It would be fair to say the range of factors that should be considered in assessing performance must be tailored to the specific requirements of the municipality as a customer.
Nevertheless, there is likely to be considerable consistency concerning requirements not only across different municipalities, but also between the public and private sector. Those private sector buyers who have implemented performance evaluation schemes generally focus on a narrow band of considerations.
Underlying any effort at performance improvement must be some form of systematic measurement. Generally, it is necessary to move from a point of known origin towards some intended performance target.
Critical areas of concern include: What does it cost to operate the purchasing department? What is the per transaction cost? Is the number of transactions processed increasing or decreasing? Is the department meeting any goals that have been set for it?
The aim of the measurement process is to provide a greater understanding of the department. A holistic review of its performance allows one to assess whether it is operating in accordance with the vision.
The following key principles afford a guide to the development of an effective measurement system.
- The measurement system must be tied to the strategic objectives of the municipality.
- The measures must be balanced, including both financial and non-financial information.
- Measures should focus on a mix of process data and outcome or impact data, taken over time.
- Measures must be based on operational definitions. Good measures are based on an organization-wide system using clearly defined and understood concepts and definitions.
- The measures must be within the organization’s sphere of influence (i.e., they must be tied to activities undertaken by the organization).
- Measures must be dynamic, relevant and timely. They must adjust to growing knowledge in relation to the organization.
- Measures must be interconnected (i.e., always reported collectively rather than singly).
- Measures must provide a holistic view. It is best to focus on a limited number of key measures that reflect all facets of the organization.
- Measures should be communicated to staff and documented. It is not enough simply to pass the results along. Employees must be able to use the information provided to improve performance.
It has been estimated 75 per cent of business performance improvement projects fail to produce the intended results. One reason for this high failure rate is these plans are based on inaccurate information.
In order for real planning to take place, managers must have access to information on a timely basis and they must have confidence in its accuracy and utility. They must also be trained in using the data with which they are provided. A prerequisite to meaningful assessment is to measure the initial position for only by so doing can one track progress towards an intended target.
In the process of performance improvement planning a purchasing department should gather information relating to procurement and logistic operations, analyze it and present it in a comprehensible and digestible form to senior planners within the municipal organization.
In order to make rational decisions they must have access to current, accurate and comprehensive data, provided to them on a timely basis. The presentation of information in a raw form slows the process of factoring that information into decision planning.
It is, therefore, highly beneficial to receive information in a processed form so that it is first compiled and analyzed by those having specific understanding of the subject to which it relates before it is provided to senior decision-makers. The purchasing team can play an important role in smoothing the flow of information into the strategic decision-making process.
The monitoring of the internal process of supply should be directed towards effecting improvement whenever possible.
