Project Procurement, Risk Management, Quality Control

Introduction

To a greater or lesser extent, every organisation needs to purchase products or services or both from other organisations, which justifies the importance of such an area of organisational activities as professional procurement. Academic studies have confirmed that successful procurement largely contributes to the overall success of organisations’ operation (Burke 2013). It is suggested to recognise and consider that procurement is not merely the acquisition of goods; it is a complex combination of processes and functions within an organisation as well as among organisations that need to be properly managed. One of the approaches to procurement activities is project procurement. The project approach is helpful because it regards procurement processes and functions comprehensively and in connection to one another, incorporating (besides the actual acquisition, i.e., implementation) such stages as planning, preparation, monitoring, and evaluation.

Apart from the flow of procurement, project procurement encompasses a range of considerations that need to be applied in order to ensure that the goals set by an organisation are achieved. Three such considerations are continuous improvement, risk management, and quality control (van Weele 2014). Continuous improvement is defined as an ongoing effort to improve various aspects of a process. It means that processes should be designed and implemented to not only accomplish determined tasks but also to constantly increase such indicators as efficiency (i.e., improving the quality of results with the use of the same resources). Risk management is defined as predicting and evaluating possible threats to achieving the set goals and minimising possible adverse effects. Quality control is defined as a system of testing that is aimed at checking and maintaining the standards necessary for successful performance. To establish the interconnections among all three processes and their importance for the project procurement activities, it is necessary to regard them from both theoretical and practical perspectives.

Continuous Improvement

Sollish and Semanik (2007, p. 6) argue that “[t]o be effective, the procurement professional must continually explore new methods and seek out alternatives that will improve existing processes.” Various studies on project procurement have confirmed that improvement is pivotal in succeeding from the perspective of procurement. It means that achieving established goals and standardising processes and functions involved in this pursuit does not lead to stability, as may be assumed, but to deterioration and falling behind. In an organisation, as well-established as it may be with its internal procedures and operation, developments constantly occur, and the number of needs and issues to be addressed subsequently grow continually, which is why existing processes (in various spheres, including procurement) become obsolete (i.e., inadequate or insufficient for addressing new challenges).

One of the approaches to continuous improvement is benchmarking. According to Quayle (2006), benchmarking processes contribute to shaping organisations and largely affect planning. They are also capable of modifying various aspects of the existing operation. Quayle (2006) examines a particular example: the experience of Rank Xerox, which discovered serious competitive disadvantages compared to their competitors based in Japan. From a procurement perspective, Rank Xerox had higher costs, nine times the suppliers, and complications with taking products to the market (approximately twice the time that competitors needed). In this situation, the organisation’s management decided to resort to benchmarking. The effort of Rank Xerox was so outstanding and successful that it resulted in the creation of a benchmarking model that has become influential since then. Five processes are identified in this model: planning, analysis, integration, action, and maturity. Key steps in benchmarking are identifying the best competitor and establishing functional goals. Upon implementing specific actions, progress should be reported, and benchmarks should be recalibrated.

Benchmarking and other approaches to continuous improvement are particularly relevant to project procurement for three reasons: necessity, diversity, and validity. First of all, all the organisations face the need to purchase goods and services from other organisations, which is why they all possess certain experiences with procurement. This means that there is a vast array of available data for improving procurement. Second, when approaching procurement issues, professionals may be confused by the variety of available options, which is why learning from the experiences of other organisations can be highly beneficial. Finally, there are many theorists and practitioners who have confirmed the importance of continuous improvement in procurement (Baily et al. 2008; Dimitri, Piga & Spagnolo 2006; Johnson, Leenders & Flynn 2011), which is why related practices are valid for application.

Risk Management

Van Weele (2014) notes that there is a growing recognition of the importance of risk management in supply chain management. The standard definition of risks involves uncertainty, which means that a lack of planning, definitiveness, or predictability can adversely affect the performance and implementation of objectives. Procurement risks primarily include unavailability, inadequacy, and insufficiency of resources. Also, such risks as poor performance of persons responsible for procurement should not be disregarded. Managing risks does not necessarily mean eliminating them. In their attempts to eradicate any uncertainty, practitioners often create overwhelming systems that hinder operation and development. Moreover, those systems do not work because there are still risks. It should be recognised that any practical processes involve a certain degree of uncertainty (Cavinato, Flynn & Kauffman 2006) because it is impossible to predict everything or control everything. Instead, successful risk management focuses on identifying potential risks and addressing them (i.e., establishing how possible adverse effects can be avoided or mitigated).

An important aspect of risk management is providing feedback. Risk management professionals do not work separately from professionals in the areas where risks are explored; rather, they work together, and risk managers do not only support activities by predicting where failures can occur but also suggest how the operation and functional processes can be improved toward less vulnerability (i.e., a lower level of risks or possible damage from failures). Sollish and Semanik (2007) identify seven categories of risks: finances, scope and schedule, law, environment, social and political issues, project organisation, and human behaviour. For example, an organisation may assess that a major risk for its operation is hindered implementation caused by the lack of instructions at the branch office level. Managers of this level have reported repeatedly that they receive insufficient guidelines from the corporate level, which is why a lot of time is spent on clarifying functional tasks. As risk management specialists identify this problem, they not only ensure that instructions for a particular project are more comprehensive but also encourage the organisation to adopt a different model of internal communication. This example shows how risk management efforts contribute to shaping organisational procedures and policies and to overall development.

Judging from this perspective, the importance of risk management in project procurement is evident. Processes and functions of organisations associated with supply and resources involve many interconnected elements, which means that there are many things that can go wrong. Assessing how they can go wrong and what should be done in this case is needed to ensure that established objectives are met. However, it is also important to assess why they went or might go wrong. Through this assessment, risk managers provide valuable recommendations for the project procurement system.

Quality Control

Quality control is the practice of testing samples of particular products or services with the purpose of assessing whether they meet the requirements of the buyer or the declared standards of the seller. The practise requires the presence of clearly defined standards and evaluation criteria. The very term “quality control”, as opposed to quality assessment, implies that the structure or unit that performs it is separate from production and placed above for monitoring, estimating, and reporting (Lysons & Farrington 2006). However, it has been recognised within recent decades that such a principal characteristic of products and services as their quality is less expensive for organisations if it is controlled from within operation and production than an external inspection is (Sollish & Semanik 2007). At the same time, failures associated within compliance (i.e., cases where products and services do not meet requirements) may occur on different levels and stages of creating or delivering products and services (Baily et al. 2008), which is why comprehensive control is needed and not only testing of input (used resources and materials) or output (delivered products and services).

In project procurement, quality control is applicable in several contexts. First, organisations need to develop standards to be applied in purchasing to ensure that they buy what they need and what will serve their purposes properly. From this perspective, quality control appears to be the key practice in procurement. The entire process of purchasing and resourcing should be built around the understanding of quality standards (Burt, Petcavage & Pinkerton 2010). Second, quality control requires procurement professionals to develop comprehensive assessment tools (Dimitri, Piga & Spagnolo 2006) that normally include technical descriptions and detailed evaluation criteria.

With the use of these tools, project procurement activities are less likely to have risks, because they are planned and implemented on the basis of solid and reliable technical data. Finally, quality control may provide valuable feedback that can contribute to the organisations’ operation (Johnson, Leenders & Flynn 2011). When standards are discussed (i.e., when project procurement professionals and quality control professionals establish lists of technical requirements and evaluation criteria), they may discover that the requirements as they are described do not benefit the organisation. Therefore, in quality control, there are opportunities to discover shifts in organisations’ needs. Also, quality control teams profoundly explore a wide selection of products and services and learn about various characteristics, which is why they are likely to find products and services whose characteristic may serve their organisations’ purposes better. It shows that, apart from ensuring that standards have been met, quality control can also improve procurement by matching it more accurately to the organisations’ goals.

Conclusion

In exploring the connections between project procurement and such practices as continuous improvement, risk management, and quality control, the importance of all three for achieving organisations’ goals have been established. Further, it should be noted that the three practices are connected to each other as well. Judging from insights into the practices described above, these practices incorporate similar and often overlapping processes, which means that the professionals involved in them should cooperate extensively. Risk managers and quality control teams provide feedback that contributes to an organisation’s continuous improvement both in the procurement area and the area of the overall operation.

Reference List

Baily, P, Farmer, D, Crocker, B, Jessop, D & Jones, D 2008, Procurement principles and management, Pearson Education Limited, Harlow.

Burke, R 2013, Project management: planning and control techniques, McGraw-Hill, New York.

Burt, D, Petcavage, S & Pinkerton, R 2010, Supply management, McGraw-Hill Irwin, New York.

Cavinato, JL, Flynn, AE & Kauffman, RG 2006, The supply management handbook, McGraw-Hill, New York.

Dimitri, N, Piga, G & Spagnolo, G 2006, Handbook of procurement, Cambridge University Press, Cambridge.

Johnson, PF, Leenders, MR & Flynn, AE 2011, Purchasing and supply management, McGraw-Hill, New York.

Lysons, K & Farrington, B 2006, Purchasing and supply chain management, Pearson Education Limited, Harlow.

Quayle, M 2006, Purchasing and supply chain management strategies and realities, Idea Group Publishing, Hershey.

Sollish, FB & Semanik, JS 2007, The procurement and supply manager’s desk reference, John Wiley & Sons, Hoboken.

Van Weele, AJ 2014, Purchasing and supply chain management, Cengage Learning, Andover.