Canadian Government Executive - Volume 23 - Issue 03

6 / Canadian Government Executive // March/April 2017 Jessica Sultan More Than Tactical Procurement: Strategy Commodity Management as a New Strategic Tool C ommodity Management (the official term for life-cycle as- set management of goods and services) presents an opportu- nity to amplify the value of government purchases. This can be achieved via the Procurement and Material Management (MM) functions of any department. A strategic, enterprise-wide approach to Commodity Management would enable coordinated asset management decisions, which would result in decreased costs and the creation of competitive advantage. Current State It is easy to understand the importance of total life-cycle asset management, includ- ing the cost of ownership and disposal. However, in reality, public service com- modity management focuses singularly on basic procurement outcomes. Its strat- egies include bulk buys of mandatory commodities, and depend on the pre- sumed efficiencies of competition-based procurement methods. Viewed as a tactical, back-office func- tion, commodity management looks like a static activity. In a classic model, an orga- nizational need will activate the procure- ment team. In turn, the team undertakes an isolated purchase, and then passes on the asset to the operators. When the life cycle of the product reaches an end, the procurement team is engaged again. While the product is in use, there is little or no input from key stakeholders or from the procurement officer. Procurements are completed in isolation, outside the consideration of any government-wide specialists in that category of commodity. Opportunity To leverage fully all that the procurement and MM functions have to offer, com- modity management must be viewed as a strategic tool, capable of enabling achieve- ment of organizational objectives. The efforts must be dynamic and responsive: a comprehensive examination of the re- quirements, investments, usage and even- tual disposal of a specific category of goods or services (regardless of the commodity). Agile practitioners have demonstrated that procurement and material manage- ment can effectively influence business, drive full integration of the supply chain, and optimize the cost of ownership for the Crown. Together, the capabilities of procurement and MM teams, and the un- tapped potential of commodity manage- ment implementation, provide a unique opportunity for efficiency and results. They can deliver additional insight on demand, and inform strategic decisions, while at the same time ensure day-to-day execution that is rigorously efficient and transparent. Procurement and MM groups have demonstrated that they can combine to form interdisciplinary teams that can drive comprehensive, intelligent, strategic business decisions in support of organiza- tional goals. Next Generation: Strategic Commodity Management So how can these practices be realized? Strategic commodity management is about intelligent sourcing and procurement plan- ning, along with material management fo- cus on the life-cycle of a commodity, from acquisition, through usage, to disposal. Be- yond these predictable definitions, it must be understood as comprehensive owner- ship of one commodity across all facets of the organization. Procurement and ma- terial management-led cross-functional teams must proactively engage stakehold- ers to understand business needs, drivers and challenges and ensure commodities are planned and adequately captured and managed. This strategic view of commodity man- agement harmonizes business intelligence and expertise to support organizational goals. Fully leveraged commodity manage- ment must include: • historical use of the commodity; • organizational mandate; • entity investments (current and upcom- ing); • industry trends; • global awareness of factors affecting business; and • various supply issues (such as procure- ment, current and planned inventory, storage and warehousing, shipping, and disposal issues). All stakeholders must have an intimate