Last week, we re-ran a post by David Furth, former VP of Marketing at Hiperos and current President of Leap the Pond, on Procurement – Why We Really Matter. In this post, David explained that Procurement is on the verge of its next major transformation where it will continuously assess risk and introduce integrated processes and controls across the company to mitigate the risk by working closely with other functional areas, business lines, and geographies. In addition, Procurement will implement management control programs that actively monitor both performance and compliance to help ensure suppliers are meeting all their obligations.
David was, and is, right. Now that everything is outsourced, resourced, and optimized to razor-thin JIT models, risk management — and continuous monitoring — is key. But that is just the beginning.
It’s not just risk monitoring, but compliance monitoring and performance monitoring. (Safety) regulations (like RoHS, WEEE, and REACH) are coming into effect fast and furious around the globe, as are bans on toxic substances, materials and products that can be used to create dangerous weapons, and conflict minerals and diamonds. As a result, compliance monitoring is becoming more and more important.
But so is performance monitoring. You can’t ignore the importance of quality, reliability, and safety as it is your reputation — and bank account — on the line. If the products you deliver continually break under warranty, even if you have a policy that you can return for replacement, you’re still losing the profit, the customer’s trust, and the costs associated with processing the return. If the products hurt someone — you’re getting sued, not your supplier. And if the products don’t perform up to spec, even if they don’t break, the customer ain’t coming back.
And even though savings aren’t everything, because it all comes down to ROI — value delivered by your organization. However, if your organization is to remain competitive, it still has to keep costs in check and at least keep costs in line with your competition. Often the only way to do this is to identify when you need to help your suppliers decrease their costs and increase their productivity, and this requires constant performance monitoring.
And who else in the organization can properly monitor risk, compliance, and supplier performance? Not manufacturing. Not logistics. And definitely not finance. That’s why Procurement Matters — Now More Than Ever.