In general business processes, and especially within procurement functions, a big question is often looming: can an organization be both efficient and effective? The answer, thankfully, is yes. Many purchasing organizations are finding that efficiency can lead to effectiveness. The key is balancing efficient processes and effective results.
Efficiency and effectiveness are commonly used terms in the procurement and supply management arenas. They may sound similar, but they have different meanings, both by definition and in practice. First, let’s define both efficiency and effectiveness. According to Merriam-Webster, efficient is defined as: “capable of producing desired results without wasting materials, time, or energy.” It defines effective as: “producing a result that is wanted.” In layman’s terms, effective results are the goal and the efficient way to get there is without wasting resources. As Peter F. Drucker, the author of The Effective Executive: The Definitive Guide to Getting the Right Things Done said, “Efficiency is doing the thing right. Effectiveness is doing the right thing.” Efficiency is how the procurement process is handled, while effectiveness focuses on attaining the end result.
In procurement, efficiency is often put to the side while the focus is on effective results for the organization. Effectiveness may vary over time as the procurement environment adapts and evolves. Strategic thinking is needed to reach the desired effective outcome, however if the processes are inefficient — will the goals ever be met? Within thousands of purchasing departments across the country, there are still manual processes that can be made more efficient with current technology and e-procurement software.
In the end, specific procurement goals of an organization may vary, but most likely they revolve around cost control and cost reduction of goods, services and construction bids. For an organization to become more effective, it must identify goals and try to achieve them as efficiently as possible.
Transitioning the procurement process to more efficient practices can ultimately lead to effective results. Efficient processes can empower purchasing staff to focus on more strategic procurement initiatives. By shifting time from redundant tasks to contract negotiations and other valuable operations, the end goal will be increased effectiveness.
Organizations have to be both effective and efficient in order to be successful. There must be a balance of the two within procurement to reach the high standards expected of a purchasing department.