All procurement projects need to be data driven, however, this often requires additional resource in your procurement team or otherwise. It is necessary to get into the granular detail in order to identify the best purchasing opportunities and deliver consistent, successful results. This often requires the detail included in invoices and unless you have an advanced system to recognise, read, collate and report this detail, then its just down to hard graft!
Are procurement projects a priority in your business, or do they frequently get put on the back burner in order to deal with more pressing issues?
Should these projects be deemed less of a priority when Procurement is one of the key functions to drive improvements in a business’s profitability and cashflow?
An outsourced procurement partner can ensure that these projects are consistently delivered.
A poorly executed procurement process often leads to failed sourcing activities with detrimental consequences: budget over-spend, losses, frustrated stakeholders and suppliers, wasted resource, fragmented buying, maverick spending.
We regularly hear that procurement processes are avoided because they are authorisation and admin heavy and actually easy to circumvent. A robust procurement process doesn’t necessarily mean that it has to be cumbersome. The process should be lean and as efficient as possible, however, there should be a process.
A manufacturing company has 3 separate departments purchasing stationery. Department 1 buys it from a local supplier, department 2 buys from a national supplier, department 3 shops around and buys from whoever offers the best prices. There are up to 10 different stationery suppliers set up on the system. The product range is extensive, prices vary for similar products and delivery charges are frequently applied where order quantities are below MOQ. Orders are placed on an ad-hoc basis, so the finance team are processing multiple invoices and payments and are continually dealing with price queries.
By looking at the procurement of stationery across the whole of the business, the process can be simplified. By involving all stationery stakeholders, a much reduced and common product range with a standardised specification can be agreed. The consolidated volumes can then be purchased from the supplier offering the required specification of product at much more competitive prices. The intangible benefits of this process are reflected in the time saved shopping around, a reduced number of POs, consistent prices, fewer and quicker processing of invoices.
Of course, this principle can be applied across all spend areas in a business…
As a business leader, owner, decision maker in a manufacturing company, what do you think about when you hear the word procurement? Raw materials, packaging, supply chain?
All budget holders within a business are “buying” on one level or another, yet very few businesses follow the same stringent procurement processes that are in place when purchasing raw materials and packaging.
Holistic procurement looks at the entire organisations’ procurement practises to ensure a thorough and consistent approach.
Holistic procurement is imperative in the current environment as businesses face the double whammy of inflation and supply shortages.
Traditional price negotiation strategies are less effective when trying to keep costs below the inflation line.
To increase profitability, as well as making productivity improvements, businesses should also be looking at their internal end-to-end procurement processes to remedy inefficiencies that impact the bottom line.