective management and control of that critical function.
Employing effective procurement activities is crucial to the success in doing
School of Management and Languages
Degree: MSc Strategic Project Management
Course: Project Procurement and Contract Management C11CM
Assignment: The Added Value of Procurement
Lecturer: Prof. Tom Chadwick
Student Reg. #: H00103391
Date: 13 Feb 2011
Word Count: 2732 (2535 excluding the reference list)
Table of Contents
1. Introduction 3
2. Impact on Projects 4
2.1 Impact on IT Projects – Personal Experience 4
2.1.1 Old Situation 4
2.1.2 Negative Consequences 4
2.1.3 Improvement 5
2.1.4 Positive Results 6
2.2 Impact on Construction Projects 7
2.2.1 Cooperative Procurement Procedures 7
2.2.2 Effects of Cooperative Procedures 8
3. Impact of Effective Global Sourcing 9
3.1 Quantitative Improvements 9
3.2 Critical Success Factors 10
3.3 Anticipated Benefits 11
4. Impact of the Effective Management of Indirect Spend 12
4.1 Importance 12
4.2 Strategies & Benefits 13
5. Conclusion 14
6. References 15 1. Introduction
Getting the best services and products at the desired time for the least possible cost has been always a key success criterion of every business since the beginning of human history.
Companies and organizations spend the greatest proportion of expenditure on acquiring resources provided by external suppliers. Procurement, which is the function of managing and administering this acquisition, is a fundamental business aspect that requires deep focus, constant monitoring, and continuous improvement.
A recent report (CAPS Research Benchmarking Team 2010) covering more than 18 different industries states that companies spend on average around 82% of their expenditure through Supply Management. This significant percentage indicates the importance of the role played by Procurement in business firms and hence necessitates the effective management and control of that critical function.
Employing effective procurement activities is crucial to the success in doing
References: CAPS Research Benchmarking Team (2010) “Cross-Industry Report of Standard Benchmarking”, CAPS Research. Carter, P., Beall, S., Rossetti, C. and Leduc, E. (2003) “Critical Issues report: Indirect Spend”, CAPS Research. Cox, A., Chicksand, D., Ireland, P. and Davies, T. (2004) “The Management of Indirect Spend: A Framework for the Effective Alignment of Supply and Demand”, 13th International IPSERA Conference, Catania, W229-238. Eriksson, P. and Westerberg, M. (2011) “Effects of Cooperative Procurement Procedures on Construction Project Performance: A Conceptual Framework”, International Journal of Project Management, Volume 29, Issue 2, pp 197-208. Golini, R. and Kalchschmidt, M. (2010) “Moderating the Impact of Global Sourcing on Inventories through Supply Chain Management”, International Journal of Production Economics. Journal of Supply Chain Management (2005) “Sourcing indirect spend: a survey of current internal and external strategies for non-revenue-generating goods and services”, Vol. 41, No. 2. Kotabe, M. and Mudambi, R. (2009), “Global Sourcing and Value Creation: Opportunities and Challenges”, Journal of International Management, Volume 15, Issue 2, pp 121-125. Monczka, R., Trent, R. and Petersen, K. (2006) “Effective Global Sourcing and Supply for Superior Results”, CAPS Research. PMI (2004), A guide to the project management body of knowledge, 3rd edition, Project Management Institute, PA.