Everything is a project

From the June 2024 print edition

Profitability and financial stability are priorities for any organization, yet recently the global variability in supply and demand has meant unpredictable market conditions.

Therefore, a focus on budgets has now eclipsed operational excellence. In order to boost profits, organizations are implementing cost-cutting measures instead of value-engineering strategies.

Procurement’s goal is to source a product, service, or resource on time and within budget. Project managers, meanwhile, say there’s a critical path in predefined purchasing tasks aligned with waterfall, agile or hybrid project methodologies. The link between procurement and project management methodologies is to measure productivity as a key performance indicator.

Productivity comes from using project management resources efficiently within an effective procurement process. Project management looks to produce a deliverable while mitigating risk by controlling the waste of materials, time, and energy. Procurement involves the end-to-end process of sourcing activities for the right people, technology, and service. Author and management consultant Peter Drucker is credited for progressive leadership theories including the distinction between effectiveness and efficiency in business management. Effectiveness is doing the right things, while efficiency is doing things right. Procurement is strategic sourcing to minimize risk and liability between buyer and seller. Managing process, people and paper is a procurement function that goes beyond actions like ordering and invoicing.

The concept of procurement hasn’t changed much through history, although the focus has shifted to the three C’s: control, consolidation, and cost savings. Procurement is a hybrid function that evolved to manage supplier and internal stakeholder requirements. As a result, the procurement process is critical to sourcing goods and services. Since projects exist to deliver a new product or service by a specified time within a budget, these parameters put constraints on negotiations.

Starting the procurement process begins with a request of anything (RFX) where ‘X’ can be a Request For Information (RFI), Request For Quote (RFQ) or Request For Proposal (RFQ). These documents outline the scope, requirements, and timeline for new sourcing events. The procurement process streamlines the buyer and seller activities. The roadmap to manage a new sourcing event lines up with the five project management phases: initiation; planning; execution; monitoring; and closure.

Similarly, project management is a series of process steps with techniques to complete the project lifecycle. Project managers must therefore be communicative, with interpersonal skills and ethical business acumen.

The project lifecycle outlines the scope, cost, time, quality, and risk as the five pillars of a project. These are the same principles used to manage a project in alignment with the project management phases.

The procurement process must use certain capabilities to produce a desired result. Procurement focuses on doing the right things, while project management is geared towards doing those right things. Think of project management methodologies as enhanced capabilities to produce a desired result without wasting materials, time, or energy. It’s about effective resource usage. Organizations must do more with less, resulting in higher outputs with lower inputs.

A transformational role
Streamlining business practices to minimize risk and liabilities between the buyer and seller is not only mitigated through legal contracts but through savvy negotiations. That’s why the new role of procurement project managers has seen increased demand. In April 2024, Glassdoor reported the average procurement project manager salary is $85,833, with a range of $64,000 to $99,000 per year.

Agile organizations are recruiting leaders with cross-functional skillsets. A procurement project manager is an adaptable and integral player who can lead initiatives for which the focus is not solely on financial targets. Rather, such initiatives require a jack-of-all-trades approach to keeping a sourcing event on task, on budget and on time. Procurement project managers plan, control, and execute a project on time and within budget, while also creating a procurement plan focused on understanding the total cost of ownership (TCO) for stakeholders. There is a delicate balance of managing stakeholder and supplier relationships within the RFX process. In this blended role, the procurement project manager must navigate the intricacies of managing a sourcing event as a project.Knowledge of procurement and project management best practices are key to achieving strategic initiatives that not only reduce cost but also focus on quality products and services. This results in stronger buyer-seller partnerships.

Procurement’s value is not sourcing cheap products but rather sourcing partners for longer-term and mutual trade benefits. Similarly, the importance of project management is not solely on completing a project as quickly as possible. Rather, its value is delivering a quality product and service. Business leaders are thinking proactively, not reactively, while managing costs. Tactical actions result in cutting jobs for a short-term cashflow increase. On the other hand, a strategic outlook means thinking about how to create value. For example, sourcing projects for alternative and renewable energy are becoming mainstream ideas to meet organizations’ climate change and corporate social responsibility goals.

As our linear economy transforms into a circular economy, merging the procurement function with project management methodology has led to adaptable, skilled professionals. For example, the focus on using an accounting framework to measure sustainability in terms of social, environmental, and financial indicators, is outpacing the traditional measure of profit and loss. Transformational leaders are focused on innovative change that delivers results through effective and efficient sourcing projects. Work to be the change leader that increases productivity through collaboration, coordination, and commitment to planning, people and price management.