Do You Know Your Procurement Organization’s True Value?
It’s a competitive world out there. In today’s complex globalized environment, it’s critical to leverage the most appropriate strategies for your procurement initiatives. Sometimes, however, it’s easier said than done.
Initially, two questions come to mind:
1. Are you looking to optimize your procurement performance and delivery?
2. Are you seeking value and increased return on investment (ROI)?
Nowadays, many firms are seeking to reduce operating costs in this challenging landscape. Procurement is increasingly getting a seat at the table for several reasons:
1. Firms are having difficulties increasing sales prices for products and services, reducing operating costs becomes an alternate way to increase profits / bottom line
2. Many firms spend a large amount on goods and services but do not know how to control and optimize this process
3. A sound plan to optimize a procurement function and reduce transaction costs and purchasing costs will get attention. Savings from these initiatives go right to the bottom line
The emergence of digital and cloud capabilities has also brought about new strategies and approaches, all of which make procurement a valuable asset in continuing to deliver cost reduction and growth.
However, without the proper tools, processes, and a platform to enable these improvements, efforts can be difficult to launch and could fall short of expectations. Here are a few examples why:
1. Many procurement organizations are at least partially manual and do not have reporting tools to track progress
2. Firms with several procurement departments and non-standard processes make it difficult to view total activity
3. Without the ability to consolidate spending, suppliers, and transactions onto one platform, it becomes very difficult to realize potential benefits
In my experience, a lack of visibility to your spend or not having a consolidated view of activity by supplier or category can make managing a cost-reduction strategy very difficult. These simple gaps can make even the most basic tasks, such as gathering the data needed to manage day-to-day or drive initiatives, a tremendous amount of work. These challenges can happen or a number of reasons:
• Without a centralized contracts repository can make it difficult to locate agreements and manage renewals
• Without a dashboard on total spend and supplier activity, it becomes difficult to understand where to focus your team and manage priorities
• Without a reporting and tracking ability, responding to a request for status on an RFP, an internal audit on a contract award, or what your current outstanding payables are for a supplier becomes a huge administrative burden
Having access to key data and, better yet, a dashboard of all procurement activity is fundamental to enabling efficient management of resources and priorities. Here’s the three-step process I’ve seen that works:
1. Get access – Find a way to visibly track spend and supplier activity
2. Standardize – Find a process that makes it easy to view total activity
Measure – Find a tool that easily lets you track and benchmark your progress
The area of reporting on status, activity, and financial commitments is also tremendously valuable because it enables you to manage the procurement organization against your key performance indicators (KPI) and provides transparency.
According to SAP Ariba Benchmarking, you can achieve a 50 percent Lower Procurement Cost as a percent-of-revenue for organizations in Asia Pacific where the organization uses an integrated platform for indirect, direct and services procurement.
So why not explore what options are available to you to improve your current value realization?
There is a huge amount of insight, networking, and information sharing available at the end of this month at Ariba Live in Singapore. This is where customers, suppliers, and organizations are invited to share their experience, learn of new developments, and see the power of intuitive and collaborative solutions.
See you at Ariba Live!