M16BuildOperations· Module 5
Procurement
Buying happens informally, by whoever needs something, on whatever terms the supplier offers.
- Stabilise
- Fix
- Manage
- Operations
- Finance
- Governance
- ~5 min · Template
The business problem
In many growing businesses, anyone can commit money to suppliers. Prices are not compared, terms are not negotiated, and the same items are bought from several suppliers at different prices. The same person often orders, receives and approves payment, which creates risk.
Why it matters
Procurement discipline protects margin and cash, reduces fraud risk and builds supplier relationships that support the business when things are tight.
What you will learn
- Design a simple purchase-to-pay process
- Set approval limits by value and category
- Separate ordering, receiving and payment
- Evaluate and manage key suppliers
Core questions
- Who can commit the business to spending, and up to what amount?
- Do we compare prices for significant purchases?
- Who orders, who receives and who approves payment?
- Which suppliers are critical, and what happens if one fails?
Work through the module
CaseWhat is happening?
Construction contractor, 45 people · Illustrative teaching case
A contractor's site managers buy materials locally as needed. Prices for the same cement and steel vary widely across sites, and several invoices are paid for deliveries that were never fully received. A simple policy — approved suppliers, purchase orders above a limit, and goods received notes before payment — closes most of the gaps.
Full teaching case: The Family Employee Problem
DecisionWhat does the leader need to decide?
Keep buying flexible and fast, or introduce controls that may add a day to some purchases?
FrameworkHow should they think about the problem?
Purchase-to-pay with segregation of duties
Request → approve → order → receive → match invoice to order and receipt → pay. Different people handle ordering, receiving and payment approval, so no one person can complete a purchase alone.
ToolWhat can they use?
Purchasing policy templateTemplate
- Approval limits by value and category
- Quotes required above a set value
- Approved supplier list and criteria
- Three-way match: order, receipt, invoice before payment
ApplicationHow does it apply to their business?
Apply it to your own business:
- List who can commit spending today
- Find purchases where one person ordered, received and approved
- Draft limits and a three-way match rule
ImplementationWhat changes?
What should change in the business:
- Publish the policy and train budget holders
- Consolidate purchases of common items with fewer suppliers
- Review supplier performance quarterly
ReviewDid it work?
How to tell whether the change worked:
- Are payments now matched to orders and receipts?
- Have prices for common items reduced or stabilised?
- Have exceptions to the policy fallen over time?
After this module you should be able to decide
Keep buying flexible and fast, or introduce controls that may add a day to some purchases?
And leave with: A purchasing policy with approval limits and supplier criteria.
Sequence · Operations