In today’s global market, political and economic instability can catalyze market turbulence all too often. On top of this, changing trade laws and disruptive policy developments are beginning to perpetuate the business world. As a result of these unstable times, businesses are encouraged to enforce well-defined procurement processes in order to better manage their supply chain and any associated risks.
Deloitte’s Global Chief Procurement Officer 2018 report states that the biggest procurement priorities for businesses surround cost reduction, market development, and the management of risks on both internal and external levels. With the right procurement system, organizations better prepare for inevitable market changes.
Tips for Building a Strategic Procurement Process:
Determine Your Business’s Needs and Goals
Before moving forward, it’s important to know how the business is currently performing and what is needed to improve. If a current procurement strategy is in place, a full analysis of its strengths and weaknesses is advised in order to build future processes. This will help create a benchmark for the existing and future performance of your procurement strategy.
To help develop these requirements and goals, the following analytical tools may be used:
A simple SWOT analysis can determine the strengths, weaknesses, opportunities, and threats around an organization. With this tool, companies can analyze both internal (strengths and weaknesses) and external (opportunities and threats) components.
For productive objective making, SMART goals are essential. This form of goal making sets a measurable and actionable framework for the objectives to ensure that they are Specific, Measurable, Achievable, Realistic, and Time-Sensitive.
Invest in a Procurement Software
When organizational processes are managed manually, there is always the risk of losing money due to oversights, delays, and unbalanced accounts. With the use of a procurement software, these risks are completely minimized through automatic systems, in particular, an end to end “Procure to Pay” solution. In addition, you would leverage a procurement platform like OMX that assists with supplier discovery while measuring the socio-economic impact of a company’s supply chain as well. Furthermore, companies will also be able to source ethical suppliers that enhance their triple bottom line while nurturing their corporate culture, values and meeting ESG goals.
Identify and Evaluate Suppliers
Identifying authorized suppliers and the budget for each department will warrant a clearer understanding of the organization’s current spending and ROI. It’s important that businesses uphold strategic sourcing to mitigate the risks associated with a tumultuous market too. After all, a beneficial procurement method is one that thrives on efficiency, effectiveness, and customer service.
The best practice to ensure a beneficial procurement strategy is through setting fined tuned sourcing methods. This will help develop the way in which suppliers are chosen based on the following factors:
- Supply quality
- Delivery times
- Company compliance
- Level of service
Working with efficient suppliers will ultimately reduce the costs associated with your supply chain through fast delivery times and limited delays or errors. Additionally, this will ultimately affect the way in which an organization is able to provide the best value of goods and services to the final customer.
Initiate a Procurement Policy
For a successful and manageable supply chain, each department is recommended to have an outline of specific procurement practices. These practices should include:
- Goods and services that have been automatically approved
- Preferred lists of suppliers
- Purchases that need final approval
- Where approval is gained
Utilizing a streamlined procurement policy will ensure that an approved business practice is continued to be used across all levels of the organization while the set budgets and time constraints are honored. In turn, this will help alleviate the room for error while mirroring the company’s goals and values.
Communicate the Strategy to All Stakeholders
The Procurement Academy recommends that businesses consider communicating the plan to all relevant stakeholders. By ensuring that communication is understood on all levels, organizations can gather real-world perspectives on what their procurement strategies need. Hearing from managers and department heads will provide a clearer understanding of how the aforementioned processes fit in with the company’s bigger picture and what needs improving.
Manage and Refine the Process
As with most company strategies, it’s advised that constant monitoring is employed to assess its progress. To manage the procurement strategy, businesses can refer back to their established SMART goals and assess whether or not the process is meeting their desired objectives. Implementing a strategic plan that clearly communicates the various responsibilities, due dates, and expectations will help ensure its longevity. To monitor the plan, leverage solutions that provide real-time data.
The Bottom Line
An effective procurement process should be developed as a roadmap for a company’s spending habits. This roadmap should be formed to provide a maximized budget while minimizing areas of error such as late payments, delayed deliveries, or any other risks coming from suppliers. Following these tips will help provide a consistent cash flow that leads to a healthier bottom line and a more productive supply chain.