Managing project procurement and partnerships
One of the most important decisions in any organization is to produce itself or buy. New circumstances that have arisen in the organization, in the market or in the economic environment in general may require the company to make a decision to buy. As experience shows the company will need processes required for delivery of products and services externally, in other words, in the external coordinated delivery resources and durable partners. Project is linked system which includes intangible resources such as customer, user, supplier/service providers, officials/authorities, investors, media, competitors, and tangible resources such as raw material, software, equipment and so on. That means that change in one part may impact on other. Thus, managing of project stakeholders and project procurement is required to have successfully executed a project and important part of project management.
In my opinion, through a proper understanding of who are the project stakeholders we will be able to most closely determine their nature. For me the most relevant definition of project stakeholders is all those who participate within or outside an organization, have a vested interest or a gain upon a successful completion of a project and environment in which the project operates.
Successful management should be considered not only in terms of implementation of particular project/projects but also as benefit in the long-term viewpoint. Project can be a failure if stakeholders are not managed adequately even though the tangible objectives of the project were reached (Miia Martinsuo (2011)). We cannot say for certain but trust relationships which are already based on the experience between each other can be useful in the foreseen future, for instance may reduce the pure time of preparation before carrying out the project.
It should be noted that during of project implementation interests and priorities of each stakeholder are less or more different. But, nevertheless, one thing integrates them into one whole scilicet interest in success.
During the initial phase of the project implementation it is very important to correctly identify the stakeholder including formulating a clear state of current project tasks and roles, their expectation and interest towards project, properly understanding the influence of each stakeholder, needs and restrictions to project, and finally, assessing almost at every turn of stakeholder behavior (controlling on the permanent basis of conflicts, partnership management and so on) for further relationship building. For me the most appropriate method is stakeholder salience framework (Figure 1).
The model describes seven stakeholder characteristics based on three parameters.
(1) Dormant stakeholder does not exert his power because his requirements are insufficiently legitimate and urgent. The stakeholder does have the potency to win urgency and legitimacy, for example, a person or group able to manipulate media attention.
(2) Weak or discrete stakeholder has no urgency, but he does have legitimacy. Due to lack of power this stakeholder is unable to influence the organization. Usually these are non-profit organizations and voluntary organizations.
(3) Demanding stakeholder puts down an urgent claim, but he has insufficient legitimacy. There is no authority to be exercised.
(4) Dominant stakeholder has power and legitimacy. His demand or claim, however, is not urgent. The stakeholder has high expectations and is usually given much attention. Examples include staff and unions’ representatives who are members of a company’s board.
(5) Dangerous stakeholder will be dangerous provided he has power and an urgent claim or demand, but insufficient legitimacy. The stakeholder can be authoritative and even use violent tools. It is very important to recognize dangerous stakeholders, however meeting their claims are not always necessary. One example of a dangerous stakeholder is an interest group with incorrect or deliberately manipulated details about a company’s environmental achievements (Greenpeace and the Brent Spar case).
(6) Dependent stakeholder has an urgent and legitimate demand however he lacks the power. This means the stakeholder depends on other people such as the dominant stakeholder, who does have the power to impose the dependent stakeholder’s will. A dependent stakeholder could be a conversation organization for instance.
And, finally, ultimate stakeholder can be considered ultimate stakeholders provided they have power and a legitimate/urgent claim. This type of stakeholder is the most appropriative for company.
Figure1. The salience framework for stakeholder mapping.
Over the last few decades the rate of competition development has gained new turns with the development of globalization. During this time the leaders of companies around the world have realized that good procurement and supply management allows providing a number of strategic advantages. However, a change in the leader approach to the issues of procurement and supply management are often not reflected in the actual results.
In general, spending on goods and services account for about 70% of total company costs, so leaders are well aware that the optimization of procurement can provide increase of profits. The role of procurement management is largely associated with the idea of reducing costs. This is achieved, for example, by obtaining discounts from external suppliers, or by implementing procedures to reduce unnecessary costs not covered by the estimates. First of all, they include significant cost savings through collaboration with suppliers from countries with lower costs, and enhance the competitiveness of the supply chain, the optimization of product development and reduce implementation time of new products to market.
Some companies are experiencing a lack of qualified personnel. Because some companies underestimate the role of qualified personnel in the project procurement management that adversely affects the efficiency indicators in the future.
Another problem in the area of procurement is low or incorrect targets which are set to the relevant departments and the activities of employees limited to contracting.
Also, there is another problem that lies in the fact that the actions of procurement specialists may run counter with the corporate strategy. Typically, this problem is directly related to the two previously described. In low-performing projects differences between the procurement strategy and overall corporate strategy occur because in the early stages of strategic planning issues associated with the procurement are not taken into account.
From all the above, we can make certain conclusions. First, companies that have succeeded in optimizing procurement, pay more attention to work with the staff. They endeavor to develop the skills of specialists in supply department and at the same time are looking for effective way to unite all members of the organization a common purpose. Secondly, these companies are setting themselves scale tasks that are planned not only with the strategic vision of the future development, but also with identifying the specific ways of achieving the intended results. Finally, companies with the highest indicators in the procurement and contracting management pays attention specially to ensuring that the problems of supply units match corporate strategic priorities. This not only allows companies to more effectively use existing opportunities to reduce costs, but also creates the conditions for greater benefits in the future. All listed findings may boldly define procurement management as the status of an independent direction of action.