How Complex Procurement is driving Corporate Strategy Today

Procurement can seem simple, and in fact many organizations do treat the process as such. They look to acquire their goods, services and other resources externally, with the overriding concern being to lower costs as much as possible.

However, a huge international network of disparate providers and sub-contractors make up the supply chain now; and there are ever stronger demands for regulation, security and an uninterrupted supply across international lines. Procurement strategies have had to adjust as a necessity to these requirements for technical complexity, especially in high risk markets where value has to be optimized.

So how are businesses across the world dealing with the unique procurement challenges facing them?

Leveraging Technology

Today tools like spend analytics, eSourcing, eWorkflow and savings tracking and budget management are all go-to resources for achieving efficient sourcing and procurement. These tools are used along with strong market intelligence and data gathering abilities enabled by the internet to powerful effect. Modern technology allows companies to make their processes far more efficient, providing greater cost visibility and thus allowing savings to be tracked and audited far more easily.

In a field that’s seeing a dearth of talent, companies are investing heavily in technology as the main driving force behind advancements in their procurement. Companies such as KPMG are implementing software tools dedicated to minimizing manual labour, regulating spending, reducing stock and managing supplier contracts with the ultimate aim being, to automate the entire procurement process. So that it can be kept it under the control of a small highly trained team.

Strong Supplier Relationships

Supply can make or break a business, so involving suppliers in your processes and taking aboard their concerns is vital ensuring good communication. By aligning with your suppliers and essentially treating them as partners you increase value for both companies. The benefits to your company can be numerous, from faster delivery to better risk management and transactional efficiencies. Strong supplier relationships not drive financial gains, but improve the quality and relevance of the products you deliver.

Just look at Companies like GRS, whose whole business model is based around building strong relationships with suppliers all around the globe. Any e-commerce provider can then opt to buy in and integrate their stores with a real-time global storefront offering rewards and incentives including books, media, event tickets and gift cards.

When a GRS client’s customer becomes entitled to rewards, instead of shipping these products from one central location, GRS makes use of their strong knowledge and networking to source each item locally, fitting the needs of each client’s audience. These sorts of specific and responsive solutions to global business requirements would be impossible without making use of cutting-edge procurement techniques.

Aligning Procurement to Business Strategy

While most procurement functions adequately achieve their remit of achieving cost savings and directing the functions of an organization. On average this only contributes to about 8 to 10% of operating margins.

To increase these margins corporations are starting to look at procurement as part of a much broader picture. This process begins by clearly defining and communicating clear and measurable goals through their organization consistently and repeatedly. They then identify the areas of their business that make up the core competencies that contribute towards these goals and optimize procurement to best serve these competencies.

Measurements of success in the supply chain are then adjusted to fit new requirements, for example If quality is more important in your market than speed and ease of delivery, then measuring the success of your supply chain through general goals will not help you. Instead, testing your procurement processes based on flexibility and responsiveness is more pressing.

The process of realignment is never finished, as market requirements and your company’s circumstances change, so too must your procurement strategies.