“Creating a better world
requires teamwork, partnerships, and collaboration, as we need an entire army
of companies to work together to build a better world within the next few
decades. This means corporations must embrace the benefits of cooperating with
one another”.
Simon Mainwaring
Simon Mainwaring
As religious as I may be, I still believe
that the world changes and you may choose to call it evolution. Systems of
governance, fashion, food, words (in the dictionary), our individual
preferences, tastes and opinions all do change. They may be shaped by happenings
around us as much as we shape some of these happenings around us. That in
itself depicts the interrelationship between what causes the change and what
changes.
In Ghana, we have changed! Yes we also change
for the better! Developing countries also change! We have been changing from
centralized system of government administration to the decentralization mode
since 1992 or maybe earlier. However, developed economies have moved on, and are
now exploiting the strategic benefits of collaborative working systems. We may
not be there yet, but I choose to write about where we should be going rather
than complaining about where we are.
Challenges posed by the economic crisis (see article on blog on economic crisis)
which rippled across the world have influenced the evolution - from over
reliance on competitive advantage strategies and individualistic strategies to
a coopetitive strategic focus, where inter-organisational synergies are brought
to bear in attaining the respective objectives of organisations. Although you
may be competing in the same market, you can cooperate with your competitor
without losing the uniqueness of your firm and hence
maintaining your competitive advantage. It is common for firms in an industry
to collaborate in bettering the conditions for doing business in that industry
(example tax exempts), but this collaboration could be extended into other
facets of business operations. Limited funding resources available to both
public and private sector organizations have necessitated efficiency in doing
business at a minimum cost. This should
have been part of business all along! We are however now looking at
collaborative procurement.
A pair of eyes may see 180 degrees but
two heads with two pairs will help see the world (360 degrees). I have decided
to bait you with the benefits of collaborative procurement, which I call the “selling
points”. These benefits are real, and culled from my MBA dissertation which was
based on a case study research conducted in the United Kingdom (UK).
Cost Reduction
through Collaborative Procurement
The issue of cost
reduction is at the heart of all organisations
and is an important advantage of collaboration and sharing services. Public organisations keep incurring unnecessary
administration costs by duplicating procurement activities. Orgnaisations individually undertake
expensive procurement exercises from tendering, contract letting to procurement
in their individual capacities rather than using existing framework agreements
to buy standard commodities, such as stationery, computer equipment and travel
services. Why duplicate what has been done already?
Another important
advantage the helps reduce procurement costs in collaborative procurement is
economies of scale. Both private and public sector organisations are not exploiting the
potential benefits of volume purchases. When procurement is done individually
and not aggregated, the volumes are then reduced, which affects the cost
per item or service procured. Various literatures reviewed as
well as the National Audit Report (2012, UK) has confirmed that
suppliers regard high volume purchases. Twenty-seven (27) of the thirty-three
(33) suppliers surveyed confirmed that “they always or often provide lower
prices for contracts involving a greater volume of goods or services”.
When you buy in huge volumes, you can then negotiate for better deals, as you
hold a purchasing strength over the supplier.
Further costs that may be reduced by collaboration is through asset sharing which reduces costs associated with inventory. Organisations may turn to share
procured assets and thus put them to use rather than maintain them as inventory
with its attendant costs associated with it. This cost benefit has not been
emphasized in most literature on collaborations, as most organizations
are
not keen on sharing assets. Why maintain a conference room
alone when your organization only uses it 4 times a year? Co-location helps reduce purchase or rent
costs, maintenance costs and utility costs which would have been borne by an
individual organisation if not shared with other organisations.
Enhancement of Procurement
Information
Collaboration involves the
sharing of knowledge on procurement. Procurement experiences with various
suppliers, contracts and agreements as well as knowledge of the market could be
harnessed and be of benefit to all partners. These information may be
fragmented without collaboration and the potential that could be derived from
this is lost. Information such as service
catalogues when harnessed into a single catalogue can serve as a huge database
to effectively enhance procurement decisions made. I may know 10 suppliers, but my purchases will improve if I knew
10 more suppliers, had an experience of their products and services or even a
relationship with them. This can only be gained when organizations share
information in collaboration. Imagine going to an African market to purchase
products (note: African markets have no price tags on products). I buy a
product for $5 only to get home and realize that my brother got that same
product for $1.50. Yes it happens and you can share in this. Only if I had
shared information with my brother before purchasing, he could have accompanied
me and for repurchasing, gotten it for $1.
I would not bore you with so many
“selling points”. However I desire you
think about these questions, how much are you losing on your purchases; how
much could you have gained by engaging in collaborative procurement? And; what
would you have lost in sharing?
Ghanaian adage: it is easy to
break a broomstick, but more challenging to break the entire bundle of
broomsticks when bound together.
These are just three simple ways
culled from my MBA dissertation on ways to collaborate:
·
Inter-organisational
Service Agreements — An inter-organisational service agreement is a contract
between/among two or more organisations through which one of the organisations
provide service to or on behalf of the other organisation(s). This is
essentially contracting for services. For example, organisation A may contract
with organisation B to provide HR support, while organisation B provides legal
support to organisation A. Costs associated by the respective firms are then
reduced and focus is given to the core functions of that organisation.
·
Joint
Equipment Purchasing and Sharing — Organisations may jointly purchase and share
equipment and machinery. Such arrangements work best when the equipment
involved is expensive, specialised, and is utilised only for short periods of
time or relatively infrequently. Example, co-investing in an off-site back-up
system where participating organisation can store and secure data. The cost may
be high but little drops of water....
·
Co-location
— Co-location involves two or more organisations occupying and sharing a single
building facility, such as conference rooms, staff rooms and other facilities,
receptions, and canteens, eliminating the need to duplicate. It is also
typically less expensive to heat, cool and maintain a single building compared
to operating and maintaining two separate buildings with the same amount of
total space.
Thank you for collaborating with me on this piece….if you agree (smiles)!
Portions
have been culled from G France’s MBA Business Report, Kent Business School.
