It is becoming increasingly important for a modern strategic procurement function to demonstrate its effectiveness robustly in terms of providing financial and non-financial benefits. This is because the way we measure the effectiveness of procurement drives behavior as well as demonstrates contribution and it is also a business-wide concern. Achieving this can seem daunting, but it is in fact quite straightforward. It is about changing the way the organization thinks, quantifying benefits as much as possible and showing how intervention contributes to wider, more measurable organizational goals. Ultimately it requires the procurement function to organize itself so it can ‘tell the story’ of the benefit, share success stories, and make sure the good work of procurement stays on everyone’s radar. Doing this is possibly one of the most effective ways a procurement function can ensure the rest of the organization is recognizing its contribution.
Procurement plays a pivotal role in most organizations due to the major influence it has on the overall costs of the business. According to the Deloitte Global CPO Survey 2016, the majority of chief procurement officers agree that cost reduction is their number one priority this year. However, 62 percent expressed dissatisfaction with the execution of their respective procurement strategies. So, needless to say, there’s room for improvement.
According to an an EY research report, effective supplier / client management can reduce waste and save 5% to 15% of contract spend over time. Put another way, if a single category manager oversees a $1,000,000 portfolio and uses better, smarter performance management, it can drop $100,000 to the bottom line. That is significant value-add. The supplier benefits as well because a healthy relationship results in renewals and new opportunities within their clients.
RFPs (Request for Proposal) and, indeed, RFQs (Request for Quotation) are key tools in a buyer’s tool- kit. These are almost certainly managed through an online platform and have become increasingly routine where there is an opportunity to run a competitive process. But do they really help bring advantage? And are these tools being used effectively throughout the procurement community?
Supplier data management is costing organizations millions of dollars each year. According to AMR Research/Gartner, supplier management organizations have increased their employee headcount and system resources by 35%, and are spending up to $1,000 per supplier annually, to manage their supplier information across the enterprise.
“What benefits will category management deliver to my organization?” This is a question I am regularly asked. It is expected that I will produce a magic savings number, backed up by hard evidence to justify the claim, and form the basis for a business case. My answer is simple and is, “It depends!” It depends upon many factors but at the heart of these is the organization’s ability to effect a quality implementation. There is no doubt that Category Management can deliver dramatic benefits to an organization.
Target settings and personal bonus schemes often do not bring the best for the company. There where purchasing departments will negotiate on the best, read lowest, price the operational department will suffer. Where one department will celebrate their successes on the negotiated costs down the other department does monthly report higher cost then budgeted. How can this be avoided?
Ideally, Procurement should be involved in every project from the very beginning. However, if you’re being called in after the project is already up and running, you have a big challenge in front of you. Here are a few strategies to help you gain your footing and transition into a valuable team member.
As millennials start their families, retailers are hoping that they loosen their purse strings during the holiday shopping season.
In a new report based on survey results, “The Value of Strategic Supplier Data Management”, The Aberdeen Group reviewed how supplier data is used, managed, and leveraged to achieve superior supply chain performance. The report summarizes survey results among supply chain, sourcing and procurement organizations across all industries and geographies.