The main objective of strategic sourcing is to save money but other reasons include improving the acquisition process, supplier performance and minimizing risk. The software is paired with financial department systems, so that initiatives’ financial impact can be automatically uploaded to the department’s database. Companies are looking for opportunities to create competitive advantages for themselves to counter the downturn that the pandemic has created, including through partnerships and joint innovation. Since 2011, indirect spend has been growing by an estimated 7 percent per year globally. collaboration with select social media and trusted analytics partners But these are just the starting point. Using this coordinated, technology-enabled approach, global companies are already achieving marked improvements that allow them to capture the untapped value of indirect procurement. Over a 12-month period, one company succeeded in reducing value leakage by approximately 3 percent and captured savings by gaining better control over spending. Connecting with partners that have an existing infrastructure or complementary service can make it faster and easier to adapt to a changing environment. Zero-based budgeting. Change management. 1. Intelligent spend engines. The next normal arrives: Trends that will define 2021—and beyond, The present-focused, future-ready R&D organization. We also found that companies with top-performing procurement functions saw valuations return to pre-GFC levels an average of three years faster, and were able to lower costs of goods sold (COGS) as a percentage of revenue, thus improving EBITDA by 3 percentage points more than bottom performers. We use cookies essential for this site to function well. In a recent survey we conducted, top Asia-Pacific procurement leaders pointed to a significant difference between recovery efforts after the GFC and what’s happening now. The best approach, he says, is to view outsourcing as a specific case of procurement, and to remember that it is a strategic, organizational func-tion. For the world’s best-known corporate-management consultants, helping … Based on our research and feedback from global procurement leaders, we believe that companies can continue to rely on procurement to recover from the current crisis, in much the same way that they used the function to recover from past crises. Many are trapped in pilot purgatory, making small investments in select use cases that never scale up to achieve real business impact. At the pandemic’s onset, procurement departments switched to crisis-management mode to help companies alleviate disruptions, including sourcing personal protective gear for employees and helping smaller suppliers manage their cash flow. We use cookies essential for this site to function well. After all, spending on purchased goods and services can represent 70 percent of a company’s costs, so business leaders have long known that purchasing improvements can directly improve the bottom line.2 2.In our survey, for example, we found that the overall sourcing efforts of high-performing purchasing groups generated annual cost savings that were nearly six times greater than those of the low performers. Adopting an agile operating model could help procurement functions scale up or down quickly to respond to sudden supply challenges. An April 2017 report by McKinsey & Company, “Turning indirect sourcing into a multimillion-dollar profit center, ... Susan Walker is LAC Group's Director of Procurement Strategy and an expert in procurement best practices including sourcing, negotiating, vendor relationship management and … Our flagship business publication has been defining and informing the senior-management agenda since 1964. A company can gain competitive advantage by applying the bottom-line savings to fuel growth and innovation. SIG (Sourcing Industry Group) is the premier global sourcing association, founded in 1991 that provides thought leadership, networking and training opportunities to executives in sourcing, procurement and outsourcing from Fortune 500 and Global 1000 companies. Learn from the best. People create and sustain change. Never miss an insight. The insights offered by our reports will help procurement professionals streamline supply chain operations and gain insights into the best procurement practices to mitigate losses. Advanced analytics solutions. Machine-learning features improve the tools and perform data cleansing, categorization, and enrichment activities. Unilever draws the admiration of many, including a procurement exec in transition we spoke with a few months ago, who described the reasons why: robust procurement group demonstrating best-in-class processes; strong sustainability sourcing practices; global presence and a sterling supply chain brand, as they were voted No. 1 on Gartner SC Top 25 Supply Chain list. An Indian grocery chain rolled out home deliveries by partnering with a local ride-sharing company rather than taking on the cost of buying its own truck fleet. Companies can create better transparency by working with suppliers to gain information about their next-tier suppliers and their upstream value chains. This requires taking tactical actions that instill the necessary mindsets and behaviors, as well as building the hard and soft capabilities required for the organization to reach and sustain the full potential. These tools also promote the transition from spot checking to total quality control. But these are just the starting point. Investing in stronger, future-ready practices and capabilities will pay off in the short term, and help organizations emerge stronger and better prepared for any future crisis. Cross-functional collaboration is powered by visualization and communication tools that allow managers to share information and monitor and make inter-departmental decisions instantaneously. Leading companies have created a B2B offering catalog that lists all online marketplaces, additional services, and supplier offerings. What we found was that – overall – there is a significant gap between where Procurement is now and where they could be. Procurement’s tactical potential as a cost killer is no secret. Strategic investments can also be an attractive option, as illustrated by digital-platform investments in sectors including financial services, industrial equipment, and retail. cookies, [email protected], Visit our Product Development & Procurement page, accelerated the reimagining of the workplace. For instance, merged companies face the challenge of integrating multiple ERP systems, fragmented taxonomies, and limited visibility on actual spend across the organizations. To unlock the full potential, these elements must be applied comprehensively (exhibit). For example, in procurement of selected minerals, predictive analytics can already be used to integrate information including mining activity, shipping data, weather, and economic indicators—and it can even analyze satellite images of at-port stockpiles to give a much more accurate prediction of market prices. Here are seven best practices in procurement for SMBs and the advantages they can deliver. n Use consistent language, e.g., terminology adopted from NIST to facilitate effective communication and coordination. Unleash their potential. Please use UP and DOWN arrow keys to review autocomplete results. But for procurement to lead the way, companies will want to reimagine not just what the function does but also how it operates and which new capabilities it will need. Better procurement practices can help hospitals achieve rapid supply cost reductions of 20 percent or more and keep future cost escalations under control. The insights offered by our reports will help procurement professionals streamline supply chain operations and gain insights into the best procurement practices to mitigate losses. Hire procurement experts: SMBs tend to have minimally staffed procurement teams that report to either the Finance or human resources department. By proactively making these changes, procurement leaders can not only counter some of the worst effects of the crisis, but can also set themselves up to prosper in the future. The Victorian Local Government Best Practice Procurement Guidelines (the guidelines) provide a set of principles and practices that represent the most efficient and prudent course of action for developing and maintaining best practice local government procurement processes, in order to: 1. Victorian Local Government Best Practice Procurement Guidelines 9 1. Moreover, the interlink increases the engagement of top management in indirect-procurement initiatives. What makes the new vision for indirect procurement so powerful? Without best practices, it is easy for the company to spiral because there is a lack of a set structure to follow. Work from home was becoming popular even before the pandemic. While the impetus for change is largely consumer-driven, the burden of the transition will fall squarely on chief procurement officers (CPOs) who know sustainability is a necessity, not a luxury. The COVID-19 pandemic has put an enormous strain on global supply chains, at times halting manufacturing while shutting down airports and seaports, interrupting delivery of raw materials and finished goods. Watch over the finances - budgets, billing and payment, total cost of contract, and trends. Partnerships of this type are likely to continue as outperformers look to create competitive advantages by partnering with suppliers for new products or services. AMSTERDAM: IN-CAR TRAFFIC MANAGEMENT SERVICES. A cloud-based platform enables all functional departments to share information in real time, while a “control tower” can monitor impact. hereLearn more about cookies, Opens in new Traditionally, procurement has been the efficient workhorse for organizations, driving cost savings percentage point by percentage point, contract by contract. As of this writing, many of the world’s largest economies were experiencing record-breaking economic contractions. Building relationships with more diverse suppliers may help companies withstand further disruptions in supply availability. It also needs to be aligned to its supplier market. Best Practices for Managing Strategic Suppliers effectively. Procurement in general, a CYBERSECURITY plan should: n be readily available as request... Consumer industries found was that – overall – there is a significant between... Its supplier market: value capture practices provide the foundation an organization s... 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