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Is profit made when you buy or when you sell?

This is a big question as with our institute we are just procuring services and we are not selling it will become a problem as we are more on the spending side and not the saving side but we try and get the lowest price but not compromising quality and accessibility.

I assume your comment relates to the fact that your organisation is of a public service nature. What incentives could be provided to incentivise such a procurement environment?

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Is profit made when you buy or when you sell?

Surely the should get it.Sometimes it depends with the policy of the company or an organisation. If the company or an organisation has performance management system for each department which is linked to overall strategic plan. On the side of procuring staff their performance is based mainly on saving costs whilst at the same time procuring goods or services of good quality.

Could this not be a vehicle for agressive procurement? Taking no prisoners when negotiating?...I think that it could also lead to an adversarial relationship in some instances ( i could be wrong ) but based on the fact that any procurement organisation should be bottom-line driven - i think it would be up to the CEO or head of the organisation to OFFER the reward and not make it a driving force....(my 2 cents).......If you earn a (good) salary...and you receive recognision - it would be a plus.........

I am supportive of an incentive scheme for Procurement officials; Sales people are performing better because of an incentive scheme - Yes, it can impact on the relationships, and not only with suppliers but witin a group as well...; such an incentive scheme must be more team focused, provided that the procurement officials are involved in budgeting and the complete supply chain mangement loop.

With regards to Graham's question, "Could this not be a vehicle for agressive procurement?", surely procurement should be aggresive in achieving their goals.

The key is that the procurement goals and the individual incentive packages should support the strategic goals of the organisation. Also, the entire supply chain has to be aligned to achieve these goals!

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David van der Walt

To some extent i agree - depending on the industry. What is important is that you implement a systems approach toward aggressive procurement. Long term - i think buyer - supplier centric relationships are key.The learning curve will enable you to address bigger rewards as an example.
Short term - savings,savings,savings....and don't forget measurement.
"Look after the pennies - and the pounds look after themselves..."
Has anyone got a salary band for buyers?....what does buyers earn - entry through senior level.

I think the key point to remember here is that the goal of procurement should not only be cost reduction, but supporting the organisation's strategic goals.

So goals like supplier development, partnerships, employee development etc. can also be aggressively pursued, and the incentives should encourage procurement staff to achieve these goals.

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David van der Walt

Members,

The concept of an incentive is a great idea. One needs to understand that the overall reward may not be based on just monetary element, but other incentives that can be used to enhance and entice better results. on the other hand one must also consider that an incentive or a cut from the savings achieved could distort the overall objective of the function. By this I mean that the drive could be just for the money(savings) and the end result will be a compromise in terms of quality/ value for worth, due to continuous squeeze for savings