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10.11.2008 Feature Article

The chaotic era of procurement and supply Chain

By B&FT

The concept of Procurement and Supply Chain management has been part of the corporate Ghana functional terminologies and jargons to describe that important responsibility which ensures the flow of goods and services to satisfy our respective internal and external stakeholders.

The term is used interchangeably depending on the organisation or institution and their understanding of the concept of procurement, supply chain, logistics, and value chain among others. The procurement and supply chain functions are very critical aspects of contemporary businesses in the developed countries and as usual the real features or characteristics are now showing up in Ghana and Africa with strong resistance from the custodians of the status quo.

Most organisations and businesses in Ghana in particular and Africa in general are still in the chaotic era in terms of the standards and best practice. A critical survey will reveal the lack of clear modern structure and framework in managing this important function thus driving most businesses into the chaotic arena with its attendant waste accumulation and subsequent intense pressure on the finances on these businesses. The lack of defined order and discipline in managing our procurement and supply chain responsibilities has been a source of worry and concern to most strategic decision makers such as Chief Executive Officers and Finance Directors since they are ultimately responsible for the financial health of their respective organisations.

The main characteristic of chaotic era procurement and supply chain systems includes lack of clearly defined policies and procedures or existing ones which are scanty and pale when compared to established strategic level requirements. An audit in most of our local businesses will reveal compliance rates of about less than 10% of pale policies and procedures with the remaining 90% without any form of policies and procedures. The expression “buying value for money” alone within a two page all inclusive document termed policy cannot guarantee a well structured and a secured spend machinery which can be relied upon at all time without continuous micro management. A well structured procurement policy and procedures with inbuilt systems of internal control provides an internal mechanism which checks each function and individual to ensure compliance at all times.

The promulgation of the Public Procurement Act (663) in 2003 to streamline and regulate the public spend machinery was one of the positive steps undertaken by the government with “support and encouragement” from our donor partners to at least stop the bleeding in the public sector. The question we need to ask is what where they doing with our taxes and donor supports prior to the coming into force of the Procurement Act.

The Procurement Act in itself cannot guarantee a sound and professional procurement practice if the right qualified people are not engaged, adequately experienced and new attitudinal changed towards the collective preservation of our scarce resources. Public procurement after the above has graduated to the procedural era of procurement evolution and hopefully will graduate into the value chain category.

However if the capability levels of the same people are not improved through capacity building training programmes in line with current strategic procurement and supply chain requirements as opposed to “redefining and perpetuating the outmoded status quo” as well as attracting the right calibre of professionals with a new personal value standard which ensures that expenditures are only incurred when it is driving value into the system as opposed to expenditure based on budget availability.

Most businesses in the private sector also face the same dilemma with no established framework to manage the entire supply chain from procurement, warehouses, stores, inventory, and logistics among others. This chaotic situation can be compared to putting up a five storey building without an Architectural, structural, electrical, plumbing and other guidelines for all artisans to follow. Without the above “things will fall apart and the centre cannot hold” and thus pressure will mount in the whole system and the toxic produced will poison the entire atmosphere affecting both internal and external stakeholders.

The evidence of a chaotic procurement and supply chain system includes a stressful/unproductive function, stockholding problems, increased expenditures, falling profits, customer dissatisfaction, wasteful spending among others. The lack of order breeds business constipation, corruption and other institutional vices since the system lacks a clear defined path structured to guide the entire spend machinery.

It therefore beholds on all institutions to immediately provide the needed “procurement and supply chain architectural blueprint” to transit from the current chaotic systems into a more refine and tested structures which “can carry the business load” during the expansion period. Resources are becoming scarce and with the current global financial crunch, growing organisations, institutions, companies, governments do not have the luxury of wallowing in the chaotic spend environment.

God will only bless our finances if we can command some order into our procurement and supply chain expenditures since they constitute about 50-70% of our spend. Order cannot be restored by only wall hangings and slogans but by concrete institutional redesign, restructuring and orientation supported by top management.

The time to act is now!

Credit: Sam Buabasah [Email: [email protected]]

Source: B&FT

B&FT
B&FT, © 2008

This author has authored 3 publications on Modern Ghana. Author column: BFT

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