Coding For Buying Organisations
Standardizing descriptions is the first part of the process towards knowing what is bought then getting the best prices. Coding is the process of applying a unique code to a standardized description so it can be easily referenced in a computer system. The code should be hierarchical so that it can be used to create management information on where to base most resources.
Common Data Problems
Most procurement departments suffer from having poor quality information on what they buy. This is caused by two main factors:
The needs of the present outweigh the requirements of the future.
Procurement staff are judged to be efficient when they have orders placed for requisitioned products and services in the minimum possible time and have ensured the organisation does not run out of needed products. This is often at the expense of best price. The price paid may be from an existing contract or may be sourced from a few phone calls, so will be the best achievable on the day. Unfortunately staff will not be judged on how good a procurement record they have created or on what overall savings could have been made based on average annual usage.
Lack of staff expertise in creating good quality information.
Staff are not given any training in the creation and maintenance of quality procurement records and it is not included on any supplies training courses or by CIPS. This is because it is a specialist role and to learn these skills would take staff many months of training.
The main problem with the procurement data will be that the computer descriptions will have been created using free text which is not governed by standardizing rules and policy. This means that the procurement history that should be built up whenever a product or service is purchased is of poor quality. CIL’s experience has shown that some organisations can have the same product described over 40 different ways. Good procurement history is therefore not created, which means the following information that should be available is not known:
What products and services are bought during the year
The total quantity of the products and services purchased over the year
What should be on contract, as against what is on contract
Price benchmarking of items existing in local and national contracts
Price benchmarking of the same products made by different manufactures
How to collaborate with other similar organisations on contracts
Real savings made during the year
How to standardize and rationalize products