Developing a Policies and Procedures Manual in a Decentralized Cement Company

A U.S.-based cement company that is a global leader in cement, building materials, related technologies, and research recently decided to redesign its procurement organization and recognized that policies and procedures were an important part of this process. The company consists of several cement operations located in one region of the United States. Each operation had established decentralized procurement processes. Although the basic manufacturing processes are not dissimilar, there existed a variety of supply strategies, approved suppliers, and procurement channel strategies.

In 1999, the company developed a purchasing policies and procedures manual to define guidelines by which the purchasing function would be practiced at the company. In January 2007, an external team of experts completed a procure to pay (P2P) assessment of the company, focusing on the requisition to payment process. The key objective was to identify opportunities to improve user satisfaction and transactional efficiency such that the procurement staff could shift their efforts from pushing transactions through the system to strategic sourcing and contracting activities.

The study was concluded and presented in early February 2007. One of the recommendations made by the team was to enhance the current process; improvements were needed to eliminate or reduce current issues and reduce the purchase order cycle time for a tighter distribution, thus reducing the mean cycle time and the effort to achieve this.

In order to begin the multiple improvement efforts needed to accomplish this, the senior executive team, composed of IT, procurement, maintenance, and operations departments, recognized that it was necessary to first reestablish a common and consistent baseline of beliefs, methods, and behaviors across all of the company’s facilities. The purchasing policies and procedures manual was a good start, but the manual had not been updated since the time of publication. There was a strong need to educate, train, and monitor compliance with policies and procedures. The eight-year-old manual was also in need of review and revision to capture changes in organizational structure from a decentralized environment to a centralized procurement environment and to reflect the changing set of strategies and practices that impacted the currently accepted business practices.

In addition to the much-needed update, two additional purposes for a policies overhaul were recognized. The first was to set the stage for a concentrated effort to educate employees so that they would comply with policies and procedures. Second, the new policies and procedures manual would serve as the basis for development of a worldwide corporate procurement governance model.

In order to successfully accomplish these goals, a team was chartered to review and update the present documents and address current pain points. The stated goals were the following:

• To revise the existing procurement policies and procedures documents to reflect current practices and to relieve pain points and areas of confusion
• To develop a document management strategy, including centralized location, easy accessibility to stakeholders and users, regular review of documents for necessary changes/updates, and a notification method for new or revised documents
• To establish ownership within Central Procurement and establish processes to ensure company wide compliance

The end deliverable will be an updated policies and procedures manual that is accessible online, in compliance with global directives, and available in a common web-based policies and procedures template.

The opening vignette illustrates an important point about purchasing policies: From time to time, it is important to review them and update them as required. Because the company’s environment is constantly changing, there is a need to keep up with these changes and provide guidelines and directions to employees regarding how these changes will impact their ways of working. Policies provide the basis for action on the part of sourcing professionals, as well as a set of guidelines for the appropriate way to deal with new situations. As the purchasing and technology environment changes, policies and procedures must be kept up to date with these changes.

Most organizations have a set of policies outlining or detailing the directives of executive management across a range of topics. These directives provide guidance while at the same time placing operating constraints on personal behavior. This chapter, divided into three major sections, discusses the role of purchasing policy and procedures in today’s business environment. The first section provides a general overview and discussion of policy. This includes defining policy, the characteristics of an effective policy, the advantages and disadvantages of policy, and the policy hierarchy. The second section focuses on specific categories of purchasing policies, with a special emphasis on one area known as maverick spending. The third section presents purchasing procedures, which are operating instructions detailing functional duties and tasks.