Why is Strategic Procurement Crucial for the BFSI Sector?
The BFSI sector has witnessed a plethora of changes over recent years, and industry players are becoming increasingly aware of the highly influential role of strategic procurement, robust procurement plans, and comprehensive best practices in achieving and maintaining success. Consumers, the market, and rising competition have given rise to a dire need for unparalleled strategies, innovative offerings, and solutions for all potential market challenges and risks. The rapidly evolving sector also encourages service providers and companies to significantly improve their planning, execution, and control of all procurement, sourcing, production, and distribution activities. Over time, having a dedicated team for the various crucial departments along the supply chain has become crucial, and failure to properly manage and deliver can lead to customer attrition, and loss of market share. With the challenging competition in this sector, staying ahead of changing market dynamics, evaluating and surpassing competitors’ strategies, and providing consumers with impeccable solutions for previously unmet needs is necessary. Adopting various strategic procurement best practices can help companies address these requirements, and overcome challenges and risks with ease while managing investment, and promoting growth within the business.
What are the Key Strategic Procurement Best Practices in the BFSI Industry?
Contract Management Strategy: Procurement is an incredibly crucial process in the supply chain, and efficiently managing strategic partnerships, contracts, and business relationships can reduce expenses, minimize losses, increase profitability, and encourage overall business growth. Having a contract management strategy in place is an essential part of strategic procurement and can enable collaborative, efficient, and robust partnerships. Contract management includes planning, drafting, negotiating, signing, reviewing, ensuring compliance and revisiting terms of contract at regular intervals. Proper contract management has proven to reduce non-compliance, enable stronger and honest partnerships, minimize unexpected risks, and help both parties achieve business goals.
Account for Total Cost of Ownership: When managing the procurement process, companies must conduct in-depth analysis of all purchases, partnerships, and contracts, and ensure that every current and future expense is considered during planning. As a company grows and procurement needs rise, a common error made by procurement teams can be minimizing investment and spend calculations to the initial cost of any product or service being procured. However, all purchases lead to incurred expenses through the lifetime of the product or service, including logistical expenses, servicing and repair for machinery or other products, changing industry expenses, and increasing market risks. Therefore, strategic procurement includes accounting for all potential initial and future expenses, and the total cost of ownership.
Inventory Optimization: Procuring, storing, transporting, and distributing products can be challenging to manage in a fast-paced company. With rising demand, companies must ensure they can meet consumers’ needs, and stay a step ahead of the market. When offering products, inventory includes maintaining the ideal number of units available as per forecasted or calculated demand, and ensuring inventory can be quickly replenished to avoid shortages. It also includes tracking and planning inventory to ensure there is no overstocking, which can lead to high inventory costs, and cause unnecessary expenses. In the case of services, inventory includes various intangible sources, and for financial services and banks this includes ensuring the required or borrowed funds are readily available and cannot lead to losses or fraudulent transactions. To successfully achieve strategic procurement, inventory management helps avoid unexpected expenses, and efficiently track offerings.
Adopt Technology: The BFSI sector has witnessed a steady rise in technology dependence among consumers, and governments are encouraging the use of secure digital interfaces to provide necessary services worldwide. The supply chain can also significantly benefit from the incorporation of technology and recent advancements, including more efficient management and execution, stronger databases, and improved collaboration across departments. Automation of certain processes, and the usage of AI can help minimize the need for repetitive tasks, help focus more on essential planning and execution, improve data procurement and analysis, and support inter-departmental and partnership collaborations making strategic procurement efforts more efficient.
Robust Communication: To maintain efficient and comprehensive strategic procurement, ensuring clear and concise communication along the supply chain is imperative. As the BFSI industry grows, companies are aiming to exponentially expand operations, and maintaining transparency, cooperation, and communication through this process can help successfully achieve targets. Proper communication also helps mitigate various risks, increase overall business growth, improve decision-making, provide better clarity to stakeholders and investors, and develop a streamlined supply chain. This practice also helps the company stay ahead of potential challenges, and provide departments with the information necessary to support the supply chain.
As the BFSI sector evolves, companies are struggling to identify the ideal strategies and approaches while attempting to keep pace with the rapid pace of this technology-driven company with rising demand. A financial services provider in Eastern Europe witnessed a decline in profitability and efficiency along the supply chain, and had difficulty identifying the cause for these sudden losses and challenges. To successfully identify their shortcomings and address them, the company chose to partner with SpendEdge, and leverage our expertise and advice for strategic procurement. Our experts closely scrutinized the company’s strategies and approaches, and identified major gaps in communication, outdated technologies, inefficient inventory strategies, and a lack of planning and management of contracts. These shortcomings were leading to losses, low consumer satisfaction, incongruence between departments, and overall inefficiency within the business. The financial services provider sought our experts’ advice and successfully implemented major changes to their systems, enabling a robust supply chain, better business plans, and stronger inter-departmental collaboration. Consequently, leading to high customer satisfaction, an improved growth trajectory, better decision-making, and increased profitability.