What makes a Procurement organization world-class?
This is often asked by many at procurement organizations.
Well, the elements that go into creating world-class procurement organizations include value-adding activities, digital transformation, data-driven decision-making, customer-centric service delivery, and skilled Procurement talent.
Research from the Hackett Group points out that such organizations have 18% lower operating costs than typical companies and work with 28% fewer staff while generating more than 2x the return on investment (ROI).
Do you know that today, world-class global procurement organizations focus more than ever on digital business opportunities? This is the case because digital transformation has enabled world-class procurement organizations to achieve greater efficiency, effectiveness, and a higher return on investment.
The process has been optimized by going digital. Hence, this has helped reduce errors and free procurement staff for strategic work. Cloud, mobile, and other digital tools allow them to truly transform procurement functions by forecasting and planning more accurately, collaborating with suppliers more effectively, and improving the overall customer experience.
The application of these digital technologies is referred to as the “Amazon effect” on the procurement function. As we can see, companies are implementing cloud-based integrated source-to-settle solutions for gaining a competitive advantage in the market-place.
Global Procurement organizations falter when they devote much of their attention to transactional work and pay little attention to strategic activities. Value-adding activities include analytics, performance management, and devising purchasing strategies.
Covid-19 caught the world by surprise. Hence, organizations weren’t prepared, and the worst affected were the Procurement departments that relied on human capital. World-class procurement organizations prepare themselves for calamity before it strikes.
They have intelligent contract management tools that look into force majeure clauses, performance tracking tools that notify about poor performing suppliers, and eProcurement solutions with intuitive user experience. Such organizations can sail through crises and outperform their competitors.
The tangible benefits of Source-to-Pay are greater procurement policy enforcement, efficient processes, higher spending under management, and reduce maverick spending. In today’s time, savings are not generated from just the transactional efficiencies of Procure-to-Pay. Businesses need to have competitive supply chains. Hence it becomes vital to have an effective Source-to-Pay process that makes procurement more efficient, responsive, and agile.
Source-to-Pay is about guiding people to get what they need, at the best value and faster – while they continuously seek out higher-quality offerings and better suppliers. Getting away from the mundane and tedious aspects of procurement and sourcing decisions allows the focus to shift to the business’s strategic needs.
Some companies still consider artificial intelligence to be in the early stages. However, AI-powered sourcing and contracting tools are already being utilized by most companies. In addition, these tools automate execution, analyze large data sets, and make intelligent recommendations.
Read more about how Porsche Cars NA propelled its Procurement processes with Zycus solutions.