A Dynamic Field
Procurement‘s increasing importance is being driven by two economic changes:
– Increasing competitive pressures are forcing companies to look at procurement as a means of helping boost the main point here. CEOs are searching for areas to cut costs, and streamlining procurement processes is a practicable solution.
– A large amount of companies are doing more outsourcing. This makes procurement decisions increasingly vital that you business vitality.
There are many ways a highly effective procurement strategy improves performance, including:
– Eliminating maverick spending.
– Streamlining operations.
– Improving supplier relationships.
– Increasing bargaining power with suppliers.
– Strengthening supplier relationships.
– Aligning purchasing decisions with corporate objectives and goals.
How Mature Are you currently?
Measuring an organization’s Future Procurement maturity involves assessing how close it is to achieving each one of the aforementioned results. There are four levels of maturity: novice, intermediate, advanced, and expert. There isn’t any relationship between company size and procurement maturity. Companies of all sizes are at various procedures in the introduction of their procurement functions.
Maturity Assessment Guide
1.Evaluate maverick spending in the IT department. Talk to supervisors and find out if unauthorized purchases are being made. If so, what sort of purchases? You may be shocked through the number of purchases occurring outside of formal procurement protocols. On the other hand, without any protocol in position, expect excessive amounts of maverick spending. Supplier Management maturity is typically seen as a the next amounts of maverick spending:
oLevel 1: Significant maverick spending.
oLevel 2: Minimal maverick spending.
oLevel 3: Without any maverick spending.
oLevel 4: No maverick spending.
2.Examine your Future Procurement processes and procedures. Find your written group of procedures detailing the procurement processes for your company. When there is no documentation, does your organization follow repeatable procedures? Or does each purchase result in an ad-hoc patchwork of steps? Procurement maturity is usually characterized by the next amounts of procurement procedures:
oLevel 1: No processes or procedures.
oLevel 2: Processes and procedures exist, but aren’t documented.
oLevel 3: Processes and operations are documented and implemented.
oLevel 4: Major procurement decisions are based on a multi-function team.
3.Evaluate your relationship with suppliers. Look beyond your internal procurement processes and concentrate about how you know your suppliers. Typically, the greater information you’ve about the people you need to do business with, the greater the connection. Without any purchase information on hand, you can’t develop a partnership with suppliers and repair providers. With proper information, you are able to evaluate and rank suppliers.
Your procurement maturity level pertains to your supplier relationships as follows:
oLevel 1: No purchase information on record; have to ask suppliers for this.
oLevel 2: Use supplier information to judge price, quality, and delivery.
oLevel 3: Rank suppliers and develop strong relationships with select suppliers.
oLevel 4: A supplier’s percentage of business correlates with performance ranking.
4.Assess your bargaining power. Information offers you with purchasing leverage. To what degree do you leverage information about suppliers to improve spending power? Do you coordinate purchases to improve leverage? Does your organization possess strong negotiating skills? Your procurement maturity level is seen as a your ability to leverage spending power:
oLevel 1: Company spending power isn’t leveraged.
oLevel 2: Major purchases are negotiated and coordinated to improve leverage.
oLevel 3: All purchases are coordinated and leveraged.
oLevel 4: Supplier’s cost-reduction ideas are brought to your company first.
5.Determine Procurement‘s strategic alignment. Experienced buyers understand the overall corporate strategy and also the procurement strategy. What percentage of your buying decisions are viewed as strategic decisions? Have you got a strategic plan in position? Procurement’s strategic alignment relates to maturity as follows:
oLevel 1: No strategic plan governing procurement.
oLevel 2: Although no strategic plan exists, purchases are strategically relevant.
oLevel 3: Virtually all purchases are aligned with corporate strategy.
oLevel 4: Perfect alignment with company goals and objectives.
6.Evaluate your buying experience. Do your buyers receive training? Will they understand the strategic relevance of buying decisions? Do they understand how to apply cost accounting to a negotiation? For example, do they know the difference between direct and indirect costs, as well as overhead? Your Procurement maturity level regarding buying experience is characterized as follows:
oLevel 1: Limited buying experience; no training.
oLevel 2: Buyer training program is within place.
oLevel 3 & 4: Buyers understand strategic buying and also the need for cost.
A strategic method of IT procurement can help cut costs and improve efficiencies. The first step to going for a strategic approach to IT procurement technique is assessing your present procurement maturity.
Strategic Procurement Part Two
Many enterprises have gained a strategic advantage by treating their procurement like a strategic function. Pre-plan your procurement process and ensure it encompasses these best practices.
Strong procurement processes align purchasing decisions with corporate strategy, increase bargaining power with suppliers, while increasing the value obtained from investments.