Successful Procurement Initiatives: What Steps Should You Take?
It is indisputable that by improving the effectiveness of their procurement activities, companies will see a positive adjustment to their bottom line. It is therefore difficult to understand why some executives are not fully embracing progressive procurement beyond aggressively pursuing a lower price from their supplier, especially as they know there are limits to the success of such strategies.
Labor costs are falling as a percentage of the total cost of products due to increased automation, this means there is more room for procurement to negotiate better prices for components and materials, whether that is derivative of a lower unit cost, or a drop in the supply chain cost which comes as part of purchasing goods.
Here are the key principles that must be considered as part of any successful procurement plan:
1. Know the pillars on which to build the procurement strategy: This means having a clear vision and plan for procurement, and ensuring that it is well distributed throughout the company.
2. Encompass a knowledge base for procurement throughout the company: Have a deliberation over whether there is a sufficient level of knowledge of procurement in the company, in order to establish whether there is an understanding of what it is exactly, how it should be delivered and how it fits in with the wider business strategy.
3. Work towards understanding the cultural framework in which procurement operates: Discover how well the company shares and collaborates. Any interdepartmental constraints will mean that functions become siloed as segmented initiatives evolve. Action against these problems should be initiated from the boardroom.
4. Define roles within procurement relative to their respective competencies: The success of procurement depends upon the ability to implement it’s mission and vision in relation to this. Consideration must be given to defining the roles within procurement, as well as the responsibilities, experience and skills that are required to fulfill them.
5. Identify and isolate the processes that adhere to the objectives of your procurement plan: Processes are the blocks on which procurement is built. Of the end-to-end process, procure to pay and source to contract are the most important.
6. Utilize Data ensuring it is available, accessible and of a sufficient quality: Data is key to procurement, due to the need for supplier management, spend analysis and predictive and forecasting analysis. The company’s data management procedures must be looked at to see whether they provide adequate support for the procurement program.