ANALYSIS OF POSSIBILITIES IN PROCUREMENT (MATRIX OF PROCUREMENT POSSIBILITIES OR PROCUREMENT OPPORTUNITIES ANALYSIS)
We are often asked about the identification of priorities in the buyer’s day-to-day work, category management or procurement strategies. The buyer must make important purchase decisions every day, and in the multitude of tasks he must choose the best solution and proper direction. How can we support these decisions? One of the proven and efficient solution is the analysis of possibilities, also known as the Procurement Opportunities Analysis, which we will briefly present in this article.
This tool is particularly useful for category managers in deciding which category to optimize in the first place, especially when the category is very wide or the main category is very extensive. It have to be remembered that a well-designed plan to optimize procurement category is one of the elements of success. But as mentioned earlier, it can also be used for other areas of management, task prioritization, projects or finally purchasing strategies. In this article, however, we will use the management of procurement categories to describe the tool.
What is the opportunity analysis about in general?
- Identification of priorities;
- Identification of the right areas for the implementation of procurement strategies;
- A basis for preparing a strategy and schedule for managing subsequent purchase categories;
- Support for team management (how to split work);
- Support for decisions of the board and internal partners.
The analysis of procurement possibilities is carried out with a matrix of possibilities consisting of 4 parts. The fields are created taking into account two criteria:
1) the scale of potential benefits,
2) difficulties which we occur during the introduction of necessary changes to implement the indicated benefits.
These two factors allow us to quickly indicate whether it is worth spending time on a specific project, procurement category or strategy. Below picture shows the Possibilities Matrix (by GOODMAN GROUP Sp. z o.o).
Picture 1 – The matrix of Procurement Possibilities
You are probably wondering how to create such matrix? Several methods are existed but the simplest way is to prepare a simple table in an Excel file with the evaluation of both the above criteria with ranges. Criteria can be as following:
[Criterion] Potential benefits may be:
- Scheduled savings from the project or optimization of the procurement category;
- Risk level;
- Added value.
However, keep in mind that the potential benefits should be clearly defined and consist with company’s overall goals or/and the objectives of the procurement department.
[Criterion] Ease of implementation may include the assessment of:
- How easy it would be to change something in the organization;
- Does market exist? How the market looks like? Could difficulties be noticed to find potential suppliers, do we have possibilities to change suppliers?
- Company’s Internal problems or procedures and internal restriction occurring implementing projects, strategies, etc.
Below we present very simple method to assess both of the above criteria:
Possible analysis results (description of matrix fields):
- do not implement now – it is possible that the procurement category may be worth some effort, but perhaps later, when all other benefits from other categories will be obtained;
- worth of interest, but later – procurement categories associated with high potential benefits, however, implementation can be difficult. If we want to show quick results, we should be interested in another matrix part which is called:
- quick wins – means procurement categories characterized by a low implementation cost, ease of implementation, which we are able to implement in the short term.
- priorities – procurement categories which should be implemented in the first place, achieving high results with low resistance during implementation.
As you can see from the above, this tool can be easily used by buyer in a few minutes. You can also freely adjust them to support the buyer’s work in a professional way. On our training, we discuss how to create and use the analysis of procurement possibilities. Pleases check our ongoing trainings.