Your Prospect’s Procurement Policy Is A Must Read!

Sellers can learn a lot by reading the policies and procedures of their customers and prospects. It is an often overlooked but valuable source of insight on how the buying decision is going to be made. In this insight we examine the information typically contained in procurement policies and how sellers can use them.

Procurement Policy – A Must Read For Sellers

Procurement policies or handbooks are a behind the scenes guide to how a customer will buy, yet they are rarely read by sellers. This article is a short guide for sellers on Procurement Policies & Procedures. But before we get started here is an example of some of the information that you can gather about your prospects from their procurement and related policy documentation – click on the image to expand.

The Typical Introduction

Most procurement policies start by setting out why procurement matters. That is the vision / mission of procurement – it’s impact on business performance. This is generally backed up by some statement of the historical results achieved / track record, some assessment of the challenge or opportunity for the future. This acts as a rallying call – a call for, or ongoing commitment to change for the internal audience – that is managers and staff within the buying organization.

Presenting The Context

Procurement policies provide a procurement strategy context that includes:

• Key initiatives, a new system, SKU or supplier concentration drive, category management initiative, etc.
• Procurement systems and tools
• Description of the procurement team and structure
• The procurement support available to managers.

Establishing The Principles

Procurement policies establish the ground rules, or principles of procurement. These include:

1. Sound decision making.
2. Responsibility of managers in spending the companies money
3. Objectivity, analysis, economics
4. Competitive process
5. Best products and suppliers
6. Best economic value
7. Responsibility to shareholders
8. Compliance with the law
9. The greater good.

Setting The Standard

The procurement policy is likely to set out what is expected of managers and the organization, the standards to be achieved:

1. Confidentiality
2. Conflict of interest
3. Rules of engagement, including gifts (see geth book)
4. Process, approvals, compliance
5. Risk management
6. Ethics
7. Sustainability.

Relationships With Suppliers

A procurement policy document is likely to set out the ground rules in dealing with suppliers, as well as set the tone for supplier partnership. Key headings are likely to include:

1. Supplier performance management / supplier development
2. Innovation through suppliers
3. Supplier management, supplier rights and obligations
4. Commitment to achieving and sustaining highest levels of supplier performance
5. Proactive, not just reactive procurement
6. Supplier diversity
7. Supplier events.

Before we examine some tips for sellers on how to find and use procurement policies, here is another example of the type of information that can be gathered from such research – click on the image to expand:

Some Tips For Sellers

Some points for sellers who want to learn about their customers and prospects from their procurement policies and procedures:

1. Much of the buying behavours of an organization – the practices, processes and so on are learned rather than documented. Because procurement policies are both written and unwritten – that means reading the manual is not enough.
2. The language used, for example is buying referred to as procurement, purchasing, or supply chain management? This provides an indication of how strategic procurement is in the organization, as well as the degree of innovation by procurement.
3. The tone of the procurement policy or procedure can tell the seller a lot. For example:
    
   • Whether it is coercive or collaborative (e.g. does it seek to take the credit, or share it, etc.)
    
   • The extent of power or leadership support for procurement (e.g. is the forward or introduction written by the CEO, the CEO or the Chairman)
4. How to get a copy of the buyer’s procedures and policies?
    
   • The first and most obvious place to start is by examining the prospect’s supplier pages / portal. Another useful approach is to type terms, such as; ‘procurement’, ‘purchasing’, ‘supply chain’, ‘supplier’, ‘policy’, ‘procedures’, ‘code of conduct’, ‘strategy’, ‘strategic plan’, etc.
    
   • Other policy documents (e.g. organizational code of conduct, or annual report) may not be procurement specific but are likely to address some of the important topics that are relevant.
    
   • Talks given by procurement heads at procurement events, or interviews for procurement magazines can also provide an insight into procurement policy in the prospect’s organization.
5. Look out for supplier codes of conduct and organizational code of conduct also. They are likely to contain procurement related information.
6. Who’s policy is it? The procurement policy of your prospect’s organization may be dictated by an external body. The most obvious example is an organization in majority state ownership, or in receipt of significant state funds. Other examples include subsidiaries bound by the procurement rules of a parent organizations, or even organizations bound by the rules of a major investment house (from which it has received funds).

by Ray Collis

Ray Collis is author of 4 books on accelerating growth, His articles are just a sample of the research underpinning the Growth Pitstop - a powerful formula for accelerating growth. Ray is available to speak at conferences and events internationally.

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