Procurement – the ‘real value’ factor in integrated facilities management, JLL report
The following is the report by Aval Sethi, Head – Supply Chain Management & Procurement (Asia) JLL India
Procurement, a key component of the Integrated Facilities Management services framework, refers to the strategic element of materials purchasing. A Procurement team analyses the expenditure on goods and services and applies market knowledge and expertise leverage to ensure optimum value for money while simultaneously enforcing strict quality adherence and transparency during the entire process.
As such, Procurement involves:
· Purchases planning
· Standards determination
· Specifications development
· Supplier research
· Value analysis
· Price negotiation
· Making purchases, and
· Contract administration and monitoring.
This specialized service model emerged to provide a one-stop solution to clients who faced multiple challenges such as protracted procurement lead times, complex contract management and inefficient methods of delivery and invoice validation. With a professional Procurement team in place, various wasteful situations such as overstock or inventory depletion and fragmented vendor bases can be avoided – thereby significantly contributing to efficiency and profitability.
The evolution of professional procurement
Prior to World War I, Procurement – or Purchasing – was regarded as a primarily clerical function. However, during the two World Wars, this function gained increased focus due to the accelerated pace at which raw materials, supplies and services needed to be obtained to feed the war effort.
From the 1950s through the ’60s, purchasing continued to gain stature as the techniques for performing the function became more refined and the number of trained professionals increased. The emphasis became increasingly managerial – and with the introduction of major public bodies and inter-governmental organisations such as United Nations, Procurement developed into a well-recognised science.
The following decade saw more emphasis being placed on purchasing strategy as the need to obtain needed items from suppliers at realistic prices increased. The 1990 s saw the first major shift in this sector as Procurement started to become more integrated into corporate strategy. A broad-based transformation of the business function was set in motion, propelled by the development of supply management software solutions to automate the ‘source-to-settle’ process.
The increasing corporatisation of Procurement reached its peak towards the turn of the Millennium, when many enterprises established a C-Level title for the head of what had by now become a key business function – the Chief Procurement Officer.
During the global recession of 2008-2009, Procurement was ensconced at the very crux of business strategy as the need to optimise corporate spending became a matter of paramount importance. When the global economy attained a more even keel post 2010, Chief Procurement Officers were recognised as important business leaders and began to take on broader operation responsibilities.
Today, Procurement is recognised as an indispensable strategic business function. The increasing share of material costs and purchased services in the Profit & Loss accounts of major global organisations highlights its growing significance, given the express need of such companies to align Procurement objectives with their overall organisational goals.
The future – constant transformation
Procurement is well on the way of becoming an ‘exact’ business science. By 2020, this sector will be driven by technology – automated transactions and smart devices will be used for various functions such as:
· Inventory location
· Shelf-level replenishment detection
· Transportation locations
· Elimination of supply bottlenecks
JLL Supply Chain Management & Procurement (SCMP)
As the global leader in real estate solutions, JLL has a thoroughly evolved and refined Supply Chain Management & Procurement (SCMP) services platform, headed by a Global Chief Procurement Officer. Operations in the three regions of the Americas, APAC and EMEA are each headed by a CPO.
Today, JLL’s SCMP agency meets the demands of a vast number of international firms and helps them to stay agile and profitable in a rapidly changing market environment. JLL’s cross-functional supply chain management and procurement capabilities support its PAM, IFM, PDS and Corporate Solutions divisions. Clients can access and leverage JLL’s highly collaborative culture and streamlined operating model to access:
· Aggregated collective purchasing power
· World-class tools, ground-breaking technologies and robust processes to improve compliance and reduce risk
· Innovative supply chain solutions and deep supplier relationships that facilitate enhanced value and cost savings
Procurement technology – the digital push
We are seeing massive strides forward in the development and application of technology. The use of Internet-of-Things (IOT) devices is on the rise – from less than 4 billion devices in 2014 to a projected 25 billion by 2020. These devices are being used in more and more areas, including manufacturing, supply chain automation and consumer electronics.
As more devices get Internet-enabled, the digitisation of products will revolutionise traditional industries such as automotive, industrial manufacturing and even home construction. Internet-enabled kitchens, home appliances and cars will be more common.
These technological advancements are being manifested in information technology products and services too. Business software is not only reducing requirements for manual human intervention – armed with artificial intelligence and predictive capabilities, it is enabling faster and more accurate forecasting, planning and resource allocation.
E-procurement solutions like One Source offer a more efficient approach to strategic sourcing. E-procurement bids and vendor management software help companies save time so that they can focus on organisation initiatives and supplier relationships. Cloud-based bid and supplier management platforms can be customised to meet the purchasing needs of virtually any organisation.
India, a highly promising and rapidly growing economy, is the most sought-after investment destination in all sectors of globalised business activities. India is a global fulcrum for several industries such as manufacturing, IT/ITeS, healthcare and pharmaceuticals, tourism and hospitality, media and entertainment, Defence and, of course, real estate. A[part from these traditional sectors, it is also becoming a prominent hub for high-tech sectors like robotics, 3D printing, space exploration, genetics and nuclear technology.
Not surprisingly, India is an important market for specialised Procurement services. E-platforms like One Source will play an extremely important role in this country. Such cost effective and time saving solutions are critical in a country which has world’s highest penetration of smartphones and other mobile devices. Users of such devices rely heavily on technology to make purchases ranging from household goods to industrial equipment.
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