Posted on Wednesday, June 15, 2016 by Breelyn
The procurement process can occasionally feel like a stroll through a field of landmines. It's possible to get from Point A to Point B in one piece, but without adequate planning it's far more likely that the result will be a bloody mess and lost limbs (of the business, of course).
For the honour of a streamlined workflow, here are 5 factors that must be vanquished in the name of optimal procurement. Keep these in mind when your team employs strategic maneuvers and you'll have a far better chance of emerging victorious.
It's extremely dangerous to head into the Battle for Savings without a map of company spending for guidance. Purchasing patterns must be understood in a variety of configurations - the map should still display the best route to optimal procurement even if read upside-down. Be aware of how funds are spent at a the company, branch, and individual level. Even better, consider using software that provides customized reports to gain precise knowledge about categorized procurement spending.
Too many organizations are wounded by poor exploratory skills, especially in regard to category management. Managers may be oblivious as to who's spending money, and on what. Without a system in place to manage item categories, companies are liable to purchase the same, or similar, goods and services from different suppliers (missing out on opportunities to secure an economy of scale). They may also be buying duplicate items from an unnecessary number of suppliers. The likelihood of this occurring increases unless an approval process is utilized.
Procurement should not be viewed as the only corporate function that secures savings. Organizational spending affects the whole company, so actions taken by a purchasing department need to be made accordingly - with a focus on driving company-wide initiatives that go beyond savings. That being said, it's frequently the responsibility of a procurement team to generate short-term savings to secure "buy-in", but this means that long term, more strategic objectives are sometimes overlooked. An organization's inability to include procurement in endeavors outside of cost reduction and consider objectives holistically can severely restrict value generation.
Buyers and suppliers will not have an effective procurement experience without back-and-forth communication. Negotiations are often approached as if suppliers are psychic - unfortunately this is (generally) not true. Smart companies are getting suppliers involved in long term demand planning, as this maximizes innovation and trust. Frequent supplier check-ins are mandatory in order for decisions to be made about issues that may affect the market, and as an extension, the quality of ordered items.
Optimal procurement is worth fighting for, but how can this be done if purchasing teams are unclear about their responsibilities? Procurement must operate in conjunction with management to ensure an efficient process, and management must be articulate and explicit when it comes to company-wide expectations. If this can be accomplished, optimal procurement has been attained! Free of landmines and prosthetics too.
Communicate to build a better buying system.