Procurement has come out of obscurity and into mainstream business. Once known merely as a back office function, it is now a mainstream business management activity for most organisations as it’s now understood that it is more than just a cost-saving measure but a way to gain competitive edge in this day of business globalisation. Procurement competence has taken a more strategic approach because the way we do business has changed.
Procurement Executives Realise That They Face The Following Challenges:
As cost increases, business are relying more on outsourcing to supply partners and third party managed services. It therefore becomes critical to ensure that there should be some strategy or system to ascertain key strategic supply categories and key suppliers and explore opportunities to outsource non strategic supply categories to suppliers or third party specialists. That way an organisation can realise further cost savings and enhance process and service.
Procurement Automation Revolution
The last 10 years has seen a major uptake of organisations adopting technology solutions to source and manage the supply goods and services. This procurement strategy is both cost effective and creates a highly competitive environment.
The supply market is constantly changing. High costs such as energy and transportation costs and in some cases labour costs have impacted the supply market. Therefore, the procurement executives need to make certain they have a full appreciation of the Total Cost of their supply and manage proactively for price changes.
As we now operate in a global market, most organisations have multi offices. It means that the procurement function needs to support at a global, hence executives need to understand best fit supplier arrangements for their business. Consideration needs to be given to whether certain arrangements are better at global local level. Certain spend categories lend themselves to better at a global level, however each organisation needs to set out what is the best set up for themselves of supplier requirement. However, it is not as daunting as it seems. As long as procurement executives understand the importance of procurement competence and what happens if it lapses, the future is bright for these organisations to stay ahead of the competition. The procurement competence process can be started by understanding the following:
This is a step whereprocurement executives and management identify their group’s goal and vision. There should be a deep level of understanding of the procurement function and how it can add value to the organisation if executed suitably followed by a timeline and goals set to achieve this.
Current Procurement Competence
An assessment of the procurement function its structure and supporting structures needs to be carried out to identify gaps and holes in the process. Once you are able to establish the above, then the next step is to perform an assessment of your organisation, the processes, knowledge and current technology used. The assessment may seem tedious but it helps to answer some important questions which may give a clue to further improve procurement competence in your organisation.This process will also assist the procurement team to identify if the current organisation goals are being met and set future goals.
This process involves, measuring your current Procurement Competence and supplier base against your competitors and the best in industry. This will give you an insight as to whether your current procurement strategy is well placed.This whole process will slightly lessen the burden of procurement executives who not only have to constantly improve the procurement strategy but also ensure all this is done with tight budgets. This is only possible if the above measures are taken in place so that the executives are armed with sufficient knowledge so that they can prioritise the supply management strategies and at the same time be able to benchmark their procurement competence against industry peers. Michael O’Brien is a Partner at Epago Group. He and his partners have a combined experience of over 20 years in the procurement consulting and managed services business.