How to Become a High-Performance Procurement Organisation
- Posted by: David Watters
- Category: Best Practices
By now, businesses have seen vulnerabilities in their processes, policies, supply chains and overall resiliency of their business exposed through the pandemic. Irrespective of size and scale, an organisation’s ability to adapt to secure its supply chains, cash flow and workforce continues to be the difference between those who have been able to survive during the pandemic and those who have thrived. Common trends amongst those businesses that have been able to thrive are that they have:
- An accurate, clear view of their supply chain to identify any areas of concern or new capabilities
- Real-time reporting on current liabilities and cash flow to help understand the financial picture
- Access up-to-date spend analysis to identify where costs can be reduced.
- The ability to proactively make data-driven, fast decisions based on actionable insights.
Prior to the pandemic, these would be ways in which you would describe a high performing procurement function. So, as more and more businesses look to improve their business resiliency and strengthen their vulnerabilities, we wanted to share some insights into how you can become a high performance procurement organisation.
Sourcing, Contracting and Supplier Management
High performing procurement organisations are able to drive value and visibility through how they manage their suppliers, source goods and create, negotiate and approve contracts. In our experience, high performing procurement organisations all:
- Actively use data to drive stronger relationships with our suppliers
- Conduct all sourcing through a single unified platform used across the entire business
- Have a centralised procurement team that has complete visibility over all spend with our suppliers
- Have clear and enforceable policies and guidelines to define strategic and tactical sourcing
We find that organisations that don’t have these in place typically lack the accurate, detailed spend data that helps drive leverage in contract negotiations. Which, in turn, impacts on their ability to drive cost savings across your key spend categories.
Using data to drive business insights
A high performance procurement business has complete and on demand visibility over its committed spend and outgoing liabilities. In our experience, high performing procurement organisations all:
- Can run reports detailing purchase order vs non purchase order spend
- Have the tools to run real-time reports on different spend categories (IT, marketing, operations) pre and post payment
- Able to run on-demand spend analysis reports to negotiate better deals with your suppliers
- Have and track KPIs for invoice approvals
- Have and track KPIs for purchase order approvals?
- Able to benchmark your source to pay processes against industry standards and best practice on demand
How can businesses improve their procurement operations?
Procurement leaders who have access to high quality, on-demand spend and supplier data can deliver real value for organisations, instead of focussing solely on hard cost savings and negotiating contracts.
How can businesses unlock this value? Start by uniting your people and processes with the right procurement technology. By this we mean, platforms that enable your procurement and finance process to become as visible as possible to internal and external customers. Technology that actively drives your policies and processes forward whilst delivering accurate and real-time data, which is benchmarked against industry standards or otherwise comparable reference points.
Procurement leaders and teams that are enabled with the right tools and processes can act as strategic partners and deliver huge value across the organisation. They can be a real disruptive innovator in the business through:
- Actionable insights to drive continued cost savings to the business
- Creating more value-driven supplier relationships that drive your business forward:
- Helping your business out when you are in trouble, such as quicker order turnaround times or longer payment term
- Product/service Innovation – suppliers are experts in their field may be able to find more effective ways of solving their customer’s problems or accelerate your speed to market with a new product line
- Reduce the risk in your supply chain
- Driving a culture across the organisation of focussing on achieving the largest amount of value for the lowest amount of money
- Bringing a different, cross-business perspective to strategic decision-making
- Providing a significant contribution to achieving sustainability targets through leveraging supplier relationships.
- Providing complete and detailed visibility of spend across all suppliers, categories, and business units
Measuring the performance of your procurement operations
There are many different ways to measure the performance of your procurement operations, from KPIs around cost savings to supplier performance. To help businesses get a more holistic view of their procurement and support business leaders we have created a free online assessment of an organisations finance and procurement operations.
The assessment provides a detailed 13 page report with recommended next steps based on your organisations current procurement performance.