Five winning procurement strategies

Procurement strategy
October 15th, 2019
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An article recently published on the Zycus social media procurement platform put forward a list of the most effective procurement strategies. It is true that between prioritising innovation, cost reduction, process productivity and data processing, companies may find defining the most effective procurement strategy a bewildering process.

The winning procurement strategies recommended by the article are based on feedback from market-leading companies. They suggest simple, practical pathways to enable all chief procurement officers to set out their roadmap along with clear points of reference.

Analysis of the most successful procurement strategies makes it possible to identify five fundamental areas, each answering part of the question surrounding the function's performance:

Winning procurement strategy no. 1: Standardising the purchasing chain

Several pathways may contribute to the objective of improving procurement performance. Some companies choose to concentrate their efforts on reducing costs. However, others may decide to focus on making invoice processing as slick as possible, for example.

In its attempts to make the entire purchasing chain run smoothly, procurement strategies should always integrate research into new suppliers as well as the payment of invoices.

Winning procurement strategy no. 2: Manging supplier risk

A procurement strategy that takes an aggressive stance on cost almost always leads to taking risks. Such audacity is only acceptable for an organisation if the consequences of a possible supplier failure are limited to the supply itself. Systemic risk for the company must be completely eliminated.

For example, trialling a new supplier on a product that is very easy to obtain within 24 hours is a good strategy. On the other hand, trialling a partner on a strategic supply at peak production periods is an uncontrolled risk.

Winning procurement strategy no. 3: Centralising supplier data

The procurement division of a global group relies on data from a large variety of sources to document, for example, supplier innovation strategies, the mapping of their facilities or their product descriptions. Consolidating this data into a single database provides a lever for improving the procurement strategy. A supplier intelligence process can only work if data is centralised and available to be fully processed.

Winning procurement strategy no. 4: Establishing predictive analytics capabilities

The most successful organisations consider the use of predictive analytics to be essential, with its use of big data and artificial intelligence. An ambitious procurement strategy cannot afford to overlook this technology which is being adopted by an increasing number of companies at a rate of over 20% per year [1].

Winning procurement strategy no. 5: Incorporating the department into the global innovation system

In market-leading companies, one in two chief procurement officers [1] considers innovation to be just as important as gaining a competitive advantage or opening new markets to create value. As a result, an effective procurement strategy positions procurement teams and their processes within a company-wide collective intelligence dynamic.

Collaboration across multiple departments puts the procurement department in the best position to identify and harness any innovation that may be created by suppliers.

To conclude, each of the five winning procurement strategies described has the potential to contribute to company performance, which can also be enhanced by digital transformation. Simplification, supplier relations, collecting and processing data, and innovation are all challenges where the impact of digital technologies is particularly high.

If you want to digitally transform procurement within your organisation, take a look at "The P2P roadmap" article by Xavier Laurent, Manutan's Director of Value-Added Services.

 

[1] Study by the Aberdeen Group