Strategic procurement: Three quick wins that people want most
Strategic procurement is something you cannot crack on your own. It requires a Finance/Procurement alliance that's led from the top. CFOs must use their influence and join forces with their colleagues in Procurement. Unless all the parts are moving in harmony, nothing much works at all.
Unfortunately, the Impact of Strategic Procurement Survey found that this kind of close co-operation is lacking in around half of global enterprises, national companies, public sector agencies and not-for-profit organizations.
But what are the incentives for getting it right – and what are the returns you'd see soonest?
Look but don't touch
Although many organizations admit they're a long way from mastering strategic procurement, they can see the business benefits – tantalisingly close, but just out of reach.
Research found that almost 80% of organizations could recognize untapped opportunities for maximizing efficiency through strategic procurement. In fact, 61% could see 'many' possibilities ahead of them. So where are those quick wins to be found?
Respondents were asked to select their best opportunity for realising rapid and direct cost savings through strategic procurement. From the choices presented, here's how people voted:
#1st place: Supplier agreement savings
Almost two thirds of organizations (62%) reckoned that quick wins could be achieved by reducing purchasing costs from improved supplier agreements and the greater use of those contracts.
People's instincts are correct because strategic procurement can deliver the answers. Reducing purchasing costs from improved supplier agreements can be achieved by avoiding bad sourcing processes and replacing them with state-of-the-art sourcing that combines the right tools and expertise.
But savings cannot be realized unless new contracts are used to full effect, by following strategic procurement principles. Put simply, a contract is only as good as the way it's managed up and down the line. Neglected supplier agreements have a nasty habit of biting back but you can succeed by following effective ways to ensure contracts always deliver on their promises.
#2nd place: Improved analytical capabilities
Almost one third of respondents (29%) had their eye on savings derived from improved analytical capabilities. When strategic procurement is functioning properly, you can start to get those elusive business-critical insights. Then, with the right information, you can make the key decisions to sharpen up your sourcing, mitigate risk, improve processes and drive up efficiency.
#3rd place: Accounts Payable employee savings
Without the right processes, Accounts Payable staff can find themselves at the sharp end – branded as a bottleneck, criticized by suppliers and colleagues. But when strategic procurement starts to get all the parts moving and the right tools are added, then efficiency opportunities will start to ripple through an organization. Suddenly, AP has the ability to win three vital battles and staff can switch onto more value-added activities.