An engaged 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 bottom line. CEOs are searching for areas to cut costs, and streamlining procurement processes is a viable 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?
Measuring an organization’s Strategic Procurement maturity involves assessing how close it is to achieving each one of the aforementioned results. You will find 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 in various stages 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 now being made. If so, what kind of purchases? You may be shocked by the quantity of purchases occurring outside of formal procurement protocols. However, with no protocol in place, expect excessive levels of maverick spending. Procurement maturity is typically characterized by 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 Supplier Diversity processes and procedures. Find your written group of procedures detailing the procurement processes for your company. If 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 following levels of procurement procedures:
oLevel 1: No processes or procedures.
oLevel 2: Processes and procedures exist, but are not documented.
oLevel 3: Processes and procedures are documented and implemented.
oLevel 4: Major procurement decisions are determined by a multi-function team.
3.Evaluate your relationship with suppliers. Look beyond your internal procurement processes and focus on how well you know your suppliers. Typically, the greater information you have concerning the people you do business with, the better the relationship. Without any purchase information on hand, you cannot create a partnership with suppliers and repair providers. With proper information, you are able to evaluate and rank suppliers.
Your procurement maturity level relates to your supplier relationships the following:
oLevel 1: No purchase information on record; have to ask suppliers for it.
oLevel 2: Use supplier information to evaluate price, quality, and delivery.
oLevel 3: Rank suppliers and develop strong relationships with select suppliers.
oLevel 4: A supplier’s number of business correlates with performance ranking.
4.Assess your bargaining power. Information offers you with purchasing leverage. To what degree do you leverage details about suppliers to increase spending power? Do you coordinate purchases to improve leverage? Does your company 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 increase 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 comprehend the overall corporate strategy and 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: Almost 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 comprehend the strategic relevance of purchasing decisions? Do they know how to apply cost accounting to a negotiation? For instance, do they be aware of difference between direct and indirect costs, as well as overhead? Your Strategischer Einkauf maturity level with respect to buying experience is characterized as follows:
oLevel 1: Limited buying experience; no training.
oLevel 2: Buyer training course is within place.
oLevel 3 & 4: Buyers understand strategic buying and the importance of cost.
A strategic method of IT procurement can help cut costs and improve efficiencies. The first step to going for a strategic method of IT procurement strategy is assessing your current procurement maturity.
Strategic Procurement Part Two
Many enterprises have gained a strategic advantage by treating their procurement as a strategic function. Pre-plan your procurement process and ensure it encompasses these guidelines.
Strong procurement processes align purchasing decisions with corporate strategy, increase bargaining power with suppliers, while increasing the value from investments.