In this article, I would like to introduce you to one such area where business analysis (BA) is tremendously helpful and have potential to save millions of dollars i.e. buying decisions in corporates. Let us first look into a typical purchasing process that happens in a company and then review the “BA way of Buying”.
Typical Purchasing Process:
- The user department identifies a need for software, hardware, machinery or in general assets.
- The user department either gets the budget allocation from the finance department or already have the budget.
- The user department identifies the vendor based on the company’s approved list of vendors or by calling tenders.
- Once the vendor is identified, the user department places a purchase request with the purchase department and subsequently a purchase order is issued to the vendor to supply, install and commission the asset.
Purchasing Process using Business Analysis:
- As soon as the user department identifies the need for an asset, this will be made as a business analysis project and will be handed over to a business analyst (BA).
- The role of a BA in this project will include
- Working with the stakeholders (users plus others affected by this new asset) to define the need as business and stakeholder requirements. At times, user departments think only their requirements and not the other departments. An asset acquired with these partial requirements can never be put to best use.
- Finding out what capability will be added to the organization by getting this asset and its alignment with the goals and objectives of the organization in short term and long term. A construction company is planning to buy about USD 25 MM worth of machineries which will last for the next 15 years. In this case, they have to think about their required capabilities that are needed for the next 15 years before making a decision.
- Check whether the capability under discussion is already available anywhere within the organization, so that the unused capacity can be used without buying a new one.
- Ensure whether the excess capacity requested is certainly not available in your organization. In one of our project for a medical equipment company, we advised them not to buy a new machine costing USD 500,000 as we found that the required capacity is available in the existing setup itself.
- Develop use cases detailing how the proposed system will be used to perform the required tasks to fulfill the need of the organization.
- Design acceptance and evaluation criteria to screen and rank the vendors respectively.
- Prepare the business case to present the argument towards why such an asset is required or not required for the organization to enable the management to make a decision.
- Once the user department and the management is convinced with the business case then the purchase department will take care of the rest.
Though the BA way of buying involves elaborate work before the buying decision is made, the time spent is worth rather than buying an asset,
- what you already have.
- that is not meeting your requirements.
- which is incompatible to your goals and objectives.
- from a wrong vendor.
- that is meeting only part of the stakeholder requirements.
When do I need to use this approach?
- The asset in question is costing more than USD 2,000.
- The asset adds an important capability to your organization.
- A critical asset which will be used by several functions within your organization.
- Anything that deals with security, safety, risk, business sustainability, privacy etc.
If your proposed asset qualifies under any of the above criteria, please use the “BA Way of Buying”.