Futureproofing Procurement

Futureproofing Procurement
The Importance of an Ethical and
Sustainable Approach

Katie Jarvis-Grove
Futureproofing Procurement:
The Importance of an Ethical and Sustainable Approach

Copyright © Business Expert Press, LLC, 2021.

Cover design by Lynn Cobb & Charlene Kronstedt

Illustrations by Lynn Cobb

Interior design by Exeter Premedia Services Private Ltd., Chennai, India

All rights reserved. No part of this publication may be reproduced,

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except for brief quotations, not to exceed 400 words, without the prior
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First published in 2021 by

Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com

ISBN-13: 978-1-63742-054-6 (paperback)

ISBN-13: 978-1-63742-055-3 (e-book)

Business Expert Press Supply and Operations Management Collection

Collection ISSN: 2156-8189 (print)

Collection ISSN: 2156-8200 (electronic)

First edition: 2021

10 9 8 7 6 5 4 3 2 1
 Description
This book demonstrates and explains how to best conduct yourself in a
procurement role and what challenges you should be aware of. Factors
such as being aware of modern slavery, supply chain’s pollution emissions,
and opportunities to recycle and reuse will be explored to create an under-
standing for the reader in how value should be achieved in today’s way of
managing procurement.
As you make your way through the book you will learn about tools
and techniques that can aid you in making the right decision for you and
your organization, to ensure that all ethical and sustainable elements of the
procurement process are explored, evaluated, reviewed and documented.
This book discusses the ways in which procurement can help to pro-
vide an ethical and sustainable approach to business and product creation
while raising an awareness of unacceptable practices with a view to their
eradication.
You, the reader, will learn more about the authors honest experiences
of working in procurement as you progress through her literary work.
At the end of each chapter, she provides a mini case study exploring
and explaining some of her purchasing stories that she has collated over
the years.

Keywords
added value; benchmarking; bribery; child labor; collaboration; contin-
uous improvement; corruption; cost; CSR; embezzlement; ethics; fraud;
globalisation; human rights; mission statement; modern slavery; product
life cycle; raw materials; recycling; social aspect; supply chain; sustainabil-
ity; value stream mapping; vision statement
 Contents

Chapter 1 An Introduction to Procurement and Its Evolution����������1

Chapter 2 Strategic Versus Transactional Procurement��������������������13
Chapter 3 Ethical and Sustainable Challenges���������������������������������23
Chapter 4 Reacting to Changing Consumer Needs�������������������������37
Chapter 5 Price Versus Cost: Supplier Evaluation and
Relationship Management����������������������������������������������51
Chapter 6 Understanding and Challenging Specifications���������������63
Chapter 7 Transparency Through the Supply Chain������������������������77
Chapter 8 Challenging Suppliers to Make a Better Future���������������87
Chapter 9 Building Strategic Relationships to Promote
Innovation����������������������������������������������������������������������99
Chapter 10 Promoting Ethical and Sustainable Approaches������������115

Glossary���������������������������������������������������������������������������������������������125
About the Author��������������������������������������������������������������������������������129
Index�������������������������������������������������������������������������������������������������131
 CHAPTER 1

An Introduction to
Procurement and Its
Evolution
What Is Procurement?
Procurement is a key function across industries. Regardless of sector, be
it public, private, or third, procurement has an important role to play.
Public sector procurement is responsible for the spend of govern-
ment-run organizations, and as such, has a large responsibility to manage
that spend, which is the tax payers’ money, with care and due diligence in
accordance with strict policies and procedures.
Private sector procurement is responsible for managing the expendi-
ture of a large variety of organizational spend, which includes everything
from retail to insurance to manufacturing. Private sector procurement is
not as stringently regulated as Public sector procurement, but this does not
mean that procurement professionals should not exercise good practice.
Third sector procurement involves professionals investigating the best
way to spend the money generated by donations, legacies, and fundrais-
ing. This sector is heavily regulated to make sure that funds that are being
used are spent for the benefit of the cause for which they were given.
Sourcing, purchasing, and procurement are terms that are often and
incorrectly used interchangeably, as they are considered to mean the
same thing. They are not, and there is a distinct difference between the
three functions.
Sourcing is the process that involves researching the market, seeking
out and evaluating potential suppliers, and understanding the external or
macro factors that may have an effect on the objective being met.
2 Futureproofing Procurement

Purchasing is a transactional operation comprising the acquisition,

ordering, and expediting of and payment for a tangible or intangible
requirement. Purchasing can only happen once the sourcing process has
been undertaken.
Procurement is the overriding term that encapsulates both sourcing
and purchasing. Procurement is, or should be, a strategic function in all
organizations to ensure value is added and money is saved. Procurement
includes everything from the identification of a need from a stakeholder
through to the payment and contract and supplier management.
Table 1.1 shows the clear differences involved in each of the afore-
mentioned terms.
Sourcing and purchasing have a short-term objective focus, whereas
procurement has a strategic, long-term focus and is related to organiza-
tional alignment.
From Table 1.1, it is clear to see that procurement involves a number
of tasks and processes. These tasks and processes always follow the same
order and should be followed if effective and value adding procurement
is to be practiced.
Figure 1.1 shows the procurement process complete with all stages
from 1 to 14 which are explained in Table 1.2 after the figure.
When procuring a new buy, the entire process is followed. This is
because the product or service will not have been sourced before so every
aspect has to be considered.
Table 1.1  Sourcing, purchasing, and procurement
Sourcing Purchasing Procurement
• Make-or-buy • Obtaining a requi- • Obtaining a requisition
decision sition • Make-or-buy decisions
• Specification • Raising purchase • Specification development
development orders • Market analysis
• Market analysis • Expediting orders • Stakeholder engagement
• Supplier identi- • Receiving orders • Managing expenditure
fication • Checking order • Supplier selection
• Supplier evalu- quality • Raising, expediting, and receiving
ation • Instructing pay- orders
• Supplier selec- ment • Supplier engagement
tion • Supplier management
• Contract management
• Compliance management
• Corporate alignment
 An Introduction to Procurement and its Evolution 3

Figure 1.1  The procurement cycle

When working on a modified rebuy, only Stages 4 to 13 will be required.

This is because the first four stages relate to preprocurement activity. A
modified rebuy could be a slight amendment to a specification, a change
to the quantity, quality or delivery details even the price.
If a procurement professional is seeking to carry out a straight rebuy, only
Stages 11 to 13 are needed to be undertaken. This is because a straight rebuy
is an identical process to the last. Nothing has changed between the buying
organization and the supplier. The specification remains the same, but the
quantity, quality, lead time, price, and delivery details are all unchanged.

The Evolution of Procurement

Procurement has not always been the function that we know in the 21st
century. Like all processes, procurement has evolved over time, and as such,
it has gained creditability as a value adding function to an organization.
4 Futureproofing Procurement

Table 1.2  The procurement process explained

Stage Term Explanation
A stakeholder identifies the need for a prod-
uct or service and advises the procurement
Need identification or department via a requisition.
1
justification The procurement department conducts work
to ensure that the need is justified and has
been authorized.
Research of the marketplace is undertaken.
How readily available is the product or
2 Research the market
service? How many suppliers are there that
can assist?
Evaluation is conducted to establish if the
need would present best value to the organi-
3 Make or buy
zation by being brought in from an external
supplier or created by the internal workforce.
If the product or service is an off-the-shelf
item, a specification may already exist. If the
product or service is a new concept, procure-
4 Develop a specification
ment will need to work with the stakeholders
to create and develop it. The specification
may be conformance or performance.
Research is carried out to identify any
suitable suppliers to fulfill the need. This
5 Identify potential suppliers could be through Internet searches, through
procurement knowledge, via networking or
recommendation.
The identified suppliers are evaluated based
on factors such as financial stability, ethical
6 Evaluate potential suppliers
conduct, capacity, and capability to fulfil the
need and corporate compatibility.
An invitation to tender or a request for
Create tender or request for
7 quotation is created including full details of
quotation documentation
the specification from Stage 4.
Documentation is sent to all preapproved
suppliers. This can be done via e-mail, an
Send documentation to eval-
8 online portal, or by post. Ensure all suppliers
uated potential suppliers
receive exactly the same information to
promote fairness and transparency.

The offers from the suppliers are returned via

9 Receive bids or quotations
e-mail, through an online portal or by post.

The bids or quotations are reviewed by

procurement and possibly an award panel. To
10 Review bids or quotations
promote fairness, more than one individual
should be involved in this process.
 An Introduction to Procurement and its Evolution 5

Table 1.2  (Continued)

Stage Term Explanation
The contract is offered to the supplier who
has offered the best value bid or quotation.
Award contract to supplier
11 The supplier is not obligated to accept so
offering best value
ensure that acceptance is gained prior to
commencing Stage 12.
Contact is made with suppliers who have
not been successful in gaining the contract.
Provide feedback to unsuc-
12 Feedback can be given to help the suppli-
cessful suppliers
ers understand why they did not win the
contract.
The ongoing management of contractual
Manage the contract or
13 performance and supplier relationships
supplier
throughout the duration of the contract.
The need may represent itself, in the same
14 Review the need or a modified form—review it and start the
process again.

In its infancy, procurement in the 1800s was purely transaction-driven.

Somebody realized they needed something and that person or somebody
else went and investigated that need. There was no planning or research,
simply a reactional process to meeting an identified need.
Following on from this, in the late 1800s, people started to under-
stand that planning made things easier and, procurement moved to being
efficient and organized.
By the early to mid-1900s, the world had experienced two world
wars, money was tight, and products were scarce. This produced the drive
and motivation by procurement of saving money and parting with as
little cash as possible.
As the end of the century drew closer, globalization was beginning
to have an impact. No longer did procurement have to buy from local
or national sources—it had become much easier because of transporta-
tion advances and technological development to make purchases from
overseas. Procurement at this time was driven by international sourcing
and saving money by working with less advanced economies. No concern
at this point was given to any conditions or situations in which supplier
found themselves.
6 Futureproofing Procurement

At the end of the 1900s, procurement was realizing that the price
of goods or services was not the sole factor to be considered. Cost was
becoming apparent, and as this became better understood, procurement
started to focus on being cost-driven-looking at ordering higher volumes
to save money and considering that quality could be an important part
of the supply chain.
Finally, today in the 2020s, procurement is thriving in its evolution-
ary journey. Now, procurement is a key function within forward-thinking
organizations and forms part of the corporate strategy. This means that
procurement is now heavily involved with aligning itself to mission and
vision statements, working on organizational sustainability, and giving
much thought to ethical and responsible sourcing for the benefit of the
planet, the people, and ensuring a profit.
Figure 1.2 shows the evolution of procurement as an organizational
function. In the 1800s, procurement was simply reactive. If a need was
identified, the procurement process started there, and then with no pre-
planning, no supplier database or previous knowledge. There was little,
if any, consideration for price, quality, or lead times—the need was iden-
tified and had to be met in whichever way it could. Toward the end of
the 19th century, efficiencies were starting to be understood. Individu-
als conducting purchasing started to understand concepts such as buy-
ing in larger volumes and holding stock rather than being completely
reactive. During the Second World War, when countries were trying to

Corporate
2020 Alignment
1990
1970
0 Cost
194 International Focused

50 Price Driven
18
Efficient
00
18
Reactive

Figure 1.2  The evolution of procurement

 An Introduction to Procurement and its Evolution 7

manufacture items such as tanks, airplanes, and ammunition, and when

money was tight, price became the most important factor. Individuals
involved in purchasing were looking to secure goods and services at the
lowest prices to allow higher volumes to be secured. After the war time
had passed and the economies around the world started to develop, so did
international trading. At this point of the procurement evolution, buyers
started to look outside their local community for suppliers and started
to engage with overseas organizations to fulfill the needs. The advance-
ments in freight and transport aided this change, which allowed the start
of importing more items from countries such as China. Buying from
overseas opened up a new style of buying along with a larger variety of
products, but in the 1990s, purchasing started to become procurement.
All aspects of the sourcing process began to be considered. The quality,
the lifecycle, and the lead time were understood to contribute toward
the total cost. At this stage, procurement professionals started to evalu-
ate quotations from suppliers based on more than just the price as they
had historically and now realized that price, although important, was not
the sole factor for comparing options. Now in 2020 and into the future,
procurement is a function that considers all aspects and elements of not
only the finished product or service but the contributing factors needed
to acquire the goods. Areas such as environmental impact, sustainability,
and aligning values with the suppliers are all taken into account along
with price, lifecycle, quality, lead time, and volume.

Procurement Roles and Hierarchy

Procurement covers a vast array of processes, and as such, generates a

multitude of roles that require fulfilling to ensure an effective function.
The most common roles in procurement are as follows:

Procurement Director

This role is the highest-ranking role within procurement. The person

who undertakes this position has the ultimate responsibility for the pro-
curement department, the strategy, policies and procedures, the spend
management, compliance, and quality. This is a well-remunerated role,
challenging yet rewarding, which requires an individual with a lot of
industry experience and professional qualifications.
8 Futureproofing Procurement

Procurement Manager

A procurement manager will report to the procurement director. While

the procurement director role holds the highest level of responsibility, the
procurement manager is involved in keeping the day-to-day operation
running and ensures that the team is functioning effectively.
A procurement manager will have authority over senior buyers, giving
him or her the final say in approving spend, signing off specifications,
approving suppliers, signing contracts, and managing budgets. A senior
buyer will be involved also in the day-to-day operations within the pro-
curement department such as negotiation, supplier management, and
reviewing key performance indicators or service-level agreements.

Senior Buyer

This role is filled by an individual who is well experienced. A senior buyer

has a level of authority that is higher than buyers, and they are able to
make some strategic decisions on behalf of the business. A senior buyer
is likely to head up a team of buyers, junior buyers, apprentices, category
managers, and analysts.

Category Manager

A category manager will be a specialist in the category they manage. Cat-

egory managers are often present in larger organizations where there is a
high level of spend across a significant number of categories. A category
manager could, for example, be responsible for direct or indirect procure-
ment of something more specialist such as metals.

Buyer

A buyer is a role that is quite generic in its title. A buyer can be respon-
sible for an agreed amount of spend, a specific product or service, or
an agreed department within an organization or procurement from one
country. Buyers usually report to category managers in organizations that
have a large procurement function.
 An Introduction to Procurement and its Evolution 9

Supply Chain Manager

A supply chain manager role is one that oversees the effective and efficient
running of the supply chain, both upward and downward, from start to
finish. A supply chain manager’s responsibility is to guarantee safe deliv-
ery of goods and services to the consumer, mitigating against any risks
that may be presented.

Supplier Relationship Manager

This role includes managing the relationships of current and potential

suppliers to an organization through meetings, negotiations, and the
monitoring and reporting of key performance indicators, service-level
agreements, and general supplier performance. This role is likely to
include a lot of time traveling to visit suppliers.

Procurement Data Analyst

A procurement data analyst role is one that involves gathering, collating,

and interrogating data to provide team members with trends, forecasts,
and predictions on what to order and when. The role also includes creat-
ing reports on suppliers based on their prices, quality performance, and
delivery schedules.

Junior Buyer

A junior buyer role is a position that is carried out by an individual who is

relatively inexperienced or new to procurement. This is a foundation level
role in the building of a procurement career. A junior buyer will report to
a buyer in a large organization.

Procurement Apprentice

Some countries operate government-funded or privately funded appren-

ticeships, which allows individuals coming directly from full-time educa-
tion to enter a profession of their choice. A procurement apprentice role
10 Futureproofing Procurement

is suitable for somebody with no industry or procurement experience and

who wishes to enter a career that involves working with the supply chain.

Expeditor

This role is based around the tracking of purchase orders from their plac-
ing to the point where the goods or services are delivered. An expedi-
tor works closely with suppliers to ensure that the purchase orders are
(1) received, (2) leave on time, and (3) arrive on time at the correct
destination. An expeditor is an integral part of the supply chain who
is responsible for advising on any delays or issues that may impact the
procurement end to end process.

Materials Controller or Planner

A materials controller or planner role is one that ensures products are

available as and when required while taking care not to hold too much
inventory. This role involves the individual working closely with produc-
tion and buyers to make sure that orders are placed in a timely manner to
ensure stock levels are accurate at all times.

Warehouse Manager

While this role does not always fall within the procurement function, it is
important to understand the part it plays within the supply chain. Ware-
house managers’ roles involve the assurance of stock being stored correctly
and being available for transfer from a warehouse to the shop floor or to
dispatch to satisfy customer and consumer needs.

Logistics Manager

This role involves the management of the movement of products and

services throughout the supply chain. Logistics managers have to ensure
that items are moved effectively throughout manufacturing plants, ware-
houses, and transport channels to reach their final destination in an
acceptable form.
 An Introduction to Procurement and its Evolution 11

Procurement
Director

Procurement
Manager

Senior Supplier
Supply Chain Relationship Logistics
Buyer Manager Manager
Manager

Procurement
Category Data Quality Warehouse
Manager Analyst Controller Manager

Buyer

Materials Junior Procurement

Expeditor Controller / Buyer Apprentice
Planner

Figure 1.3  Procurement department hierarchy

Quality Controller

A quality controller is responsible for a product or service conforming

to its specification. This may involve end product inspection, as well as
working on the process that makes the product and identifying any way
that improvement can be made to add value to the product.
Figure 1.3 shows the hierarchical structure of a typical procurement
department. The diagram shows that the procurement director is in charge
of the entire department, with the procurement manager reporting into
them. The senior buyer, supply chain manager, supplier relationship man-
ager, and logistics manager are all on the same tier and report directly to
the procurement manager. The managers on tier three then have support
staff working for them.

Author’s Notes of Experience

During my 25 years in procurement, I have been lucky enough to have had
many roles and experienced buying from a variety of industries, sectors, and
organizations. My career started when I “fell” into buying. My official role in
those days, the late 1990s, was an administrative assistant, but I was tasked
12 Futureproofing Procurement

with “sorting out the stationery cupboard.” As with any project, I gave it my
best shot, and within a few weeks, had rearranged the cupboard; put the pens,
paper, and printer ink into specific and labeled locations; and set up reorder
points to ensure that nothing ever ran out. I had spoken to a few suppliers
and realized one of the rules of procurement (the more you buy or commit
to take, the lower the price) and also began to understand the basics around
price versus cost, lead times, and the importance of a solid specification. Over
the next few months, I received praise from managers in the organization in
two main areas. Firstly, they were impressed that they could always find what
they wanted and it was always available, and secondly, the stationery spend
was significantly below the predicted budget for the year. Due to that small
project, a love of procurement was born, and I soon moved jobs to be a junior
buyer for an agricultural company, then after a few years, sought more respon-
sibility and got a job as a buyer for a kitchen manufacturer. Over the years,
each job move gained me more responsibility, knowledge, and passion for the
profession. In 2016, I had a role as a procurement manager for a large buying
cooperative and had been in situ for nine years when I decided I wanted to
give something back to the profession and share my years of experience. At that
point, I left employment and set up my own business training people through
delivering courses, writing books, and offering outsourced buying solutions.
And, this is where I am now, in 2021, writing educational literature and
delivering my own training material.
 Index
Letters ‘f’ and ‘t’ after page numbers indicate figure and table, respectively.

Added value, 2, 18t sustainable sources of raw materials,

45–49
Benchmarking transport methods, 38–39
aim of, 117 Continuous improvement, 110–111
definition, 117 Corporate Social Responsibility
ethical and sustainable, 118t–119t (CSR)
traffic light system, 119–120 CSR inclusions, 121t
types, 118f policy elements, 121
Bonded labor, 25, 26 Corruption, 84t, 86
Bribery, 84t, 86 Cost, 6, 7, 72
Buyer, 8 factors, 52t
supplier evaluation techniques, 57t
Category manager, 8 supplier evaluation, 53–54
Child labor, 24, 27–28, 37, 71, 85t supplier relationships, 54–58
Collaboration, 17, 88t vs. price, 51
Communication CSR. See Corporate Social
blame culture, 102–105, 108 Responsibility
blame vs. accountability, 104t
blame vs. feedback culture, 103 Descent-based slavery, 25, 26–27
conflict resolution, 103–104, Domestic slavery, 25, 27
105–106
distortion, 99 Economies of scale, 33
effective, benefits in procurement, Embezzlement, 85t
101f Environmental challenges, 25, 31–32
feedback areas, 102t Equilibrium, 33
feedback role in, 100–102 Ethics, 6, 23, 37, 41, 54, 89. See also
forms of, 99, 100t Sustainability
Conformance, 63, 64t behavior, elements of, 23f
Consumer needs, factors affecting, key areas in, 24–25
37–38 supply chain, 41–42
country of origin, 38 Expeditor, 10
end product recyclability, 44–45,
70–74 Fair Trade, 71
environmental impact, 40 Forced labor, 25–26
packaging, 42–43, 70–71 Fraud, 85t, 86
recycled components, percentage Functional value, 13
of, 43–44
supply chain, ethics in, 41–42 Globalization, 5
132 Index

Human rights, 48 vs. purchasing, 2, 2t

Human trafficking, 25, 27 vs. sourcing, 1, 2t
Product life cycle, 69f
International Labor Organization, Product shortages, 25, 32–33
25, 27 Psychological value, 13
Public sector procurement, 1
Junior buyer, 9 Purchasing, 2, 13

Lean Quality controller, 11

definition, 106
waste categories, 107t Raw materials, 33, 37, 40, 43, 45, 70,
Logistics manager, 10 77, 108, 123
Recycling, 14t, 43, 44, 70, 80t, 82,
Market engagement, 48–49, 49f 118t, 121t
Materials controller/planner, 10
Mission statement, 6, 89–91 Senior buyer, 8
Modern slavery, 24, 71, 85t Six Sigma
forms of, 25 processes in, 109
Modified rebuy, 3 Social aspect, 15t
Monetary value, 13 Social value, 13
Sourcing, 1
New buy, 3 Specifications
advantages and disadvantages, 64t
challenging, 73–74, 73f
Performance, 63, 64t
characteristics of, 65f
Private sector procurement, 1
cost issues, 72
Procurement apprentice, 9–10
creation of, 64
Procurement data analyst, 9
end product recyclability, 70–74
Procurement director, 7
generation of, 65, 66f
Procurement manager, 8
product life cycle, 69f
Procurement, 1, 31, 32. See also
renewable inputs, 68–70
Specifications; Supply chain;
stakeholder role in, 66–68
Value
sustainability and ethical
corporate strategy, 6, 13
conduct, 71
cycle, 3f
types, 63
definition, 2
Stakeholder, 66–68, 84
evolution of, 3, 5–7
categorization, 66–67, 67f
market engagement, 48, 49
communication and management
process, 4t–5t
of, 68, 68t
role of, 1
types, 66
roles and hierarchy, 7–11, 11f
whistleblowing, reasons for,
strategic procurement, benefits of,
84t–85t
17–18, 18t
Straight rebuy, 3
transactional procurement
Supplier audit, 80–82, 87
risks, 19t
Supplier evaluation, 53–54
transactional vs. strategic, 13,
criteria, 53t
16–17
techniques for, 56, 57t
value, 13, 16f
Supplier performance
 Index 133

key performance indicator, 91, 92, Six Sigma, 109–110

93 supplier accountability, 95–96
measurement of, 92t supplier audit, 80–82, 80t
service-level agreement, 91, 92 supplier ethical audit, 81f
SMART model, 93f supplier prequalification checks,
supplier accountability, 95–96 79–80, 79t
target setting and monitoring, 91 supplier sustainability audit, 82f
Supplier relationship manager, 9 supplier tiering, 77–79, 78f
Supplier relationships, 54–58, 55f training, 115–117
managing, 58, 87 transparency in, 82–83
procurement preference, 55, 56f whistleblowing, 83–84
supplier evaluation techniques, 57t whistleblowing, reasons for,
trust, creating and maintaining, 58 84t–85t
unsustainable, termination of, Sustainability, 6, 7, 23, 37, 54, 68,
58–59 89. See also Ethics
Supplier reviews, 87–89 and business, benefits of, 96f
benefits of, 88t elements of, 24f
considerations for, 88f
Supplier vision, 89–91, 91f Third sector procurement, 1
Supply chain manager, 9
Supply chain, 6, 9, 10, 37, 40, 58, Value stream mapping, 108, 108f
74, 77, 106, 115. See also Value, 14t–15t, 108
Communication areas in, 13
benchmarking, 117–120 product/service categorization,
continuous improvement, 110–111 14–15, 16f, 54
Corporate Social Responsibility, Vision statement, 6, 89–91
121–123
ethics in, 41–42
Warehouse manager, 10
informed choices, importance of,
Whistleblowing, 83–84
120–121
stakeholder reasons for, 84t–85t
leading by example, 115
Working conditions, 25, 28–31, 29f,
lean, 106–108
37, 71