Tough Economic Climate: Project Procurement’s Added Contribution

Subject: Strategic Management
Pages: 6
Words: 1676
Reading time:
9 min
Study level: PhD

Project procurement managers can point out the importance of their projects and defend them against budget cuts (Stover 2009). Proper records of performance benchmarks and projections would play an important role. They validate future return on investment, which would be an innovative preparation by a company for the period after the current recession.

Project procurement managers could initiate or use the knowledge transfer processes within their firm to transfer their project management skills (Rwelamila & Edries 2007). Companies can differentiate themselves from their competitors by going to the last mile of their customer expectations (Porter 2008). To achieve that, they need an organization’s culture, which embraces customer centeredness (Cadden, Humphreys & McHugh, 2010). Project managers should help their firms realize the quality strategy by managing with a keen eye for details. The unique treatment of customers will boost their brand loyalty, which also increases customer expectations. Without detailed and customized project management, it would be difficult for businesses to hold on to their existing customers and prevent shrinkage on their market share.

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Delivering the Benefit

Companies look at their costs as the first frontier of increasing their efficiency during a recession. Their sales reduce and therefore, they require a lean workforce. Most times, the project will also face a rescheduling. However, the tough circumstances call for project managers to become remarkable at their jobs. In addition to delivering projects successfully on a tight budget, they should ensure that their new projects increase the overall strategic advantage of the firm (Renko, Sustic & Butigan, 2011). The projects should also boost the company’s cash flow. This calls for the project manager to restructure their priorities and realign the function of their project (Schenk n.d.). It may also include an amalgamation of roles from different departments to capitalize on a pooled budget and the increased human capital.

Rough business times require managers to think creatively and ensure that their projects do not guzzle funds from their firms. A perfect project would include various sub-projects with different commissioning dates; each brings a ready injection of cash or other resources into the business. Moreover, the subprojects would ease the cash outflow from the firm instead of having a huge outflow with a big procurement task. Thus during lean times, management should not be an administration affair alone. It would be appropriate for one to cover supplemental management roles such as human resources if the firm is not very big, and the roles are not so demanding. The amalgamation would help save additional hiring costs, as it is cheaper to award a pay rise with existing benefits than to conduct fresh hiring (Rodger et al. 1998).

The global business environment is turning to be murkier as emerging economies claim a stake. Their exports are affecting the international currency market, which is affecting wages in other markets. Project managers have to embrace the challenge and be strategic and flexible in their spending (Yen-Lin, 2009). They need to order supplies when the exchange rates are in their favour. Moreover, they should develop a better understanding of globalization. Malik, Niemeyer and Ruwadi (2011) illustrate the point concisely by noting the example of China where wages increased more than 20 per cent in some cities, which affect their attractiveness as low-cost suppliers (Zuo et al. 2009).

Making Projects Adaptable

To meet the challenges, managers must be swift. Projects must be broken down so that they take advantage of real-time inventory management technologies in the supply chain (Verburg, Ortt & Dicke, 2006). As Rwalamia and Edries (2007) indicate, project procurement has to come before anything else because it affects the decision-making and resource allocation later in the implementation stages.

Bevilacqua, Ciarapica & Giachetta (2008) show that project managers need to time their work orders in a way that saturates their operation capacity. Proper timing gives them the ability to pursue continual innovation. Thus, they can respond and predict market requirements. Being indispensable allows them to offer additional value to the firm’s products. It is more convenient for firms that handle greater responsibility when handling their projects and those of the client.

Where possible, project managers should seek to have their company partner with other firms on common deliverables (Cheung, Albert & Kajewski, 2012). There is evidence from the research by Cheng & Carillo (2012), which shows that collaborating with suppliers enhances the project’s coordination. The combination leads to mutual benefits that include operational improvements. The reduction of transactional hazards lowers the overall exposure of the business to project risks (Rwlamila, Talukhaba & Ngowi, 1999). For construction projects, managers need to look beyond procurement and into the constitution of the design-build teams (Wang, 2005). Having a poorly constituted team will have negative effects such as dissatisfaction from the owners (El Wardani, Messner & Horman, 2006).

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Project managers should also become better risk analysts, especially during the early stages of design and implementation (Damodaran, 2008). For example, the arrangement of tender interviews has to take care of the expected achievements of the project (Paul, 2004). Being fully briefed benefits the project by reducing the time taken to resolve contract misunderstandings. In addition, it eliminates potential disputes and intractable claims (Chan et al. 2012). Project managers should also incorporate the management of other systems within their organizations as part of their portfolios. Thus, they should use their expertise in evaluating a project to evaluate company applications to see whether there are additional avenues for the company to save maintenance costs. They should also look into the consideration of working as a public-private partnership, whose benefits increase with the scale of the project (Raisbeck, Duffield & Xu, 2010).

Optimizing the Project Implementation Stage

Successful procurement projects are essential for organizational change or new-product development (Nijaki & Worrel, 2012). The key focus would be to enable the organization to achieve more with the same resources. Working on projects should be done smartly. The organization should face its strategic and operational challenges. Although project managers handle different projects at a time, they have to take a holistic view of the whole organization. Therefore, all projects should exist within the firm’s strategy. They should be aligned to the products or services, and aim at meeting customer and market needs. Thus, while monitoring projects, the procurement managers should look at projects and their relation to the strategy before deciding on how to optimize their implementation timing (Anvuur, Kumaraswamy & Mahesh, 2011).

Regular communication will assist the firm to mitigate any shortcomings in its core operations. Different operation goals have distinct weights in terms of achieving the strategic advantage of the firm. Therefore, once the project is underway, the project manager needs to evaluate continuously how they relate to the cash flow, brand equity, innovation and other company targets (Royse, Thyer & Padgett, 2010). Working with the performance dashboard will assist in keeping the critical issues as the focus of implementation. Dashboards eliminate unnecessary purchases, which have no significant impact on the project outcomes, and this could act as a cost-cutting measure for the firm (Krahmer & Strausz, 2011). Absolute control of the project might stifle their response rate. Business processes assist in managing project-based work (Sisaye, 2006). They should disseminate information about their functions.

Project teams require constant motivation to perform at their best. In addition, those working in project teams require functional systems and procedures that do not impede their working (Chritamara, Ogunlana & Bach, 2001). The working channels are likely to be repetitive and allow the business to function. Channels may include software systems (Luu, Thomas & Cheng, 2003). Nevertheless, if they are not serving the same purpose as the business, then their benefit becomes difficult to determine. For example, procurement procedures and software systems allow the firm to control efficiently its purchasing tasks. However, the system depends on the quality of the staff operating it and their manager. Project managers need to complement systems by providing management skills and the necessary human touch. Otherwise, left on their own, systems do not detect staff’s sentiments, burnouts and general perceptions of the technology use and its impact on the company’s image to customers.

Companies should conclude issues raised for project implementation promptly. Where no apparent conclusion is faced able, the manager should terminate the project instead of letting it hang on the competitiveness of the firm (Dyer & Singh, 1998). Under tough economic times, firms do not possess the luxury of vague time schedules for implementation. Lastly, as managers optimize their implementation strategy and procedures for projects, they should also factor in external factors necessary for the success of those projects. Laws and regulations affect the organization’s processes and disobeying them have the potential of causing operational harm to the company. Although they are generally routine works, sufficient knowledge by the manager can open up additional ways for the firm to enhance its strategic advantage. For example, special fiscal laws encouraging employment could be used to provide marginal capital from the difference in tax savings and hiring costs. Laws can also be beneficial when they support a specific source of supplies for the project (Esteves & Barclay, 2011). Project managers have to understand the legal implications, of their implementation strategies, to their projects and the overall competitiveness of the organization.

A case study by White & Bruton (2011) on GlaxoSmithKline (GSK) demonstrates how project managers can help their companies maintain their innovativeness. At GSK, the core strategy of innovation is to focus on the best science. The company needs to remain innovative for it to stay relevant in future (Tidd, Pavitt & Bessant, 2005). In 2008, the firm came up with 70 Discovery Performance Units (DPUs). As a result, the generation of ideas has surpassed the level at which the company can pursue at any time. Moreover, the company has to cut some of its budget spending on non-performing products to speed up the delivery of new products with a higher return on investment potential (White & Bruton, 2011). Most importantly is the allocation of specific budgets to each project, which narrows down what they can procure and leads to fewer wastage of resources.

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