High-Performance Procurement

Introduction

Whilst further and higher education institutions in the United Kingdom are generally considered as having the primary purpose of educational output, it is generally seen in the market place that these institutions are run in a similar fashion to most other corporate institutions. It is therefore not surprising that strategies of strategic procurement in these institutions are similar to these traditional corporate institutions. Further and Higher Education Institutions (FHEIs) face a unique challenge in terms of sustainability goals as they are highly valued in the market in terms of national education goals, yet face significant challenges with regards to budget concerns as relying on government funding, research incomes, tuition income and fundraising initiatives as combined sources of incomes. With austerity measures in the current economy seeing further restraints on these budgets, strategic procurement becomes arguably more important. FHEIs historically, as having a primary goal of educational output place a stronger emphasis on operational efficiency and as a result may neglect strategic processes which have an effect on long-term sustainability goals (Kotler & Murphy, 1981). The underlying assumption of this research proposes that FHEIs do not prioritize strategic procurement as a part of their corporate performance objectives and therefore are institutions that stand to benefit greatly from the implementation of effective strategic procurement measures. Simultaneously however, the need for strategic procurement measures ensuring sustainability and organizational effectiveness must meet the need for operational efficiency. As such, traditional theories of strategic procurement may have limited operation to these institutions. However, there is a lack of research into the applicability of these theories in this sector and the proposed research there aims to address this gap.

The research proposed aims to understand the potential benefits of strategic procurement that exist for FHEIs, as well as a set of criteria that can be used to measure this aspect of organizational efficiency within the sector taking into consideration the specific challenges and nuances of the sector itself. Specifically because of the high reliance on operational efficiency within these institutions, it is necessary to consider the non-financial benefits of strategic procurement, as well as the financial benefits.

Research Question & Objectives

The research question proposed hereby aims to determine the application of theories of strategic procurement in the further and higher education sectors in the United Kingdom with regards to potential benefits and corporate performance. In doing so, this research proposes the following specific objectives:

To determine the specific benefits of strategic procurement in the further and higher education sector in terms of corporate performance.
To determine a set of criteria for measuring the effectiveness of strategic procurement within this sector.
To determine the applicability of traditional theories of strategic procurement to Further and Higher Education Institutions.
Literature Review

Whilst there are a number of definitions that are offered for procurement, the following definition is offered for the purposes of the proposed research:

“Participation in the development of requirements and their specifications; managing value analysis activities; conducting supply market research; managing supplier negotiations; conducting traditional buying activities; administering purchase contracts; managing supplier quality; buying inbound transportation” (Dobler, 1990).

It is submitted that this definition is most relevant to FHEIs, because of the governmental purchasing element that is involved in these institutions by their very nature. FHEIs historically have needed to adapt their procurement strategies in a manner to maximize their resources. With 70% of the activities of a typical college of further and higher education consist of teaching and other business support activities, and only 30% made up of procurement (Quayle & Quayle, 2000), it is clear that there is a strong need to ensure that these procurement strategies are efficient and that these clearly maximize resources.

Strategic procurement generally consists of six core components, including supplier optimization, risk management, total quality methods (TQM), green purchasing, global sourcing and vendor development (Ukalkar, 2000). In assessing the potential benefits to FHEIs, one must consider the strategies used by these institutions in relation to these core components. The distinguishing feature of the proposed research however is in the application of these components to FHEIs, as arguably these theoretical concerns do not necessarily consider the size and type of organization involved in the evaluation.

Cox (1996) argues that there is a need for proactive strategic procurement management, rather than reactive management. The approach argues a link between competencies, relationships and asset specificity in order to procure a supply and value chain which reduces the costs of transactions and improves profitability. In this way therefore, the strategy must be one which is flexible and specific to the organizational needs of those institutions. To this end Chadwick (1995) argues that assessment of performance in this sphere can only be truly effective when the specific circumstances and environment of the organisation are considered. This measurement must be used with the means of improving performance and therefore lending itself to lean development of strategy rather than generic application of corporate strategies.

As a means of measuring institutional effectiveness of strategic procurement, Smith and Conway (1993) identified seven key characters of effective procurement. These are: a clear procurement strategy, effective management information and control systems, development of expertise, a role in corporate management, an entrepreneurial and proactive approach, co-ordination and focused efforts. Quayle and Quayle (2000) supplement this with an eight character, namely effective communication of the key success factors to all levels of the organization. This eight characteristic recognizes an identified weakness in procurement strategies as occurring when members are unaware of the total procurement picture (Wheatley, 1998).

These definitional elements will form the foundation of assessing the applicability of traditional theoretical components of strategic procurement to FHEIs considering the specific nuances of these organizations are unique in their position within the sector. In order to measure the effectiveness and potential benefits of these strategies for FHEIs, these theories will be examined as they apply to these types of institutions. In addition, the content of these characteristics will be explored in terms of traditional corporations to determine actual practical effectiveness in terms of financial and non-financial goals.

Data Collection & Analysis

Data collection in the proposed research will consider both primary and secondary information available as it relates to the topic. Primary information will be gathered about the state of FHEIs in the U.K with regards to publications by selected institutions as regards to financial and non-financial information, as well as that which is published by these institutions about their strategic procurement strategies. Primary information with regards to organizational goals of strategic procurement will also form the basis of the proposed research in order to determine the criteria for measuring the effectiveness of these strategies.

Data collection of secondary sources will be undertaken from a number of electronic sources, primarily from databases that consolidate the information relevant to the current topic. This will be drawn from sources such as such as Questia, Jstor, Emerald Insight, and Google Scholar. This will be used to supplement any other secondary resources that are available in libraries or published in scholaric literature. This literature will be used in order to form a theoretical comparison between the goals of these institutions in relation to their published strategy and on the basis of this comparison, recommendations for improvement of these strategies will be made.

The primary method of data analysis proposed by this research is one of secondary data analysis. Secondary data analysis can be defined as the analysis of data or information that was either gathered by someone else or for some other purpose than the one currently being considered, or often a combination of the two (Cnossen, 1997). If secondary research and data analysis is undertaken with care and diligence, it can provide a cost-effective way of gaining a broad understanding of research questions without having to undertake time consuming and often impractical methods of empirical data studies.

Conclusion

FHEIs are unique corporate institutions which face significant challenges in the market, because of the need for operational efficiency above effective procurement. However, because of the current economic climate and the ever increasing concerns over budgetary constraints of these institutions, the benefits of strategic procurement present attractive advantages. The nature of FHEIs make application of traditional theories of strategic procurement problematic as they may not consider the specific needs of these institutions and therefore the current research aims to explore the benefits that may result in the application of strategic procurement management, however specifically the application of traditional theories of strategic procurement. Through analysis of the published strategies of these institutions and comparative analysis with the accepted theories of strategic procurement, this research aims to develop a set of criteria for measuring the effective application of strategic procurement within FHEIs for maximum benefit within these institutions and in doing so, to add value to the current ambit of knowledge available with regards to strategic procurement within further and higher education institutions in the UK.

References

Chadwick, T. (1995) Strategic Supply Management. Butterworth Heinemann: Oxford.

Cnossen, C. (1997) Secondary Reserach: Learning Paper 7, School of Public Administration and Law, the Robert Gordon University, January 1997. [online] Available on: jura2.eee.rgu.ac.uk/dsk5/research/material/resmeth [Accessed 2 January 2013]

Cox, A. (1996) Relational competence and strategic procurement management. European Journal of Purchasing & Supply Management, 2 (1), pp. 57-70.

Dobler, D., Burt, D. and Lee, L. (1990) Purchasing and Materials Management. McGraw-Hill: New York, NY, pp. 100-15.

Kotler, P. and Murphy, P. (1981) Strategic Planning for Higher Education. The Journal of Higher Education, 52(5), pp. 470 – 489

Quayle, M. and Quayle, S. (2000) The impact of strategic procurement in the UK further and higher education sectors. International Journal of Public Sector Management, 13(3), pp. 260 – 284

Smith, R. and Conway, G. (1993) Organisation of Procurement in Government Departments and their Agencies. HM Treasury Consultancy and Inspection Services Division: London.

Ukalkar, S. (2000). Strategic procurement management for competitive advantage. New Delhi: Oxford University Press.

Wheatley, M. (1998) Strategic procurement: the route to big savings. Management Today, December, pp. 2-5.