Role of Linkages in the Procurement Activity
Role of Linkages in the Procurement Activity
Procurement is the process of acquiring supplies and services from external sources through a competitive process. In this process, several suppliers bid for tenders, which allows the buyer to select the best price after a process of comparison in different product or service aspects (Tate & Council of Supply Chain Management Professionals, 2014). These include the quality of the product or service, the quantity, and the aspect of time. This is meant to promote fairness and a competitive tendering process while at the same time minimizing the risk of fraud or misinterpretation of information, which may bring negative effects to the buyer (Tate & Council of Supply Chain Management Professionals, 2014). Procurement linkages are the preferential treatment in government tendering process. Procurement linkages can be used as a procurement tool, which is aimed at achieving certain economic goals in certain targeted groups. This policy involves a formulation of the intended groups meant to benefit from government procurement (Tate & Council of Supply Chain Management Professionals, 2014).
Procurement linkages have faced a lot of opposition and controversy as discussions continue to determine if procurement linkages should be treated as a type of government procurement (Christopher, 2016). This preferential policy entails specific legislation from the government and other determined mechanisms, which are aimed at effectively implementing the policy to benefit the targeted groups (Christopher, 2016). Procurement linkages have been established to address economic problems with an aim of using government procurement to address the social economic challenges by enabling certain organizations to access financial resources through government procurement (Christopher, 2016). One example of procurement linkages involves government procurement meant to improve the development of small and medium business enterprises, which involves preferential treatment of small and medium businesses (Christopher, 2016).
This also includes reserving government procurement to small and medium enterprises where the companies are able to access certain government tenders, which would be difficult to access under normal conditions (Christopher, 2016). This may be attributed to the high competition with other large firms which have a large capacity and adequate resources compared to the small and medium enterprises. This may also allow the small and medium enterprises to enjoy certain price discounts for government procurement (Christopher, 2016). This will enable more small and medium enterprises to grow and develop by access to financial resources from the government. Procurement linkages implement strict measures to enable firms that qualify to access the preferential treatment (Christopher, 2016).
History of Procurement Linkages
In the earlier times, most government procurement and tendering processes involved large firms, which would bid for tenders at every tendering process. This made it difficult for certain small and medium enterprises to gain access to government procurement (Ashlock, 2018). This is due to the limited resources and capacity to bid for tenders in the competitive environment. The government also incurred many costs on regular advertisements and the different complex processes involved in the tendering process, which also increased lead times (Ashlock, 2018). To address these challenges, the development of procurement linkages was implemented which involved establishing certain connections with external firms, which would develop important relationships. This would help the government in addressing some of the challenges experienced in the procurement process (Ashlock, 2018).
These relationships would increase trust between the government and the suppliers, which is associated with improved performance and other positive effects in the procurement process (Ashlock, 2018). Procurement managers have the responsibility of ensuring improved performance in their organizations by sufficiently supplying the required materials and services, which are important in ensuring that all other employees perform their responsibilities effectively (Ashlock, 2018). This requires procurement managers to establish effective procurement linkages, which is important in developing log-term relationships, which will maximize the effectiveness of the procurement process. This will include satisfaction for the procuring organization in terms of saving on costs, increased quality as well a reduction on the lead times (Ashlock, 2018).
This led to the development of procurement linkages in 1975 by Stinchcombe who found out that other groups could furnish certain procurement aspects, which were lacking in an organization. These relationships included transactions and rewarding between the two groups, which was aimed to mutually benefit the two groups (Ashlock, 2018). One of the benefits included increased efficiency for both groups involved by the standardization of different policies and procedures between the two organizations. Procurement linkages also contribute to long-term sustenance of performance for parties involved, which leads to a successful procurement process (Ashlock, 2018).
Role of Linkages in the Procurement Activity
High performance in procurement is a major goal of all businesses, which is affected by many challenges in the business environment due to the high competition from other companies in the market (Srivastava & Verma, 2012). Procurement linkages have a positive effect on procurement activities in different perspectives. One advantage of procurement linkages is reduced costs due to the procurement process involving same or similar enterprises (Srivastava & Verma, 2012). There are costs involved when dealing with a new firm, which requires a long process to authenticate and determine the quality and quantity of services offered by the certain firm. However, with procurement linkages, these costs can be minimized through effective processes and the removal of unnecessary processes in the procurement process (Srivastava & Verma, 2012).
Procurement linkages also lead to short lead times due to the removal of certain barriers in the procurement process. This process is meant to enable preferential treatment to certain targeted groups, which involves the elimination of certain unnecessary processes, which reduces lead times in the procurement process (Srivastava & Verma, 2012). Procurement linkages are also beneficial in developing countries in helping small and medium enterprises in government procurement. This enables small and medium enterprises to develop and grow increasing competition in the procurement process (Srivastava & Verma, 2012). This is also important in bringing positive economic as well as social impact in the local communities. In an economic perspective, small and medium enterprises are able to increase employment and more firms are able to develop which will lead to an economic growth positively impacting a nation’s economic status (Srivastava ; Verma, 2012).
Procurement linkages with large firms will help in the reduction of procurement costs which is important in improving productivity. Procurement linkages also involve the formation of business relationships, which are important in creating and maintaining trust in the procurement process (Haksever ; Render, 2013). These relationships are important in reducing some of the associated risks in procurement and costs. Procurement linkages have also been attributed at creating a favorable environment to carry out government procurement activities (Haksever ; Render, 2013). This increases public trust and social responsibility, which demonstrates the government commitment to strengthen the communities to grow by supporting small and medium enterprises to grow. Procurement linkages also minimize the inspections, which are done on procured materials and certifying the materials, which incur a lot of costs and time resources (Haksever ; Render, 2013).
These linkages have also been attributed to enable a reliable and a flexible supply of materials. Flexibility in material production includes quick and easy responsiveness to a change in material supply where the company is also able to track any changes in the supply process (Haksever ; Render, 2013). Companies are also able to respond quickly to any complaints, which minimizes costs by the elimination of any ineffective processes in the production process. Procurement linkages also enable companies to anticipate any changes in variety and needs, which can be addressed effectively (Haksever ; Render, 2013). This also improves the loyalty of the supplying firm, which creates an effective and beneficial relationship with the procuring firm.
Procurement linkages are important due to the benefits associated with this process, which include improved effectiveness and other benefits associated with long-term relationships (Wallace ; Xia, 2015). These relationships also benefit the procuring organization in maximizing value in the procurement process and a reduction in associated risks, which is important in increasing the performance of the procurement process (Wallace ; Xia, 2015). Due to the pressure on procurement managers to implement effective procurement processes, it is important for them to form procurement linkages, which will help the managers in reducing lead times and improve the quality of products and services in the procurement process (Wallace ; Xia, 2015). Procurement linkages have also an important role in helping small and medium business enterprises in accessing government contracts, which will enable the firms to access financial resources, and other benefits associated with government contracts (Wallace ; Xia, 2015).
Ashlock, J. (2018). Sourcing and procurement in SAP S/4HANA. Bonn; Boston: Rheinwerk Publishing.
Christopher, M. (2016). Logistics and supply chain management. Harlow, United Kingdom: FT Publishing International.
Haksever, C., ; Render, B. (2013). Service Management: An integrated approach to supply chain management and operations. Upper Saddle River, NJ: Pearson Education.
Srivastava, R., ; Verma, S. (2012). Strategic Management: Concepts, skills, and practices. New Delhi: PHI Learning Private Limited.
Tate, W., ; Council of Supply Chain Management Professionals. (2014). The Definitive Guide To Supply Management And Procurement: Principles and strategies for establishing efficient, effective, and sustainable supply management operations. Upper Saddle River, NJ: Pearson Education.
Wallace, W., ; Xia, Y. (2015). Delivering customer value through procurement and strategic sourcing: a professional guide to creating a sustainable supply network. Upper Saddle River, New Jersey: Pearson Education.