Unleashing the latent potential of procurement as an element of supply chain management.
Procurement has been viewed as a Cinderella function, merely rendering service to core functions such as operations/production, engineering, R&D and marketing. The activities of procurement have been mundane and repetitive in nature. The importance of procurement can be understood by looking at the cost of goods sold as reflected in each company’s financial statement. In some companies this cost is more than 70% of sales revenue. World class companies realised this and elevated the procurement function to strategic levels. However, lagging companies still operate as if it is fifty years ago. The aim of this study is to determine whether companies are adapting new methods of procurement instead of pitting suppliers against each other in search of the lowest purchase price. A sample of 30 procurement managers was drawn from the 2006 Financial Mail 100 SA Best Companies. It comprised managers of companies stemming from different industries ranging from petrochemicals and banking services to hospitality, etcetera. These companies were chosen because they are the best in their class. Data was collected using questionnaires developed by the researcher and e-mailed to respondents. Regression analysis was conducted and it was established that there is a positive relationship between information sharing and trust. There seems to be a negative relationship between trust and communication. It was noted with dismay that a large contingent of procurement personnel who are supposed to uplift the status of procurement do not possess post-matriculation qualifications. This poses a serious drawback since these procurement personnel are supposed to transact with highly qualified sales representatives from the supplier companies. It is therefore recommended that companies be selective in their procurement approaches, tendering for leverage items, negotiating for strategic items and using a procurement card for shop items. Supplier performance measurement must be conducted to improve performance and partnerships formed with high performing suppliers. The skills levels of procurement officials need to be upgraded to enable them to deal with new challenges.