The Business Challenge
The client, a well-established automobile manufacturing company in Michigan, was facing a number of challenges due to drastic shifts in the global supply chain. Since they were looking to expand their business to new and emerging markets, they wanted more information on the procurement best practices. Developing a suitable business model was a key challenge for the automotive company since these markets were posing challenges related to global trade and finished vehicles logistics fulfillment. This was increasing the need to reduce production costs and excess spend. Their primary aim was to outperform competitors, both in home and emerging markets, by reducing operational costs, increasing efficiency, and following the best practices to meet the regulations of the emerging markets.
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To address the needs of the client, the experts at SpendEdge identified the procurement best practices for the target region and tailored a plan that would allow them to procure raw materials at the lowest possible price. The analysts at SpendEdge followed a scrupulous research methodology that comprised of primary and secondary research coupled with qualitative and quantitative data collection procedures.
In a span of eight weeks, the automotive manufacturing company was able to successfully lower their sourcing and procurement costs by 11%. Our expertise in analyzing the procurement trends and regulations of international supplier markets further helped the automotive company to improve their relationship with key suppliers and minimize procurement risks. By following the suggested procurement best practices, they were finally able to maintain a healthy relationship with suppliers. The engagement also emphasized on the importance of selecting the right supplier, especially when it comes to ensuring the highest quality, flexibility, and cost efficiency of their supplier networks.
By adhering to the suggested procurement best practices, the client was able to enhance their procurement system and synchronize supply management with demand across business processes. They were also able to evolve from a fixed-cost-driven supply network to a variable-cost-driven value network and streamline information flow from the department level to a global scale. This reduced costs for the automotive company by 11.2%.
What are the Basic Principles of Procurement Best Practices?
Procurement has become a fundamental enabler of business strategy and a preferred method for achieving sustainable cost reduction for many business entities. It is considered to be the most viable option for process simplification with technology enablement. Therefore, businesses should adopt procurement best practices to realize the full potential of their sourcing process.
While following procurement best practices, the team should strike the right balance between short-term savings opportunities and longer-term transformational opportunities. This provides good traction, better substantial benefits, and supply management for companies. Here are a few procurement best practices that companies should follow:
- Devise a spend map
- Engage with a wider organization to reduce costs
- Ensure supply management and contract management
- Connect commercial and technical capabilities