Procurement today and tomorrow – Transformative Scenarios for Change part – 2

Procurement today and tomorrow – Transformative Scenarios for Change – part 1
January 29, 2013
5 Steps to Manage Contracts Efficiently – Spokes in the Contract Life-cycle Management Wheel
February 7, 2013
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In the previous blog, we discussed the current state of procurement and the 5 scenarios that procurement professionals should be watching out for that are likely to be game changers.

In this 2nd and the final part we will share 5 smart tips given by Jason Busch, Executive Editor – Spend Matters & Managing Director – Azul Partners at Horizon 2012 to manage procurement better.

Tip no 1: Don’t be finance’s poodle

With the finance teams forecasting cash, revenue, demand etc. and mapping its strategies to that of procurement deliverables, procurement is increasingly being considered as a strategic function. However, procurement needs to be careful of not implementing somebody else’s programme but educate finance. It needs to define for itself what being strategic means. Ask questions like

  • If procurement is more strategic, why can’t it build business cases for high levels of staff and technology investment more easily (e.g., doubling headcount)?
  • Does finance (and the board) believe your savings numbers?
  • Why do salary deltas still exist within procurement management ranks and sales/commercial organizations?

Tip no 2: Stop and think about why we’ve not been able to get our full allowance request

As highlighted above, there is difference of goal alignment between finance and procurement. Procurement may be unable to show its impact on the company’s top line thus making finance question its effectiveness. This in turn affects the budgets allocated to procurement. It is time for procurement to collaborate with finance and educate them about the savings generated and demand full allowance.

Tip no 3: Get smart on technology!

This would help procurement to have a more fluid RFI/RFP process, ability to explore different commodity scenarios e.g., who buys, from whom, how much, when, from what geographies/plants, on what terms?, become more collaborative, understand the cost of tradeoffs e.g., split of business to reduce the chance of a supply disruption etc. Thus manage the procurement function smartly and efficiently.

Tip no 4: Focus on starting fires, not just fighting them!

Some initiatives that can be taken to start lasting fires are

  • Tackling services procurement, inclusive of complex categories like labor, legal by taking responsibility not just for savings, but value
  • Educating and leading finance to get more value from procurement including the top line
  • Taking risk off the table by commodity management, building commodity and supplier management dashboards to track key variables, contract management, total cost management etc.
  • Redefining the sourcing process.
  • Putting on a supplier management cap by driving both risk and compliance initiatives that can expand our reach and influence.

Tip no 5: Don’t be afraid to ask, Show us your spend

Procurement in order to deliver on the savings has to first gain visibility into the spend happening across the functions within the organization. This will help procurement to increase its scope and influence within the organization by bringing more spend under management.

 

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