PROACTIS Blog

Strategic Procurement: Where are the Opportunities for “Quick Wins”?

Charlotte Sutton
Charlotte Sutton,
PROACTIS
Like many important undertakings, transforming your Strategic Procurement Process to where it becomes a competitive advantage is “a journey, not a destination”.  But there are opportunities in every organisation for “quick wins” that immediately reduce cost and risk, and quickly impact the bottom line.
You want savings now. Every organisation is looking for short-term cost reductions – improved supplier agreements can reduce purchase cost immediately, reduced manpower requirements in Accounts Payable and elsewhere can be realised in a very short time. Some of the savings to be gained from transforming your Strategic Procurement processes will take time and investment, so it’s important to find early savings to offset the investments as they are made. Early results will encourage the organisation to help drive more results:  Every transformation effort is a human effort; when people see early successes, they are encouraged to stick with the plan. 
 
A Likely Opportunity for “Quick Wins”

The “quick win” opportunities within one organisation will be different from those in another. Depending on your level of procurement maturity and progress to date, your best opportunities may lie in areas such as contract management or sourcing. But our experience has shown that many organisations have great opportunities for realising rapid and direct cost savings by simply putting in place the basic tools to improve what we call supplier engagement. By taking the steps to better capture and organise supplier information, cleanse and extend that information, and use it to support key initiatives such as supplier rationalisation, many organisations can gain significant cost savings within a matter of months.  These savings usually come from:
  • Reduced purchase costs from improved supplier agreements and greater use of those agreements (i.e. increased “spend under management”)
  • Re-allocated FTEs in Accounts Payable due to reduced workload for responding to supplier enquiries and maintaining supplier data
  • Other savings derived from improved analytical capabilities such as spend analysis due to improved supplier information in financial systems 
The four steps outlined below, all of which can be done within a few months with proper commitment, will provide important and valuable “quick wins” in many organisations:  
  1. Implement a central supplier directory:
Utilising a procurement system to establish a central supplier directory – and the processes to keep it complete and up to date – provides an informational foundation to improve just about every procurement activity.  Besides providing a single view of your suppliers (much like you have probably done for customers), a central electronic directory enables you to quickly:
  • Eliminate redundant and excessive maintenance effort
  • Improve Procurement team and Accounts Payable department productivity  
  • Enable supplier base categorisation to support better spend analysis
  • Improve the effectiveness of existing financial systems through improved supplier data
  • Set the stage for supplier self-service data management
  1. Strengthen supplier qualification and contract review processes:
Supplier qualification and contract review processes are critical to maintaining a solid supplier base and avoiding undo risk.  But they can take a lot of time and effort.  A good procurement system will support streamlined processes that can quickly do several important things:
  • Identify existing supplier risk so steps can be taken to mitigate it
  • Reduce risk, and the associated cost, going forward  
  • Improve Procurement team productivity by automating supplier reviews and performance assessments, as well as the contract review process
  1. Perform a supplier rationalisation process and establish corporate contracts:
Once a central supplier directory is in place, suppliers are categorised for effective spend and risk analysis, and a solid qualification and review process is implemented, you will be in a position to address what is likely to be your biggest “quick win” opportunity: supplier rationalisation. 
 
If your organisation is like most, you have accumulated far more suppliers in many categories than you really need, while possibly having too few in others.  Spreading your spend across more suppliers than necessary dilutes your buying power, while maintaining only one source of supply in key areas may represent too much risk if that supplier should fail to perform. 
 
Using information from your supplier directory along with spend history and other information from your financial systems, a supplier base rationalisation initiative will enable you to:
  • Reduce the overall cost of purchased goods and services by negotiating lower prices and better overall value when you consolidate your spend to just one or a few good suppliers per category 
  • Lock in savings through corporate contracts with preferred suppliers 
  • Where appropriate, reduce the risk of reliance on just one supplier in certain categories by establishing relationships with one or more additional suppliers
  1. Deploy a supplier portal:
One of the best tools for reducing administrative expense in both the short term and long term is deployment of a supplier portal.  Using a secure Internet portal, you can dramatically streamline two-way communication with suppliers.  You can use such a portal to:
  • Reduce initial supplier engagement effort by enabling potential suppliers to apply for approved status and answer questionnaires online themselves
  • Reduce supplier on-boarding effort by enabling suppliers to enter or upload profile and catalogue information themselves
  • Reduce sourcing event effort by enabling appropriate suppliers to browse open invitations to tender, download RFx documents, upload responses, and view award status
  • Reduce the workload in Accounts Payable by enabling suppliers to access account information themselves
  • Reduce supplier information management effort by enabling suppliers to maintain changes to their profile and catalogue information themselves
 As stated above, these may or may not be your organisation’s best opportunities for “quick wins”. If you already have these capabilities in hand, your best opportunities for quick savings may be in better contract management or streamlined sourcing processes. A good procurement system will allow you to start wherever your best opportunities lie, and move towards the ultimate benefits of an integrated approach in the phases that work best for your organisation.
 
 
 
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