Procurement is defining its own culture: processes have had to become sharper and faster to be able to deliver in ever-tighter competitive environments. Sourcing no longer equates to instant cost gratification, but is now defined as a strategic component used to drive maximum competitive advantage.
Strategic sourcing is itself a benchmark. It relates to getting the best products and services at the best value. It is designed to segment external spend and ensure that procurement resources are focused on the most important categories. What sets strategic sourcing apart is its continuous attention to improving and re-evaluating the purchasing activities of a company, thus enabling organisations to adapt to changing market forces.
Supply Chain Management
The growth of consumer knowledge across globalised economies has meant that the notion of instant gratification by people is now a given. If companies are unable to rationalise their processes effectively, the degree to which they will maintain competitive advantage can be seriously compromised.
Companies must deliver, and this is reflected in effective Supply Chain Management (SCM). The aim, ultimately, is to reduce inventory and risk.
With the increased focus on cost and compliance, the procurement function has been elevated to a strategic component of value creation and a rich source of competitive advantage. To achieve this, rather than creating a world class procurement capability in-house, many companies have simply outsourced it.
Procurement outsourcing is often undertaken to leverage economies of scale and improve the execution and control of underperforming or non-core tasks and poorly managed spend categories. In doing so companies can realise reduced supply and operational costs, improved compliance and enhanced performance and cycle times.
It is important to recognise that outsourcing the procurement function does not necessarily mean a complete transfer of control but more likely the utilisation of third-party services.
At a simple level procurement outsourcing can involve migration of infrastructure: people, technology, systems and supplier management. A step further and more complex procurement-related processes can involve, for example, transferring procure-to-pay (P2P) and/or requisitioning. At a higher level, value-added functions such as strategic sourcing can be transferred. Taken to its full conception, strategic responsibilities can be given over, which might include the formulation of business rules.
Services procurement encompasses the strategic management and procuring of complex category services such as contract labour, consultancy services, marketing, print, travel, telecoms and legal services.
Services spend represents an enormous expense and while companies try in earnest to control the costs, few have the same visibility into their services expenditure as for goods and materials. It is estimated that nearly 50 per cent of corporate procurement spending is for services, and for even the most proficient enterprise, services spending can still be an abyss of unsourced buying and lost savings opportunities.
Consequently leading organisations are looking at methods for tracking this spend and the significant savings a correctly centralised services procurement strategy can deliver.
Procurement leaders are making a step-change in spend analysis and are looking at spend management as a platform to support an analytical, data-driven approach to managing procurement and operations on a sustainable basis. Not simply about good data, successful spend management should highlight compliance leakages, be repeatable, results driven and realize savings.
Spend management is crucial for all companies, and in gaining visibility of spend across company’s with big ERP systems it is hot on the agenda.
Supplier Relationship Management
As the need to maintain quality, coherence and deliver tangible savings across the supply chain has increased, so the focus has turned to procurement departments to realise the benefits through supplier relationship management (SRM). Improving the selection and management of global suppliers is a key issue for many large organisations.
Effective management of the supply base is critical. When companies are confident they are working with the most capable and economical suppliers, processes can be streamlined.
Companies can reap the rewards by managing relationships in a more strategic fashion
As the need to gain competitive edge tightens, companies that were once content to cultivate their local and national markets are now keen to globalise their operations and tap into new markets.
Global sourcing, and specifically low-cost country sourcing, is a hot topic. Legitimised by early pioneers, offshore providers proved their value as alternative resources. Companies initially questioning why you would source from low-cost countries are now asking: why wouldn't you?
As familiarity with the available opportunities has increased, so more enlightened companies have come to focus less on achieving incremental cost improvements and, instead, are evaluating all their capabilities to define a winning global sourcing strategy.
They see global sourcing as a long-term strategy rather than a tactical solution for short-term goals. The global deployment of work has its critics, but it can be argued that it holds huge opportunities for procurement: companies can benefit from lower costs, faster times-to-market and access to a massive pool of skilled resources, resulting in substantial value to the bottom line.
Outsourcing, or Business Process Outsourcing (BPO), is at the top of many corporate agendas in today's economy. With a focus on core competencies, more and more companies are outsourcing human resources, IT, procurement and other key business functions in order to reduce fixed costs, streamline and improve performance.
Procurement plays a central role in any outsourcing agreement. From selecting an outsourcing provider to negotiating the final contract, procurement must understand every aspect of the deal and its financial impact on the organisation.
Effective talent management is a critical business goal for all leading organisations in today's economy. The fast-paced development of purchasing as a crucial lever for competitive advantage has meant that the 'war for procurement talent' is as intense as it has ever been.
The scarcity of skilled executive purchasing talent means that companies must be creative in their approach to attracting, developing and retaining the top people. A recent management article in ELP Magazine suggested: "it is far easier to teach a business manager about procurement than it is to teach a procurement manager about business."
Other services include..
Procure to Pay(P2P) Process Improvement
Business Systems Optimisation
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