A recent post by the maverick over on Spend Matters asks Does the “Best” Procurement Organization in the World Exist? There’s the long answer, which the maverick gives, and the short answer, which the doctor will give.
Question: Does the “Best” Procurement Organization Exist?
There is no best, at least, as the maverick explains, as a whole.
The reasons for this, as detailed by the maverick, include, but are not limited to:
- direct vs. indirect
there are organizations “best” in direct, “best” in indirect, but typically not “best” in both
there are organizations that excel in certain categories, direct or indirect, but not other direct or indirect categories
- trade secret
organizations that are, or at least believe they are, truly ahead of their peers tend to keep quiet, thinking this provides them a competitive advantage
- inbound vs outbound vs omni-channel retail
most organizations tend to excel in one of these supply chains
- operational efficiency
which allows an organization to attack more categories than their peers
But also include the following:
- market intelligence
detailed supply market and pricing knowledge that can be used to the organization’s advantage
- modelling capability
to build accurate should-cost models using raw material, labour, energy, and overhead data to understand the gap between market pricing and actual costs and whether or not it is a fair profit margin
- optimization-based negotiation
to get the truly best price during the organization’s sourcing exercise
There are a host of factors that make a “best” Procurement organization, and all of them need to be met for an organization to be “best”. And since no organization is best in all of them, there is no “best”. But the good news is that not only is there room for improvement, but it’s easy to identify where the improvement needs to happen, to make the improvement, and surpass your peers. Fortunately, to win the game, you don’t have to be “best”, just “better” than your peers. Improve on each of these eight dimensions, and your organization will be on the fast track to getting there.