The modern business environment is volatile and poses many threats to your procurement function. To mitigate the current risks and improve the overall performance of the procurement arm, businesses must achieve procurement excellence.
Achieving excellence in the procurement function requires a collaborative approach from all parties involved to align procurement and supply chain operations with the overall goals and objectives of your organisation.
By achieving this, you streamline the process of assessing and measuring internal policies. It also supports the evaluation of governance tools and systems that are established to identify strengths and vulnerabilities in procurement and address them accordingly.
Optimising the following elements can help any organisation achieve excellence in procurement.
- Spend analysis: Organisations need to monitor, evaluate, and reconfigure procurement spending continuously to create a high-value procurement function. By extension, they enjoy a more cost-effective supply chain.
- Strategic sourcing: The procurement function faces many challenges due to the dynamic nature of the business environment. These threats need to be handled with the utmost urgency and care to create a stable supply chain. Strategic sourcing helps you do that.
- Supplier relationship management: Many procurement professionals consider suppliers their partners since they help an organisation function smoothly. Supplier relationship management, therefore, aims to create stronger relationships with suppliers to improve the stability and performance of your organisation.
- Contract management: As one of the most critical elements of a procurement function, contracts need to be monitored, evaluated, and managed throughout their lifecycle to ensure the best possible outcomes.
Every modern organisation, regardless of its size, strives to achieve excellence in its industry. The continuous drive for excellence has pushed businesses to adopt transformative technologies and strategies in all aspects of business operations, including the procurement function.
In the eyes of academics, achieving excellence in procurement means aligning all aspects of your procurement function to the mission and objectives of your organisation. This involves making the procurement function and supply chains resilient.
A resilient procurement function also includes the effective management of variables that impact supply chain processes, like fluctuations in currency value, language barriers, and government regulations.
By achieving efficiency and resilience, you can overcome the challenges in front of procurement and supply chain management today. This is critical in the current business landscape, which is in the midst of some of the worst material shortages in recent times.
With the impacts of COVID-19 and widespread supply chain disruptions, businesses need a robust procurement framework more than ever before. Achieving procurement excellence can help them maintain a more sustainable framework.
Here are the most critical priorities in the procurement industry that will help you achieve procurement excellence.
Modern companies spend millions each year on materials and supplies to sustain their production and supply chain. The portion of your business expenses flowing through procurement makes it vital that you document your procurement expenditure in order to maintain an efficient function.
This may seem like an obvious step, but many organisations fail to collect accurate data about their procurement spending. Without this data, they fail to optimise their procurement function or create new strategies to increase efficiency.
Spending data provides you with insights on spend management lifecycles, spend visibility, and spend category management. Such insights can help you make decisions that improve your resilience and flexibility and reduce your costs, helping your company achieve its overall targets and objectives.
You can also increase spend visibility by automating your spend management lifecycle. This provides key decision-makers with a real-time, accurate view of procurement expenses.
Strategic sourcing has a bearing on determining the total cost of ownership and supply chain performance. It also allows your organisation to mitigate the supply risks it faces. It is especially critical in supply crises such as the current global semiconductor shortage and plastics shortage—challenges that have impacted several industries from consumer electronics to automobiles.
With strategic sourcing, it is easier for your company to predict these shortages and look for more sustainable alternatives to ensure the continuation of production.
Strategic sourcing can also bring down overall spending on product or service provision because it involves the evaluation and improvement of procurement practices.
Supplier relationship management
In achieving excellence in procurement, organisations need to place more emphasis on supplier relationship management. This approach considers suppliers the partners of your company and takes action to evaluate, measure, and manage supplier performance continuously to ensure a competitive advantage.
Co-value creation is a popular way to improve production and supply chain performance and foster healthier supplier relationships. With efficient supplier relationship management, you can stay ahead of upcoming supply issues and can work with your suppliers to resolve them.
Many leading companies spend millions to improve this aspect of their work. Toyota, for example, invested $154 million to nurture strong relationships with its suppliers, and it paid off; they ended up being the only automobile OEM to improve their supplier working relations index.
Procurement takes effect through contracts, which means that for an organisation to achieve procurement excellence, it needs to have an efficient contract management process. This can help businesses improve their performance strategically and systematically.
Since contracts are of critical importance to the effectiveness and sustainability of your supply chain, procurement professionals need to manage them with maximum diligence to ensure efficiency in supplier relationship management, optimal service delivery, increased profitability, and regulatory compliance.
A smooth contract lifecycle management process will monitor adherence, contractual obligations and benefits, and key performance indicators seamlessly. By doing so, you can ensure contractual compliance throughout your contract lifecycle.
Achieve procurement excellence to stay ahead of the curve
Achieving excellence across your procurement processes can take your organisation one step closer to achieving its objectives and goals.
Via the processes and solutions highlighted in this post, explore how you can add value to your procurement arm today.