Steps to finetune your organisation’s procurement management process to maximise returns and profitability
Summary
Optimising your procurement management process toward achieving maximum returns and profitability can allow you to better navigate the tumultuous business climates of today.
In initiating this process, you should first conduct a procurement audit for greater visibility to ensure that all the necessary information is at hand.
The insights and results of the audit will help you to then develop a viable plan to maximise profitability and returns from procurement.
Having formulated a proper plan to finetune procurement, the next step delves into how you can implement and action the plan within the procurement function toward achieving maximum returns and profitability.
As the final step, it is important to focus on continuous improvement and update the plan as needed to ensure long-term results, as this is not going to be a one-time process.
Procurement management is a vital function that affects the quality, cost, and delivery of the products and services that the organisation offers to its customers.
Proper management of the procurement function can also have a significant impact on the organisation’s profitability, as it can reduce expenses, increase revenues, and improve cash flow.
However, this process is an ongoing activity that cannot be forgotten post-initiation. Successful alignment of procurement management requires constant monitoring, evaluation, and improvement to ensure that the organisation is getting the best value for its money and meeting its strategic goals.
Read on and explore some of the proven steps that you can take to finetune your organisation’s process for procurement management toward constantly achieving maximum returns and profitability.
1. Conduct a procurement audit for greater visibility
It is advisable to start with a procurement audit—a systematic review of your current procurement practices, policies, procedures, and performance. This helps you identify the strengths and weaknesses of your existing procurement management process as well as the opportunities and threats that you face in the market at present.
Starting with a procurement audit can also assist you in benchmarking your current performance against industry standards and best practices, and measure your progress towards your objectives.
To initiate this process, data from various sources will need to be collected and analysed.
Based on the data collected, you can evaluate your procurement performance based on criteria such as the efficiency of resource usage, compliance, risk potential, and degree of effectiveness in meeting customer expectations, quality standards, quantities sourced, and timeliness.
Based on the results of the evaluation, you can identify the gaps and areas for improvement in your existing procurement process. You can also set procurement objectives and prioritise the resolution of issues based on their urgency and impact on your organisational goals.
2. Develop a viable plan to maximise profitability and returns from procurement
With a clear view of your existing procurement function in hand, the next step involves formulating a plan that outlines how you can achieve your procurement objectives and address the issues identified in the audit.
An effective plan defines the scope, direction, and approach of your procurement activities. It also aligns your procurement goals with your organisation’s overarching vision and strategies toward aims such as profit maximisation and optimising returns.
The plan needs to address any threats or weaknesses that can hamper the generation of returns and savings from procurement and should also detail strategic action toward implementing the plan effectively.
It is also vital to assign roles and responsibilities to relevant parties to ensure that the plan is put into action and should clearly define KPIs and other indicators to measure the performance, progress, and success of the endeavour.
3. Implement and action the plan within the procurement function
This stage involves executing the actions and tasks that have been detailed in the plan you formulated in the previous stage.
In addition to carrying out the tasks mentioned and hitting deadlines, the team handling the implementation should also ensure effective coordination, communication, and collaboration among all of the parties involved directly and indirectly in the procurement function.
Keeping the implementation of the plan on track also requires regular monitoring, effective control, and timely feedback. Synergy in the actioning of all tasks detailed in each part of the plan ensures that the implementation will be conducted smoothly.
In terms of boosting returns and profitability through procurement, implementation teams could focus on negotiating with suppliers to obtain the best terms and conditions for contracts, managing supplier relationships better to ensure mutual trust, evaluating supplier performance, and providing feedback for improvement among many other viable actions.
4. Focus on continuous improvement and update the plan as needed
With time and the current business environment that is experiencing high volatility and rapidly fluctuating conditions, the scope and focus of the original plan will need improvement to encompass new opportunities and accommodate new conditions.
Improving your procurement management process can involve identifying, analysing, and implementing changes that can enhance the efficiency, effectiveness, compliance, and risk management potential of your procurement function.
To achieve success at this stage, the teams responsible should undergo continuous learning, innovation, and adaptation to the changing needs of customers, evolving market conditions, and technological advancements.
Finetune your procurement management process to continually operate at peak performance through the expertise of trusted procurement consultants
Businesses can gain a sustainable competitive edge and consistently stay ahead of the competition by optimising the effectiveness and performance of their procurement management process.
Working with a specialist with a proven track record in procurement consulting and leveraging their expert insights and specialised knowledge can help your organisation accelerate the results from a swifter and more successful optimisation of their procurement function.
