Popularly known as the Iron Triangle, the variables of quality, time and costs need to be effectively managed by the procuring organisation the same way the supplying organisation does it to enhance the value chain. This is in recognition of the fact that procurement now focuses on managing the value chain that is achieved by effective the supply chain management.
PURCHASING & SUPPLY: NYASHA CHIZU
The supply chain is as strong as its weakest links. Modern procurement systems target strengthening the supply chain rather than competing with your service providers. The relationships in modern supply chains are now cordial, collaborative as opposed to traditional short term arms-length relationships.
Quality, time and costs need to be managed by all elements of the supply chain for an organisational value chain to be effective. Effective management starts with the end in mind. The three variables tend to compete and a process that is driven by the desire to minimise costs tends to compromise on time and quality.
There is a tendency of reducing the investment in the human and other resources that are necessary to meet the targets. This further extends to compromise on the class of inputs necessary for the project. In the end, low value is achieved when quality has been compromised and when schedules are not met because of the inadequate investments in resources.
On the flip side, if time is the factor, the tendency is that when it is a constraint, it inevitably increases costs. The organisation supplying the products or service would have to invest more to complete the project within the tight schedules.
Where the buying organisation does not accept additional costs related to additional resources to meet the tight schedules, quality is unavoidably compromised. The organisation may employ cheaper labour in form of lower class of skills just to meet the deadline without adding costs. This position is detrimental to the level of quality that will be achieved.
If the end is consideration of the procurement process is quality, it means the organisation will need to plan the cost of the inputs to meet that quality. The inputs would then be fit for the purpose providing the right appeal to the customers.
The cost will therefore be associated with that level of quality required. Productions schedules will be planned in line with the process that will be applied.
Schedules will accommodate the minimum level of quality required. In this case, the level of quality required determines the associated time required as well as the costs balancing of the three Iron Triangle variables.
Since the focus of modern procurement systems consider the supply chain in total. It means that request for quotations sent to members of the value chain shall consider the minimum lead time that is required to produce goods of a certain quality.
Under no circumstances shall the buyers demand shorter lead times that is not consistent with the level of quality required. This can only be achieved if the relationship with the supplier is cordial and long term.
It allows for sharing of information that is necessary for planning on both ends.
The benefit of sharing information are that the supplier can anticipate when the customer enquiry is expected with some degree of certainty the same way the buyer will anticipate the quality, costs and schedules from the suppliers.
This cannot be achieved when the buyer-supplier relationship is adversrial, short term and win-lose. If the focus is service par excellence, then a paradigm shift is required from purchase contract management to supply chain management to enhance the value chain for the benefit of quality service delivery.