Becoming "leaner": Vital steps for strategic procurement
How can your organisation become leaner in today's digital economy? One-off savings are always welcome but what can Finance and Procurement do together to embed efficiency, streamline processes and improve the bottom-line in a sustainable way?
In the digital economy, being light on your feet is a business necessity. Budgets need to stretch further and achieve more, so organisations can respond faster to new threats, challenges and opportunities.
But where should your strategy begin if you want to become leaner? And how should Finance and Procurement work together?
Smarter policies pay off
While it may seem obvious that teams should work together on crafting the kinds procurement policies that will deliver a leaner and smarter organisation, this often isn't the case.
In fact, research by Proactis has revealed that CFOs at 65% of organisations are not fully involved in refining procurement policies to drive value, when they should be actively engaged and aligned with their Procurement counterparts. We made this discovery in a recent survey of senior decision-makers from global enterprises, national companies, public sector agencies and not-for-profit organisations.
There's a direct link between procurement policies and value/savings — so it's vital that CFOs bring their expertise to the fore and get involved in policy decisions with Procurement. Policies then need to be hard-wired into purchasing decisions using the right tools. Get this right and organisations can typically save between 5% and 20% for every dollar of spend they bring 'under management'.
Volume really matters
It's no good being lean in some areas of the business and bloated in others. But this can happen all too often. Our survey also found that nearly half of the organisations reckoned they only had a low or medium impact on total spend and supplier selection. In other words, spend management only went 'so far' and then ran out of gas or hit some kind of obstacle.
What enterprises must realise is that every sourcing 'event' and supplier engagement can be a way to save money, improve value and mitigate risk. Procurement teams understand this most of all — so it's vital that they are given the right support to implement the most appropriate policies, processes and tools to make it easier to maximise the amount of spend brought under management.
Waste at its very worst
Negotiating a good deal with a supplier is only the start. Unfortunately, successful wins for the business can be wasted if the organisation fails to leverage new contracts and relationships.
Nearly two thirds (62%) of decision-makers said they want to reduce purchasing costs from improved supplier agreements and make greater use of those contracts — as a way to secure quick wins. And this should be a priority for any organisation. What's more, it can be a way to build momentum for a far-reaching and profitable strategic procurement programme.
For the benefits to come through, buyers need systems to be able to access approved suppliers and contracts easily. As a result, you can make greater use of hard-negotiated agreements. You'll reduce cost and risk, impacting the bottom-line.
Keeping on top
To stay lean, Finance and Procurement should also work together at a strategic level to tackle cumbersome, manual supplier-related processes that may have been overlooked or endured in previous years. They won't just prove costly themselves, they'll create bottlenecks and waste elsewhere too. But when you encounter these, you'll often find there's a digital solution available to conquer them.
In particular, organisations should adopt new ways to improve 'supplier engagement,' which can be a huge drain on resources for both you and your suppliers. With new tools, you can better capture and manage supplier information, improve communications, streamline commerce and review performance easily.
This will also generate the insight you can use to optimise your spend, supplier base, contracts and all-round efficiency. As a result, you won't just become a faster, leaner and smarter organisation...you'll have the numbers to demonstrate it's happening.