Procurement is not only about saving money!

By all means, Procurement has a meaningful protagonist-role in helping enterprises to reach their go...

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Posted by Dave Food on Dec 12, 2019 3:15:29 PM
Dave Food

By all means, Procurement has a meaningful protagonist-role in helping enterprises to reach their goals and cope with imminent uncertainty.  It will demand Procurement to focus mainly on adding value in a much more strategic way and not only by putting saving as the central point.

Procurement operating models and market strategies should be:

·       Strategy and Business Planning.

·       Value and Performance.

·       Operating Models.

·       Operational Excellence.

How are Procurement experts adding value beyond cost-cutting measures?

·       Leveraging systems and technology: to meet the new need of business automation, the Chief Procurement Officer (CPO) should look at Procurement to escalate existing systems and tech to afford greater clarity into the Management Information and Business Intelligence procedures.

·       Team up with the organisation: for CPO Procurement to stand up in the company they should make critical stakeholders understand the business operation and be involved earlier in the decision-making processes, adding clear value through the organisation.

·       Advancing beyond cost savings: many organisations struggle to extend their activities into central competencies such as Category Management and to reach out beyond cost-savings to a more tactical value for the company.

·       By accomplishing the optimal operating model:  How? By the reevaluation of operating models to drive out more excellent value from their activities, while providing a robust-centralised framework to deliver efficiencies across the entire business operations at a reduced-operating cost; and push the inclusion of SC on the wide-ranging business agenda to protect the business from future uncertainty.

Procurement sections have a vital role to play both in driving value for money and managing the risk associated with these decisions. Those that take a leading role in this process enhance strategic outlines round the whole company; the early Procurement engagement proves to deliver significant savings. 

Although, Procurement is often taken along into the process to either end a deal or give an opinion on the contract terms, usually too late to add up outstanding value – or most of the times only when the business process has already gone down.

So, Procurement is not focusing enough on supervising and tracking fulfilment across the enterprise, consequently, it is dealing real challenges trying to keep control over both direct and indirect spend, as well as in backing up demand managing activities.

Procurement roles need to span to pinpoint and benefit from chances to add value, whilst ensuring organisational capital spending to enable Procurement to develop into this more strategic role.  

The ability to achieve considerable cost savings is associates to an overall maturity in category management, strategic sourcing and SRM, which can deliver a higher per cent of savings than those less mature colleagues.

The Procurement function will experience an escalating-pressure in areas now considered not to be a priority.  CPO and SC Directors should, therefore, absolutely indicate the current challenges and opportunities facing the operations today.  Procurement can raise its competition to meet – and even go beyond – the potentials of the business.

Further comments: it is the time to start to communicate in a language the entire business values. CPOs will need to be more focused on becoming efficient-edge leaders, and in involving customers to deliver the value of Procurement better. However, this usually demands a culture-shift, taking Procurement away from the concept that seems to dominate, to one that is fully line up with your organisational goals: placing VALUE at the top.

 

Dave Food

Prophetic Technology

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