Best Practices in Procurement: A Glimpse into the Best-In-Class (BIC) Index

By: George Mathew

Key takeaways

1. Embracing best practices in procurement enhances supplier relationships, drives cost savings, and fosters operational efficiency, ultimately leading to sustainable growth in the market.
2. Leveraging unified technology platforms and skilled talent enables organizations to make informed decisions, enhance visibility, and drive efficiencies across the source-to-pay spectrum.
3. SpendEdge’s services aid in identifying best procurement technology providers, digitizing procurement operations, and benchmarking industry best practices, empowering organizations to optimize processes and gain a competitive edge.
4. Through SpendEdge’s expertise, a chemical company successfully revamped its procurement strategy, focusing on supplier intelligence, technology adoption, and competitor analysis, thereby solidifying its position as an industry leader and driving sustainable growth.

With the changing digital landscape, Chief Procurement Officers (CPOs) must adopt a comprehensive procurement strategy that accounts for digital transformation and its challenges and opportunities. Best-in-class (BIC) procurement strategies refer to the most effective and efficient approaches adopted by organizations to optimize their procurement processes. These strategies focus on achieving cost savings, improving supplier relationships, mitigating risks, and enhancing overall operational efficiency, Implementing BIC strategies is crucial as it enables businesses to drive cost reductions, increase competitiveness, ensure quality and reliability, and ultimately achieve sustainable growth in the market.

Technology is no longer just an enabler for procurement but a driver of key outcomes. Unified technology platforms and tools that augment visibility across the source-to-pay spectrum of operations and are underpinned by automation technologies will aid strategic decision-making.

What are the key factors that affect the procurement strategy?

Establishing procurement vision and aligning with company operational strategies

Creating a robust governance mechanism at the enterprise level is vital for a procurement function that operates at its best. Effective governance guarantees close alignment between the procurement strategy and operational/business objectives. More and more Chief Procurement Officers (CPOs) are embracing a centralized procurement approach, which empowers them to establish policies and consolidate control over a substantial portion of global spending. Some CPOs are implementing a centralized procurement framework while still permitting localized sourcing activities. The advantages of a centralized model are considerable, including the ability to enhance end-to-end visibility and leverage synergies.

Performance measurement and metrics: Comparison of metrics

Procurement performance measurement traditionally relies on Return on Investment (ROI), but leading procurement organizations are now adopting more sophisticated evaluation methods. While ROI, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and third-party budget reduction remain popular metrics, organizations that utilize less common metrics like COGS percentage contribution are achieving greater value. These metrics align with the modern expectations of procurement organizations, which aim to deliver broader value beyond cost reduction. In addition to exploring advanced forms of performance evaluation, BIS procurement organizations are also leveraging technology and data analytics to enhance their decision-making processes. By harnessing the power of artificial intelligence and machine learning, you can gain insights into supplier performance.

How technology and talent play a vital role in strategic decision-making

As procurement continues to work closely with internal stakeholders, as well as external stakeholders, it has become increasingly important to have people with the right skill sets. To truly understand the needs of diverse enterprise groups, a significant level of industry knowledge is required. Technology is no longer just an enabler for procurement but is now a driver of key outcomes. With unified technology platforms and tools that provide visibility across the source-to-pay spectrum of operations, strategic decision-making can be greatly enhanced. Procurement strategy consulting firms partner with global procurement organizations to develop powerful and business-aligned procurement strategies.

World-class procurement: Best practices

Embracing best practices in procurement offers a plethora of advantages. Firstly, it fosters robust supplier relationships, which are pivotal for maintaining a resilient supply chain. Suppliers, when nurtured effectively, are inclined to share useful information, aiding in contingency planning. Leveraging analytics for insights enhances decision-making objectivity, resulting in optimal procurement prices and superior cost management. These benefits can subsequently trickle down to the organization’s customers, bolstering its competitiveness. A defining trait of top-performing organizations is their integration of procurement into strategic planning, using it as a catalyst for forging strong supplier partnerships, resilient supply networks, and as a tool for driving operational efficiency.

SpendEdge Services that help you identify best-in-class procurement strategies

Aid in identifying best procurement technology providers

Our SpendEdge experts specialize in supplier intelligence, are adept at identifying suppliers offering cutting-edge technology solutions, and possess a keen understanding of process standardization. Our dedicated approach ensures access to suppliers at the forefront of innovation. We excel in providing comprehensive insights into the supplier landscape, enabling businesses to make informed decisions. With SpendEdge, you gain a strategic advantage by tapping into a network of suppliers proficient in delivering technological innovations and streamlining processes, fostering efficiency and competitiveness in your operations.

Digitizing procurement operations for enhancing the process

We engage in a thorough understanding of the specific technological requirements of our clients within the procurement domain. This involves comprehensive consultations and assessments to identify key challenges and opportunities unique to their business. Our experts leverage cutting-edge technologies to digitize and optimize procurement operations. Through the integration of advanced digital tools and platforms, we streamline the entire procurement lifecycle, enhancing efficiency, reducing costs, and mitigating risks. This digitization process not only accelerates decision-making but also provides real-time insights into procurement activities.

Identifying best practices adopted by peers in the industry

Our SpendEdge experts excel in benchmarking and analyzing competitors’ practices to enhance strategic alignment and identify process gaps. We leverage advanced market intelligence tools, and we meticulously examine competitors’ strategies, offering valuable insights for optimizing your business approach. Our experts conduct comprehensive assessments, pinpointing areas for improvement and aligning your strategies with industry best practices. By leveraging SpendEdge’s competitive analysis, clients gain a strategic edge, refining processes, and ensuring alignment with evolving industry standards, ultimately fostering sustainable growth and competitive advantage.

Success story: A chemical company that utilized SpendEdge expertise to solve its procurement issues

Our client is a US-based chemicals company that deals in the manufacture of chemicals mainly used in paints lacking a comprehensive system for assessing and selecting the right suppliers. Hence, they wanted to identify reliable partners who could meet their specific quality and sustainability requirements. The client also struggled to keep up with the latest technological advancements with their technology requirements and business goals. Furthermore, the client wanted to analyze competitor’s procurement practices and strategy alignment in the chemicals industry to identify opportunities for improvement.       

Our experts at SpendEdge conducted an in-depth analysis of the client’s existing procurement process, identified the bottlenecks, inefficiencies, and areas for cost reduction, and recommended best practices for procurement within the industry. Created a supplier database with detailed profiles of potential suppliers, implemented a supplier evaluation framework based on performance, sustainability, and compliance, and developed a selection process that aligned with the client’s organizational values and goals. Furthermore, we assessed the client’s current technology infrastructure and future requirements and provided recommendations to maintain a competitive edge in the market.          

Our solutions helped the client in revamping their procurement strategy, focusing on supplier intelligence, technology adoption, and competitor analysis. This enabled the client to not only maintain its position in the industry but also solidify its reputation as an industry leader.

Contact us now to solve your procurement problems!

Conclusion

Effective supplier quality management (SQM) processes are essential for fostering strong supplier relationships and ensuring a safe supply chain. By optimizing supplier selection and implementing robust supplier quality control, organizations can enhance compliance and drive benefits across their supply chains. Integrating supplier insights into strategic supplier management processes facilitates greater supplier performance and contributes to overall operational efficiency. Leveraging a comprehensive supplier quality management system, including supplier approval and ongoing performance measurement, enables businesses to navigate digital transformation challenges and unlock sustainable growth opportunities in the dynamic procurement landscape.

Author

George Mathew

Associate Vice President, Sourcing and Procurement Intelligence

George is a procurement specialist at Infiniti Research and provides advisory services to clients across the pharmaceutical, CPG & FMCG, energy, and automotive sectors. He specializes in the procurement areas of industry benchmarking, cost modeling, rate card benchmarking, negotiation advisory, and supplier intelligence.