Procurement is a universal function of all businesses that has a direct bearing on the short and long-term performance, profitability and sustainability of an organization. However, against a backdrop of increasing competition, business interconnectedness and change due to disruptive technologies: organizations are still currently using rigid, cumbersome paper based manual procurement processes that are disjointed, non-compliant and disproportionately reliant on human administration for tracking, record-keeping, storage etc. Compound this with the fragile economic recovery from the effects of COVID and you have Operations Executives and managers trying to strike a delicate balance between the short-to-midterm on-going business operations while driving growth and sustainability in the long-term.
Whether your company is rolling out a growth, consolidation and/or survival strategy: Procurement & Operations are constantly being put under pressure to maintain compliance and come up with cost containment strategies. These strategies are to be implemented against a backdrop where, Board and managements reviews are evermore requiring answers to the following questions:
1. Are our procurement, purchase and logistics practices compliant?
2. How much has the procurement department saved the company?
3. Who are we buying from and why?
4. Are they the best suppliers and what contingencies do we have in place if they fail to deliver?
5. Are our suppliers compliant and the best partners to be working with?
6. Where are the cost savings on purchasing, supply & logistics sitting and why?
7. How come the business is not seeing the impact of these savings in its bottom-line?
Unfortunately, the answers to these questions are buried in the current manual processes making it near impossible administratively to generate these metrics worse still in real time.
Until recently cost savings for example: i.e. A company setting a target of saving 10% on what the spent in the previous year has been the end all be all objective of the procurement department. However solely focusing on this metric leads to a tendency where the operations/procurement department aggressively pursue expense reductions in the short term without much consideration to the overall medium -to- long term objectives of the business. Ultimately this approach leads to higher costs in the long term through strained supplier relations, non-compliance (internally and externally) and damaged reputations. Therefore, for the operations/procurement function to be considered a key proponent in the top-line discussions around driving enterprise growth, requires a shift in approach centred on putting in place cutting edge tools, systems and platforms that develop and track comprehensive value orientated KPI matrixes that look at how strategies implored are impacting the organization now and its future trajectory.
Tactical sourcing activities are critical to keeping organizations running smoothly, but supply managers should now be focusing more on value unlocking strategies. Forward thinking transformative procurement leadership shifts one focus from top line objectives, by coming up with innovative ways to unlock impactful value that drives the business. Therefore, beyond cost savings they should be looking for ways of greater integration and information sharing with suppliers and relevant stakeholders in their value chain processes for the effective planning and delivery of goods and services. They should also streamline processes for improved access to a diversified market that is resilient and sustainable. Finally, they can look for ways to improve stakeholder’s experiences along the value-chain through increased responsiveness in how the relate with each other and by empowering them in a transparent way to make validated data decisions to drive their overall business and operational objectives.
This tactical and strategic value approach should be managed so the outcomes align with the company objectives. This can be achieved by digitalizing your operations. In the cases where the procurement processes have been digitized and automated generating these value metrics and in real-time becomes a defining competitive advantage in your organization's operations. In doing so, their activities are directly more impactful; they strengthen and harmonize stakeholder and supplier relationships and provide cost savings that can be reinvested in growing the businesses competitive advantage or ensure survival in uncertain times such as now.
Tradata is one such platform you can consider to redefine and repurpose your organization around this tactical, strategic value approach. Click here to begin the journey! Thank you and don’t forget to like and share this post!