Even ISIS have a procurement process

ISIS have wreaked havoc across the globe as we clamour to find a solution to their terror machine. Their sophisticated use of social media is far more advanced than most western businesses and governments, but what about their procurement processes?

Give some thought to how you would go about managing a supply chain which copes with the insatiable demand for bullets, guns, suicide vests, IEDs, etc. to the front line - thousands of bullets alone every day. The consequences of not getting the 'right thing, to the right place at the right time' may also have a heavy price to pay in personal accountability. While we discuss airstrikes, effective disruption of the procurement process would be a useful strategy as it would demoralise the 'frontline' and seriously degrade ISIS impact - it has to be explored and exhausted. 

The Financial Times has provided insights into how the procurement system works.  

Blackmarket arms dealers are 'licenced' by ISIS commanders, following approval by two members of the security services, and provided with stamped IDs which provide freedom of movement on the condition that ISIS are the sole customer. 

A 'pull' system is in place from the front line; effectively a requisitioning process. Requisitions are received by 'centres' - various tools are used to communicate the requisitions. The 'Committee' provide price lists to the 'centres' for common items. The dealers also receive  price lists.

Amazingly, they have also adopted a strategic approach in that since prices having been rising, they have issued more dealer licences in an effort to encourage competition reduce prices!

Governance of the process is a top table issue, understandable given the risk of failure.

There's something fascinating about this procurement process, isn't there: requisitions, price lists, approvals, making markets work, governance, speedier transactional processes. We can't tell if compliance is an issue or even quality control, but the next time you hear someone arguing that the procurement process doesn't work for them, spare a thought to how easy it all could be.

Indian helicopter vision on the need for procurement procedural ownership

Some months ago I discussed some of the lessons from the plagued Indian helicopter procurement - it has now emerged that procurement procedures were not adhered to. To me it is one of the fundamentals of good procurement, even though it doesn't seem very strategic, that you have pragmatic procedures which demonstrate probity, gained stakeholder ownership during their development, are effectively communicated, and then performance managed. If you cannot get those basics right then it doesn't mater how strategic your aspirations are for strategic recognition, the foundations just are not right.

So why is procedural compliance such a problem? The Indian Helicopter procurement, Stoke City Council, Serious Fraud Office, Lancashire County Council, and the Housing Executive in Northern Ireland are just a few of the recent discussions where procurement procedural compliance appear to have been flawed. It is almost irrelevant whether fraud and corruption took place if you have not adhered to procedures - non-adherence to procedures will always leave you perceived as doing wrong.

My suggestion is that the core lessons here are check the procedures are fit for purpose, make sure they are understood, and then performance manage. If you don't you may be the next case study.

Execution bottlenecks in procurement

I have always been surprised at how difficult it is for workshop delegates to populate the 'Bottleneck' quadrant of a Kraljic matrix - those procurements which although potentially low price have such an strategic impact on the organisation that they can 'stop the line'.

There appears to be something built into the DNA of those who discuss procurement to focus on managing big sums of money as opposed to managing risks - low value is the unglamorous side of procurement. Yet, delivering great procurement is about identifying the right strategy for all sorts of procurements, including those which are low value but high risk.

You may recall my previous post on the strategic significance of a $10 hinge on laptops - that was an example of a 'Bottleneck' item.

Today (2 August 2013) we have learnt of a somewhat dark procurement example, the dilemma facing the state of Texas as it faces a potential shortage of drugs used for lethal injections for those who it seeks to speed on their journey to the next life through execution. Whether or not you think such a shortage is a good thing is not the point - the issue is a change in the external environment which led to a shortage of supply, in this case relocation of a key supplier to a country which does not want to be associated with execution. I feel it would be totally inappropriate for me to suggest alternative options for the state of Texas but they will need to have some solutions before the end of September [2013].

One of the problems with 'bottleneck' items is that because they are low value they are rarely picked up through a spend analysis which is an over simplification of where to focus attention.

So now you have two examples of 'Bottleneck' items but how specific can you be in identifying your own organisation's or is that a risk not yet managed?

PS: 30 April 2014 As if Texas wasn't bad enough, Oklahoma ended up with botched executions and calls to reveal their suppliers of legal injections.

Credibility and procurement

I recently had the good fortune to attend a lecture by the Swedish Finance Minister, Anders Borg, at the LSE - you can access the transcript of his speech here. Perhaps you managed to catch him being interviewed on Newsnight. His ear-ring and pony-tail are not what you expect from a successful politician and economist - appearances are one thing.

Borg impressed. He spoke with authority, was charismatic and above all was credible. Indeed 'credibility' could have been the theme of his speech as it seemed to be weaved throughout his message. For example, the need for the market to view the national economic strategy as credible.

Credibility is central to anyone paying attention to you, your opinions and your plans. Lose credibility and you are in a very precarious place. One of the reasons I am sceptical about some of what I hear is the absence of credibility, for example, the sprochling* for a cause of the recent horse meat debacle. Nevertheless, think of the last time a supplier made a promise to you, let you down, then again, and then the defaulting supplier said: "we've it sorted, trust me".

The CPO needs credibility too. Those who engage, both internally and externally, with CPOs need to be convinced that the sustainable procurement policy will make a difference, the new procurement strategy will make a difference, the sourcing plans will make a difference, the new eProcurement solution will make a difference - I'm sure you recognise it. The CPO needs to be credible if they are to bring about change and bring key stakeholders with them.

Sacrifice the 5 Rights at our peril

In the mid 70s, when I first entered the world of Purchasing & Stores, Purchasing was the poor relation. The emphasis was on Stores. Gold stars and kudos came from stores management, minimising stockholding but avoiding stock-outs. Having said that, the mantra was the '5 Rights': The Right Product, at Right Quality, in the Right Place, at the Right Time, at the Right Price.

When carrying out the field research for my PhD, it became clear that one of the characteristics of those who had been successful in the transition from a clerical to strategic function had been their ability to demonstrate consistent competence in delivering the 5 Rights - it was the springboard for a more strategic role. 

So, it came as a surprise to me, during the 'noughties', when I started to meet those who had entered the profession at comparatively senior levels, who asked me what I meant by the 5 Rights. I continue to meet CPOs who have no idea what the 5 Rights are - what is perhaps more concerning is that they don't seem to care. It appears to me that strategic procurement seems to have lost sight of the 5 Rights - have the 5 Rights gone the way of the Dodo? If that's the case who is making sure that the 5 Rights are achieved?