Procurement Transforming to Create Competitive Edge for Organizations

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by | June 12, 2017

In today’s competitive world, Procurement no longer is only a traditional function for ensuring requisites at right time, right cost, right quality, right quantity and right place.
Even though achieving the above objective needs implementation of good management skills and practices, but the expectation of the organization’s management is now quite high. Procurement is now perceived as a valued business partner and key enabler for organizations to become market leaders. How does Procurement fulfil this expectation? The below article will provide some macro level insights for this question by focusing on key activities undertaken by Procurement.

Strategic Planning. Aligning with the business objectives and strategic plans is the starting point. Accordingly scenario planning is done, where key performance indicators (KPIs) are determined along with incorporating stakeholder requirements and key supplier capabilities. Some of the key performance areas include security of supply (quality on time in full), sustainability (audits and assessments), saving, working capital management (days payable outstanding), inventory management, compliance to processes (strategic sourcing methodology, stage gate reviews, etc.), automation (catalog and automated contracts), use of good practices (like advanced eAuctions, expressive bidding, parametric pricing, category management, predictive analytics, etc.). Risk identification, risk review, technology investment, budgeting (should cost), and future forecasting are other essential activities included in planning.

Projects Pipeline. Projects are planned with respect to resource availability and time horizon. Some Quick Wins are Spend Analysis, Contract Management, Supplier Development and Rationalization, developing Category Strategies, Outsourcing, Working Capital Optimization. Mid-Term projects include enhancing the Function’s role, Process enhancement, Cost optimization, Category management, Specification management, Supplier relationship management, Innovation management, Risk management, Talent. Some long- term projects are Procurement transformation, e-Procurement.

Supplier Relationship Management (SRM) and Supplier Innovation Management (SIM). Organizations are focusing more to their core competencies. Manufacturing activities are more outsourced. Moreover organizations are reducing their assets and funding for enhanced customer value creation. SRM plays an important role in this context. Supplier segmentation is done based on business criticality, supplier capability, product portfolio, and supplier portfolio matrices. Based on the segmentation, activities of supplier dossiers, risk management, performance management, contract management and supplier integration/development is done on identified suppliers. SIM plays crucial role as it is the key to enable organization’s future success. If managed successfully collaborative SIM can produce profitable growth via improved differentiation and speed and lower costs. Suppliers provide ideas, develop products, reduce development costs and time, reduce COGS, and pave the way for organization’s price premiums. The gain for the supplier is that they get support from organization in their operations, move to strategic partner, and grow along with the organization.

Best-in-Class Technology. Big Data Analytics, Predictive Analytics, Artificial Intelligence, Rapid Scenario building, Advanced eAuctions, Expressive Bidding, Procurement Control Tower, etc., are the current trends which are fast being adopted by Procurement. Market intelligence plays important role in today’s environment.

People. Investing in continuous learning for professional and personal development is essential. Training needs of staff are identified and competency mapping is done. Compliance management, category expertise, financial acumen, mastering systems and processes, collaboration, and handling complexity are some of the skill sets desired.


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