After ringing in 2012 last weekend, you’ve probably set personal new year’s resolutions – and may have already veered from the course. Just like many resolutions, procurement too is charged with ‘trimming the fat’ but thankfully cutting costs is a little bit more attainable than cutting the waistline.
My top resolution: Make 2012 a banner year for procurement. Here are a few strategies that can be implemented so procurement executives can surpass tough cost savings and finally earn the respect they deserve in the boardroom, elevating its position as a business driver.
Resolution 1: Start embracing non-compliance
A lack of compliance means more to procurement than increased costs. Rather, it signals the need to re-evaluate the pieces of the sourcing puzzle – the technology, the processes or even the entire approach – and highlight areas of improvement. Maybe your technology is not as intuitive to use as you think, or maybe departments are buying off contract because the procurement process is too complex or the suppliers aren’t meeting their needs.
It’s critical that you stop expecting your marketing, production and IT colleagues to simply “get it”. Instead, take your most difficult stakeholders out for a drink and actually talk about the challenges and goals for procurement in 2012 and ask them to explain the same. As a result, non-compliance turns into an opportunity for improvement, as opposed to just a hindrance.
Resolution 2: Put the supplier at the heart of your process and technology
It doesn’t matter how much you’ve perfected your process or if you have the latest and greatest sourcing suite, if your suppliers fail, you fail too. Sometimes, we get hung up on categories or contracts and forget that suppliers dictate the success of procurement.
Appreciate your suppliers for what they are – your competitive advantage – and start investing the time you need to protect that advantage. Take the time to understand the health of your supplier base from conducting proper risk assessment to developing collaborative supplier partnerships.
Resolution 3: Start using market-informed sourcing – or boost your adoption.
To be successful in resolution 2, you need to move away from simply pushing your strictly defined tender requirements out to the market. In other words, just because you’ve sourced the same way for the past 10 years doesn’t mean there’s not a better way. Market-informed sourcing embraces a more collaborative approach to procurement, bringing the market to the buyer and allowing suppliers to propose innovative, unique solutions to procurement’s needs that often have yet to be considered by the organisation.
It is proven to boost category savings up to 30 per cent, but adoption is still extremely low. Reconsider traditional category management and explore how this new approach can shine light on new opportunities for spend savings in 2012.