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Focus: Sourcing/Procurement: Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- April 30, 2015 -

 
Supply Chain News: Eight Key Steps to a Successful New Procurement Initiative

 

Beating Up Suppliers on Pricing is of Limited Utility in the End

 

SDigest Editorial Staff 

 

It's beyond clear that improved procurement effectiveness contributea directly and substantially to a company's bottom line.

Yet, often there is lukewarm support from executive management for procement initiatives beyond beating up supplier for lower prices - an approach that most procurement managers know in the end is of very limited utility.


SCDigest Says:

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The program charter a brief document that includes information such as the business drivers, overall scope, roles and responsibilities, methodology, and business value and risks.

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As labor costs as a percent of total product costs continues to decline due to increasing automation, the impact and leverage from procurement being able to reduce materials and/or component costs becomes greater and greater - whether through lower unit costs or increasingly lower total supply chain costs associated with purchased goods.

With that context, a recent blog posting by on the StrategicSourcerer web site offers eight key principles for a successful procurement improvement initiativea, which we summarize here:

 

1. Identify the pillars that will structure your procurement strategy:
This entails a clear vision and mission for the procurement function that is well defined and marketed throughout the organization.

2. Gauge a company-wide knowledge of procurement: Deliberate whether or not the organization understands what procurement is, what it takes to deliver procurement capabilities and how procurement can support the company's overall business strategy. Deficiencies in this area can be overcome through education, employing people with procurement experience and/or engaging external resources with an emphasis on knowledge transfer.

3. Develop an understanding of the culture that procurement will be operating in: Gauge how open the organization is to sharing and collaborating. If there are any constraints such as departmental, divisional, and geographical, the program will likely evolve into segmented initiatives and siloed functions. Engagement from key stakeholders, executive sponsorship and a solid governance structure will help overcome the unwarranted barriers.

4. Define the variety of roles within procurement and their relative competencies: The degree to which procurement is able to achieve its vision and mission is very much dependent on this. Consider the degree to which the procurement roles and responsibilities have been defined as well the skills and experiences that are available to fulfill those roles. In addition, establish the right environment in terms of motivation, career development, and reward and recognition. Deficiencies in this area can be overcome through education, training, and recruiting.


(Sourcing and Procurement Article Continues Below)

CATEGORY SPONSOR: SOFTEON

 

5. Isolate processes which are in alignment with your procurement program objectives: Processes are foundational building blocks for procurement. The two most important, end-to-end processes worth noting are source-to-contract and procure-to-pay. To address deficiencies in this area, review best practice procurement methodologies and, if needed, modify the company's methodology to encompass the unique characteristics of procurement initiatives.

6. Data: Availability, Accessibility, and Quality: Data is critical for procurement; the key reasons include spend analytics, supplier management, and forecasting and predictive analytics. The organization's data management practices must be evaluated to determine if they can adequately support the procurement program.

7. Recognize and identify the tools needed for execution and follow-through: Determine whether existing platforms can support the procurement needs and whether additional tools are required. This can range from market intelligence tools and e-auction for strategic sourcing to an electronic transactional platform for the creation and transmission of procure-to-pay documents. The resulting gaps will require evaluation, selection and deployment of tools and technologies.

8. Create a detailed, comprehensive program charter:
The program charter establishes the overall direction and scope of the program. It should be a brief document that includes information such as the business drivers, overall scope, roles and responsibilities, methodology, and business value and risks. It will also address any deficiencies identified in previous steps with a plan of action. It should be reviewed and approved by the key stakeholder overseeing the program.

All good advice, it seems to us.


Anything to add to these steps to successful procurement initiatives? Let us know your thoughts at the Feedback button (email) or section (web form) below.




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