Time to re-visit procurement function in fast changing world
There has been a decisive change in procurement function in last few months. Procurement has become a strategic function in the mind of Top management. Most of the companies are now moving the key procurement people from normal function to become part of central core team across business lines and functions. Clients are focusing on sustained value driven procurement, top-line growth and product innovation instead of focusing on just cost and control. The normal cost saving of 2-4% from contracts may not be application as we now don't see much variation on the price of goods and services.
In order to survive, organizations have started adopting the new requirement of procurement function.
There are new emerging focus areas in Procurement, supplier assessment and management as mentioned below:
• Procurement function will have to involve early in business strategic, budget and financial planning for the enterprise and delivering value through identify the need for new mergers and acquisitions.
• To create business value by trusting and collaborative relationships with suppliers.
• Need to engage end customers and reaching end customers first with innovations
• More and more use of Integrated supply networks serving marketplaces
• Need to focus more on strategic procurement activities and to outsource the automated transactional activities.
• New business ideas to develop jointly with business
• Need for detailed insight into the markets and constant understanding of the marketplace.
• Integrate functions from upstream in supply chains with own internal functions.
• To look suppliers as a partner in assist in enhancing product and service
• Looking for suppliers who can help in innovating the end product as required by market and their insights into consumer trends to develop new products and offers for clients.
• To have KPIs for suppliers that measure the need of our end customers
• To prioritize supplier processes according to customer requirements and measure them
• Develop total solution-type relationships with suppliers. Preference should be given to supplier who understands company businesses and can help in strategic planning processes.
• Suppliers need to understand customers better so they can render solutions that improve the business.
• To have the right supplier portfolios
• Involve supplier in the very beginning of new product development cycle.
• Align and link our business strategies with suppliers' business strategies
• Identify supplier risk early in due diligence process.
Procurement cannot be run as a standalone service function and it has to be viewed as a strategic function with integration with all other departments of an organization. There is a need to revisit the emerging procurement focus areas and supplier management as mentioned above for every organization.