Enterprise leaders typically see procurement as merely an space for chopping prices. However Tracey Shearer, Managing Director of August Consulting says the precise strategy to procurement can even result in higher business success.
When procurement is evaluated with a business mindset, it serves as a helpful lever that may assist an organisation to achieve for bigger targets. This implies in apply that procurement can shift its conventional give attention to price chopping and operational administration of spend and contracts, to extra worth including actions that really profit enterprise targets and top-line outcomes.
Efficiently reaching this transition requires a variety of components to fall in place, says Tracey Shearer, who leads procurement-focused consultancy August Consulting. “To begin, you want to think about addressable spend. This ought to be beneath the remit of the procurement perform to make sure a powerful business focus,” says Shearer.
“Having a powerful give attention to an organisation’s addressable spend will bolster monetary viability, for some organisations that may differ from 30% to 70% of their price base relying on the organisation’s enterprise context.”
The ability of knowledge
With a view to convey commerciality into the best way an organisation approaches procurement, knowledge must be put entrance and centre. An organisation that understands its numbers can have higher success in tweaking procurement to its benefit.
“Unsurprisingly, 98% of decision-makers are investing in perception instruments, automation and AI for procurement. We all know knowledge affords a aggressive benefit, however provided that you ask the precise questions,” notes Shearer.
That knowledge evaluation ought to embrace completely different sources of knowledge together with inner knowledge like merchandise, behaviours, and efficiency, but in addition exterior knowledge, like business studies, market intelligence, and provider knowledge.
One of the best ways to harness the total potential of knowledge is to standardise knowledge assortment throughout the organisation and enhance collaboration between procurement, gross sales, and different departments to share knowledge. With all groups on the identical web page so far as knowledge insights, it turns into simpler to take motion in direction of bigger targets utilizing that knowledge.
“What levers or shopping for behaviours can you employ to fulfill agreed targets? Use data-driven proof to barter and safe long-term partnerships with suppliers,” says Shearer.
In addition to that, Shearer suggests organisations “monitor provider efficiency towards agreed targets and handle threat by having measures in place to deal with shortfalls, together with penalties to make sure provider relationships are pushed by a joint dedication to ship.”
Market insights
A perfected procurement perform with higher business focus can even embrace extra heightened market consciousness and interoperability. “Every little thing is related – shoppers, technique, methods and the market setting. Understanding how one can join the dots can improve business success and future-proof the enterprise,” provides Shearer.
For instance, organisations ought to be contemplating: how rivals reply to challenges out there; what challenges key suppliers could also be going through; what business tendencies are rising within the subsequent few years; and the way long-term partnerships may be leveraged to remain on high of tendencies and in the end keep aggressive.
“A commercially-focused procurement perform drives progress by aligning spend with organisational strategic targets. It leverages knowledge and market insights to drive worth creation and keep monetary viability,” concludes Shearer.
