Needs analysis is the last activity from spend analysis, following from a market analysis when developing a procurement plan.
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Market analysis provides the buyer with a strong understanding of the market dynamics in the industry they procure from.
Spend analysis then makes it easy to accurately analyse goods and services that were historically procured with an intention of extrapolating what the future would require.
The next step is then to plan what should be procured, what quantities and when the procurement should start.
Such planning is necessary and very critical given that the organisational requirements are infinite whereas the resources to satisfy them are very limited. It is, therefore, necessary to separate wood from trees and trees from forests as procurement is planned.
Economics recognises that resources are limited and prioritisation is, therefore, necessary.
The requirements of men as well as business are then classified into needs and wants. Needs are the requirements essential for the organisation to survive.
Failure to satisfy a want leads to the collapse of the organisation. Wants on the other hand are choices or desires that the organisation may or may not be able to get. The business continues normally even when the want has not been satisfied.
In satisfying needs and where there are various options on the market, another element of wants cripple in the satisfaction of needs in business.
Businesses like humans need food and shelter to survive. One may want to satisfy hunger with expensive cuisines that he may or may not afford.
There is also a choice of owning a house or renting an apartment to satisfy a need for shelter.
One might want to own or rent a house in a posh suburb that he may or may not afford.
In addition to affordability, sustainability also needs to be considered along other issues that are exposed by market analysis.
This applies to both the procurement of capital and operational items required by the organisation.
Procurement personnel use various methods to identify needs. This starts with categorisation of requirements that is followed by classification of products.
Various classifications exist and the most common is by grouping requirements into vital, essential or desirable where resources are allocated to the vital and essential class first.
This then become the first part of separating wood from trees and trees from forests in procurement.
All team stakeholders within the organisation need to be at the same page with regards to the motivation behind a procurement plan.
Engineers are generally inclined to superior products that demonstrate one’s ingenuity.
Marketers on the other hand would want products that are appealing and affordable to their target customers for easy selling.
Production on one side favours economic processes to minimise costs. It is the duty of the procurement person to balance all these varying requirements in the production of a procurement plan.
Sifting of needs and wants starts at this stage in the development of a procurement plan.
The procurement person would need to pull together a multi-disciplinary stakeholder group that would gather to clearly understand how their competing wants towards the satisfaction of organisational needs can be reconciled in every project.
It is important for the buying organisation to take cognisance of the fact that a successful procurement plan take root on the capacity of the organisation to match market knowledge with demand after a thorough analysis.
Such a process would not only achieve the objective of identifying the needs from wants of an organisation.
It will go further to recognise that resources are limited and that projects do have a critical path to follow.
An analysis of the project’s critical path would achieve the prioritisation of the procurement process of a project. Some projects failed not because needs where not identified appropriately but prioritisation of the needs was wrong.
Construction projects are easy to explain this concept since they are paid in stages and it is important to plan the cash flows appropriately.
Some due to lack of knowledge or motivated by corruption tendencies may prioritise the procurement of materials that are required at a later stage of the project at the risk of tying operational capital on issues that can be dealt with at a later stage. Moving procurement from an operational level to a strategic level is the only solutions to leverage from the critical business activity.