1. Chapter 4 Purchasing and facilities management

2. Program
The role and position of purchasing in a facilities environment
Key success variables for purchasing in a facilities environment
Measures aimed at improving the effectiveness of purchasing
How to classify services that are contracted by organizations
What it takes to buy indirect products and services

3. Purchasing and facilities management
Purchasing-to-sales turnover ratio is relatively low
Purchasing for the primary process is usually absent (since there is no physical production process)
Purchasing saving have a limited effect on return on assets
Management will spend most of the time on value added and people-related issues and activities, they will put little effort in support activities (purchasing)

4. Purchasing and facilities management
Major categories of expenditure
Buildings, installation and
Infrastructure
Real estate
Restructuring and renewal
Maintenance
Technical installations
Security Systems
Office furniture
System walls
Temporary buildings
Housekeeping
Energy
Catering
Cleaning services
Green keeping
Removal services
Security
Garbage removal
Clothing
Technical support materials
Temporary labor
Hiring of temporary personnel
Interim managers
Consultants
IT programmers, analysts and
project managers
Services
Transport services
Travel
Accommodation
Training and education
Search and recruitment
Market research
Media
Events
Factoring
IT & Telematics
Mainframes and software
Midrange systems
PCs
Peripherals
Data communication networks
Telephone switching equipm.
IT projects
Outsourcing
Office supplies and printing
Copying
Office equipment
Office supplies
Paper
Packaging material
Printing
Representation
Books and subscriptions
Adapted from Rietveld, 1995

5. Purchasing and facility management
The service sector is changing from a traditional and local arena to an international arena. As a result, service companies strive to improve their services for the end user whilst reducing operational costs.
Increased outsourcing of support activities
Integration of support activities in a facility management organization
Increased scale of operations

6. Effective purchasing for facilities
Perceived by purchasing department
Perceived by internal departments
Low price
Good contract
Objective supplier
selection
Delivery reliability
On time
Right quantity
Right quality
Fast response time
and feedback
4. High accessibility
Expectations levels with regard to purchasing are not always identical

7. Effective purchasing for facilities
Customer product group matrix
Department A
Department B
Department C
Total value
Computer hardware
Computer supplies
Office equipment
Temporary labour
Services
Total volume
a) Total purchasing volume
b) Purchasing expenditure
c) Market share purchasing
d) Expected volume

8. Improve customer orientation (1)
Analyze and document internal customer /product categories:
Determine the total purchasing spend per department
Determine which fraction of this is purchased through the purchasing department
Assess internal customer satisfaction:
Find out what bottlenecks there exist in the relationship
Target setting (detailed action plan):
What customer/product category combinations the purchasing department will reinforce its position, i.e. market share
The actions necessary to make this happen
The results that can be expected from these actions

9. Improve customer orientation (2)
Cross functional buying teams and organizational structure:
Teams with specialists from user departments should be formed to develop specific sourcing plans.
Develop sourcing strategies:
Use purchasing portfolio
Detailed action plan per purchasing category
Implementation:
Careful monitoring and results in terms of:
Savings generated
Customer satisfaction
Administrative lead time

10. Effective purchasing in facility environment
Different approaches for an optimal structure
Focused on the internal customer
Product focused orientation (most used)
Supplier focused orientation
How can an effective internal customer focused approach be achieved in combination with knowledge of products and markets?
Make the internal customer responsible for going through the purchasing process
Solving internal communication problems by pointing out an account manager of the purchasing department for each specific customer department

11. Buying indirect goods and services
Indirect goods and services that are required for those activities that do not belong to the company’s primary processes.
Distinction on destination:
Buying of general goods and services
Buying of investment goods
Buying of trade items
Distinction on character:
IT, marketing and communication, professional services, human resource management, facility management, transport and logistics, technical maintenance

12. Buying indirect goods and services
Spend on indirect goods is sometimes higher than spend on direct goods and services:
Outsourcing of processes
Average 50:50
Indirect purchasing generally uses a big supplier database
Suggestions for cost savings:
Reduction of number of suppliers
Introducing category sourcing
Analyze user pattern ‘end of year fever’
Product standardization
Supply base reduction
Reviewing current contracts and agreements
Reducing transaction costs
Outsourcing the purchase of small items and contracts

13. Breakdown purchasing spend
635
Breakdown Supplier Base Non-Production Related
422
Number of suppliers
213
154
148
132
126
112 92 86 78 68 54 48 43 39 35 28 25 21 18 14 10 7 IT
R&D
MARKETING
PROPERTIES
UNKNOWN
CATERING
TELECOM
BANKING
CONSULTANCY
RECRUITMENT
AUTO LEASE
MISCELLANEOUS
MEMBERSHIPS
INFORMATION
STAFF FACILITIES
OFFICE SUPPLIES
PRINTED MATTER
WASTE-DISPOSAL
POSTAL SERVICES
INDUSTR. CLOTHING
COMP. OWNED CARS
TRAVEL AGENCIES
PATENT AGENCIES
TEMPORARY LABOUR

14. Conclusion
Services companies represent a growing share of economic activity in most European countries.
Developing a professional purchasing approach in service organizations is a far from simple matter
For reasons of effectiveness buyers should be primarily service driven rather than cost driven.
Facility goods and services are part of indirect sourcing.