Procurement is a vital function within your business and should be approached with a continuous improvement mentality.The simple aim of the procurement function is to procure goods and services to benefit your business. Simply put – ‘managing your suppliers to meet your business objectives.’ More often than not, these business objectives include growing margin through reducing costs. It covers cost out, cost avoidance and risk management.
PROCUREMENT DONE RIGHT
Best practice procurement is like any other key function within a business – it should have a clearly defined strategy with measurable KPIs that allow granular visibility on the benefits delivered.
Your Procurement Strategy should be designed by a specialist Procurement Manager and presented to your Executive Team in the same way a sales budget is presented, agreed to, and signed off on.
Your Procurement Manager should be able to provide you with their annual procurement plan, broken down by category and sub category. Ideally, the plan should break down each category by SKU/product/service and then it should detail the targeted savings against each SKU/product/service for the year.
This is normally presented in a relatively simple dashboard format that is reviewed each quarter to track progress against target. This data should also be available for previous years to provide context and historical data for future spend management.
HOW DOES YOUR PROCUREMENT FUNCTION SCORE?
To quickly assess the competency level of your procurement function, it’s worth asking yourself how easily you can get access to, or visibility over:
- Your procurement plan broken down by category
- How each category is tracking against its savings or cost avoidance KPI
- The next five major contracts up for re-negotiation and the strategy for the renegotiation including what wins are expected from this next negotiation
- The top five contracts by spend from the contract management database
- How much of your total procurement spend is outside of approved contracts. This will give you an insight into rogue spend and often leads to a review of the procure-to-pay process
Procurement is a dynamic discipline. Technology and new methodologies mean that today’s procurement teams are able to use granular data to make constant improvements to deliver cost savings for the business.
Hunter Campbell’s specialist team has extensive experience in the procurement sector. We welcome the opportunity to conduct a review of your current procurement function to assess process and effectiveness, and identify any gaps and opportunities for quick wins
For more insights from our Supply Chain, Operations and Procurement recruitment specialists download our 2023 Market Insights: https://www.huntercampbell.co.nz/market-insights-downloads/