As mentioned in Spend Matters, Efficio recently released a study that looked at the changing face of procurement in Europe. Like Jason, I’m not going to spoil the report for you, but merely point out six key imperatives for procurement presented by Efficio.
- Become a manager of relationships
Procurement must possess highly developed relationship skills to effectively manage both internal and external stakeholders as well as suppliers.
- Grow into the role of managing networks, not “vendors”
As businesses continue to focus on core strength and outsource specialist activities, they have to manage increasingly complex supply chains.
- Focus on value, not only on cost
Procurement’s new role of managing whole networks of business partners will increasingly require it to extract value from those relationships as well as cost.
- Broaden the skills base
Procurement clearly needs a much broader set of skills than the core functional skills of tender execution and supplier negotiations.
- Become part of the business
Procurement must continue to integrate with the organisations in which it operates and be seen as a multi-talented business problem solver.
- Don’t stand still
Procurement needs to constantly focus on overcoming the challenges that lie ahead, and on proving its worth through excellent internal customer service and tangible results.
These recommendations are a great start, but I’d like to toss out five more of my own:
- Smart Sourcing, not Low Cost Country Sourcing
Remember, it’s not unit cost, but landed cost, that has the larger impact on your overall cost, and when the number of “touch” (or transition) points from a Low Cost Country is typically four times the number of “touch” (or transition points) from a local supplier, you can see how your transportation costs can really add up. A good post on Low Cost Country Sourcing is JB’s post Global Sourcing: Does Innovation Matter?. (This post was in response to my challenge post, Is Low Cost Country Sourcing to China Really Innovative?.
- Visibility, not Reduction
All though a lean, rationalized supply chain is important, effective supply chain control is requires more than just a good design, it requires visibility, a topic I visit regularly. See my post Global Supply, Visibility, and Performance, for example.
- Data, Data, Data
Bad data and / or bad classification can cost you a lot, especially in global trade. For more information, see my post on Managing Global Trade Data.
- Compliance, Compliance, Compliance
Some estimates state that up to 70% of negotiated savings are never realized! Make sure all contracts are tracked and monitored from the date of inking to the date when the last product is delivered. Buyers have to buy against them, payments have to be on schedule, agreed upon rates need to be adhered to, and, most importantly, rebates and post-order discounts need to be recouped.
- Don’t forget Legal!
Major procurements often come with a lot of risks. Make sure you engage legal counsel from day one to make sure you mitigate all of your legal risks before they happen. (See my post on Key Concepts for Major Procurements.)