Centralization to Decentralization and now Collaborative Working Systems: Evolution is ever present!

“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 

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.