The majority of government and private entities now consider procurement as a fundamental enabler of business strategy. It has become a preferred method for achieving sustainable cost reduction and a source of opportunity for process simplification. Based on our experience in working with clients to improve their procurement outcomes, we have outlined key strategies that are imperative for your procurement function right now. These strategies when implemented properly, will significantly lower costs, improve process efficiency, deliver competitive advantage by eliminating wastage in the cycle of source and supply when purchasing goods and services.
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European procurement best practices #1: Centralize the procurement function
The decision to centralize the procurement function may not be an easy transition, but it can be vital for your organization to ensure the implementation of effective purchasing practices. Companies opting for centralized procurement operation gain better control of purchasing functions and promote a more effective buying process. They spend less time on ad hoc purchasing and enjoy more discounts from vendors due to greater volume purchasing. A centralized location for all purchasing records also improves visibility into purchasing decisions, facilitates better inventory management, and prevents disruptions, which reflects on the company’s performance.
European procurement best practices #2: Share compliance data
This is one of the European procurement best practices that companies can implement. Sharing the compliance data with relevant business leaders not only allows companies to improve transparency but it can improve performance as well. Systematic and public reporting of compliance data takes advantage of image-building and competition amongst managers and departments. It drives proactive decision-making and opens up new avenues for collaboration.
European procurement best practices #3: Realize hard savings
Procurement cost savings is the main KPI for most procurement departments. Organizations use numerous ways to track these savings. However, focusing solely on procurement cost savings is not a good strategy in the long-term. The changing market dynamics have compelled CPOs to now realize savings based on transaction values and actual consumption. They are looking at achieving hard savings based on reduction in the unit cost of operations and production.
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European procurement best practices #4: Invest in technology
Most of the CPOs have had mixed views regarding procurement technology infrastructures. But they have realized that old-age solutions are not the best of the breed. They need to automate supply processes and bring significant bottom-line benefits by allowing greater productivity to increase efficiencies in business transactions. Use of technology is one of the European procurement best practices used by benchmarking firms to measure the efficiency of procurement organizations.