A Dynamic Field
Supplier Management‘s increasing importance has been driven by two economic changes:
– Increasing competitive pressures are forcing companies to check out procurement as a way of helping boost the main point here. CEOs are searching for areas to chop 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 numerous ways an 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 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 procedures in the development of their procurement functions.
Maturity Assessment Guide
1.Evaluate maverick spending in the IT department. Talk to supervisors and discover if unauthorized purchases are being made. If that’s the case, what sort of purchases? You might be shocked by the number of purchases occurring outside of formal procurement protocols. However, with no protocol in place, expect excessive amounts of maverick spending. Procurement 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 Supplier Diversity processes and procedures. Find your written group of procedures detailing the procurement processes for your organization. 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 seen as a the following levels of procurement procedures:
oLevel 1: No processes or procedures.
oLevel 2: Processes and operations 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 concentrate about how you know your suppliers. Typically, the more information you’ve about the people you need to do business with, the better the relationship. Without any purchase information on hand, you can’t develop a partnership with suppliers and repair providers. With proper information, you can evaluate and rank suppliers.
Your procurement maturity level relates to your supplier relationships as follows:
oLevel 1: No purchase info on record; need to ask suppliers for this.
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 percentage of business correlates with performance ranking.
4.Assess your bargaining power. Information also provides you with purchasing leverage. To what degree do you leverage information about suppliers to increase spending power? Would you coordinate purchases to improve leverage? Does your organization possess strong negotiating skills? Your procurement maturity level is characterized by what you can do 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. How many of your buying decisions are viewed as strategic decisions? Do you have a strategic plan in position? Procurement’s strategic alignment relates to maturity the following:
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 objectives and goals.
6.Evaluate your buying experience. Do your buyers receive training? Do they comprehend the strategic relevance of purchasing decisions? Do they understand how to apply cost accounting to a negotiation? For instance, will they know the difference between direct and indirect costs, as well as overhead? Your Supplier Management maturity level regarding buying experience is characterized the following:
oLevel 1: Limited buying experience; no training.
oLevel 2: Buyer training program is in place.
oLevel 3 & 4: Buyers understand strategic buying and also the importance of cost.
A strategic approach to IT procurement might help cut costs and improve efficiencies. The first step to going for a strategic method of IT procurement technique 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 best practices.
Strong procurement processes align purchasing decisions with corporate strategy, increase bargaining power with suppliers, and increase the worth obtained from investments.