Cornerstones of Strategic Procurement

Yesterday I pointed you to Bob’s post on Smart Working Capital Management where he pointed out the pitfalls of being preoccupied with DPO (Days Payable Outstanding) and how a DPO focus can be counter-productive. Specifically, the requests for DPO extensions that tend to result from the DPO focus tend to leave untested the willingness of suppliers to entertain aggressive discount payment terms in exchange for early payment by the customer.

Today I want to remind you of a post Bob wrote back in early January that you might have missed if you returned late from the Christmas vacation. In the evolving landscape of low cost country sourcing, Bob outlines the three fundamental requirements of strategic procurement:

  1. fact-based approach based on a thorough understanding of current reality and anticipated trends
    that should be based on whatever data you have available
  2. an investment in the appropriate skills and enough of the right resources to develop and execute the strategies
    including the right technology to perform the necessary analysis
  3. constant monitoring and adjustment to optimize results in an ever-changing world
    that should include simulation and modeling software where appropriate

For more information on strategic procurement, be sure to check out Bob’s new book on Next Level Suppply Management Excellence, hitting the (e-) shelves on June 28, 2011.