Let’s Talk Shop: 3 Simple Steps to Deliver Sustainable Procurement Value
On paper, all procurement organizations operate under the same mantra: Obtain and deliver the right product/service, at the right place, at the right time – all at the right price.
If only it were that simple.
For years, collective pressures from increasing commodity and transportation costs, expanded regulatory reforms, and progressively complex supply chain networks have molded significant roadblocks in the pursuit of this mantra. Procurement organizations, in turn, have historically responded by assessing dollar outflows, negotiating contracts with strategic business partners, and embarking on new strategies to manage enterprise spend.
But will these strategies remain effective in an evolving procurement landscape? After all, the workforce is aging, the supplier mark-ups are meager, and new technologies are around every corner. Value generation is becoming increasingly difficult to maintain, and the road of identifying new means of complexity reduction is constantly taking new turns.
Today, we spotlight three tips to ensure that your organization is intrinsically equipped for success in this evolving procurement landscape.
1) Advocate the “Value of Procurement”:
An effective procurement organization not only improves an organization’s bottom line, but delivers value by mining new opportunities, managing commercial risks, and driving efficiency gains in the P2P process.
Stakeholders; unfortunately, don’t always understand this. They view procurement as a roadblock…. show-stoppers, arm-twisters, and paper-pushers.
The challenge lies in communicating the value created by procurement. Spotlighting “wins” effectively through various channels, including meaningful executive-level dialogue, will not only help your organization understand these value-adds, but also the impact of early collaboration. In today’s business environment, people only know what you tell them and only understand what’s explained. Seize every opportunity to shape your procurement organization’s reputation. After all, a little shameless self-promotion can go a long way in clearing common misperceptions, aligning on rules of engagement, and generating earlier buy-in.
2) Provide Access to Spend Analytics and Compliance Reporting:
Visibility into corporate spending is the cornerstone of superior procurement performance. By enabling constant visibility into active supply bases, stakeholders are empowered to maximize value for the organization by better understanding and assessing their monthly expenditures.
By working collaboratively to interpret the data and understand the metrics that drive cost savings and compliance management, new opportunities may be uncovered to concentrate buying power, optimize purchasing behaviors, and purge dormant or non-preferred buying channels. Furthermore, visibility into spending patterns and budgets also allow organizations the option to leverage additional cash flow by extending payment terms and forecast for the future.
3) Define Scalable Procurement Staffing Models:
By simplifying purchasing practices and promoting compliance through preferred channels, companies will not only reduce complexity and increase cost savings, but also influence deeper collaboration with respect to supplier development, demand management and risk mitigation. But how do procurement organizations actively pursue these opportunities when facing resource and bandwidth constraints? Scalable Procurement partnership models provide on-demand procurement execution, with the ability to scale up/down depending on business need/readiness. Moreover, a scalable partner provides access to a wide pool of procurement experts, which at times, are lacked in-house. This access to expertise and marketplace insights, correlated with partner-led arms and legs and enabling technologies, help drive immediate and impactful efficiency and innovation into procurement ecosystems.
Organizations are increasingly looking at Procurement to drive higher savings and better performance across the enterprise. However, maintaining year-over-year value generation is becoming increasingly difficult to maintain. By ensuring these simple steps, Procurement can deliver superior short and long-term results that will support a sustainable business for the future.