Tag: procurement strategy

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A Comprehensive Guide for Companies to Develop an Effective Procurement Strategy

Rising competition and globalization have compelled companies in the world market to develop international procurement strategies, improve quality and delivery enhancements, and increase responsiveness to customers. This is not possible without developing an effective procurement strategy, backed by the organization’s need to uniquely customize their strategies to tackle the varied requirements of today’s customers.

Executing a well-defined procurement strategy depends on factors such as current market conditions, types of initiatives of the organization, and the current state of the procurement organization.  However, businesses need to be ready to adapt to changing business needs. This might require them to build a new strategy for their purchases. There are certain steps that companies can take to build an effective procurement strategy.

At SpendEdge, we understand the impact that a well-defined procurement strategy can have on external spend and the procurement operations of a business. Therefore, in this blog, our team of experts has highlighted five easy steps to build a potent procurement strategy.

Have you ever thought how an effective procurement strategy can improve your procurement operations?  Get in touch with our experts and know why having an effective procurement strategy is a must for your organization.

Steps to build an effective procurement strategy

Step 1: Analyze the current situation

Before developing any procurement strategy, companies need to take the time to figure out what aligns with the objectives of their company. They should know their future requirements and identify key areas of improvement. To achieve this, companies need to know the risks and market position associated with their business. Identifying risks involves the consideration of various factors such as market maturity, market capability and political opportunities, and risks and stakeholder management.

Step 2: Prioritize what’s important

Once the situation has been critically evaluated, it’s important to document drivers and link between the procurement strategy and corporate goals. Strategic drivers differ greatly from industry to industry. Therefore, firms should first gather details on corporate goals and then map procurement objectives to each.

Step 3: Build trust among suppliers

Suppliers not just only form an integral part of businesses, but also play an important role in increasing the operational and cost efficiencies. Building credibility and trust among the team will help companies to deal with high volume or last-minute demands and the successful implementation of a procurement strategy. As a company, you have to be fair while dealing with suppliers and ensure that they are paid on time.

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Step 4: Develop measurable targets

Although boosting sales remains one of the prime objectives for businesses, but companies need to be more specific while building a procurement strategy. They should precisely know if the targets set by them are specific and measurable or not. Providing a consistent tool to track key metrics linked to the procurement strategy can be an effective way for organizations to track their progress in a given timeframe.

Step 5: Plan approach to market

Before you put your plan into action, plan an approach to the market. This involves determining the appropriate tender process, identifying appropriate pricing mechanism, and deciding the type of contract required for a particular project. Companies can consider the delivery model, nature of the work, risk profile and anticipated timeframe for delivery while deciding the type of contract to ensure high quality and cost-effective outcomes.

Adopting the best-in-class practices in procurement can sometimes be challenging for organizations. If your organization is one of them, request a free demo and let our experts help you in formulating an effective procurement strategy.

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How Following Procurement Best Practices Helped an Automotive Company to Reduce Sourcing Costs by 11% – A SpendEdge’s Success Story

The Business Challenge

The client, a well-established automobile manufacturing company in the US, 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.

Want to know how following procurement best practices can help your business reduce excess spend? Get in touch with our experts now!

Solutions Offered

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.

Key Findings

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%.

Is reducing excess procurement cost a daunting task for your company?

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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

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How Can a Cost-effective Strategic Sourcing Process Benefit Companies?

Strategic sourcing process

Even now, many companies consider purchasing to be simple and merely a means to an end. The key aim of any procurement team is to meet the financial requirements while minimizing costs for their organization. Most teams, therefore, pitch competing suppliers against one another to cut purchasing costs. This hardly gives companies any scope to formulate an effective procurement strategy and build goodwill among suppliers. As a result, companies find it challenging to implement a strategic sourcing process and improve their overall purchasing efficiency. Following this traditional purchasing approach results in a lack of visibility, missed opportunities, and cost synergies for businesses. The absence of a strategic sourcing process also hampers the quality of products and negatively impacts the decision-making process.

At SpendEdge, we understand the impact that following a cost-effective strategic sourcing process can have on your business. And to help sustain profitability, our team of experts has highlighted some of the key benefits of following a strategic sourcing process. Though knowing more about the key benefits of a strategic sourcing process can help businesses achieve significant cost-savings, let’s first understand why companies need it and the impact it can have on your business. (more…)

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Top 3 Procurement Challenges and Solutions Companies Need to be Aware of in 2019

The future of supply chains is not just confined to ensuring reduced price and timely delivery of goods. It is dominated by various other factors such as legal issues, sustainability concerns, and regulatory compliances. This creates the need for companies to utilize procurement services that can enhance the speed, efficiency, and accuracy of their processes. Through this article, we’ll discuss what are the major challenges that companies face while procuring goods and services and why they need procurement services providers like SpendEdge.

Why use procurement services? 

Maintaining domain expertise in every category of spend is still an expensive and difficult task for many organizations. Leveraging a procurement service provider can assist companies to conduct a rapid analysis of an organization’s spend, negotiate with suppliers, and avoid the burden of building an effective procurement infrastructure for non-strategic categories.

At SpendEdge, we understand that not every organization can employ a strategic sourcing process and train employees on sourcing automation tactics and category and supply market assessments. Therefore, our team of experts has highlighted some major challenges that companies face while sourcing good/services and have offered viable solutions that procurement services can offer.

Want to leverage the benefits of procurement services for your organization?

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How can procurement services address top supply chain challenges?

Challenge 1: Complex spend

Every year, businesses make millions of purchases that are either too small to be handled or are too infrequent to be included in a single vendor catalog. For most businesses, such categories are sourced manually using internet searches or emails, increasing the complexity of the process.

Solution

By utilizing strategic procurement services, companies can prioritize categories on the basis of market size and product innovations and provide a comprehensive overview of all efficient suppliers in the market. Companies can even employ online procurement solutions to decrease the complexity of spend.

Challenge 2: Risk

Not only big businesses, but mid-market companies are also becoming vulnerable to various strategic and operational risks in their procurement process. They require a holistic risk strategy that can minimize total risk exposure and enhance their supplier risk management.

Solution

Procurement services help companies with risk mitigation investments and risk transfers. They analyze the suppliers before onboarding them and continuously monitor them to improve supply chain visibility and reduce the risks of working with new vendors. Also, procurement services help companies to evaluate the procurement process and manage procurement risks across various business units.

Devising a holistic risk strategy can be a herculean task for many companies. Request a free proposal and know how our portfolio of procurement services can help you successfully mitigate risks.

 

Challenge 3: Information

Companies sticking to traditional methods can never gain a competitive edge in the market. They need their procurement department to be comfortable with advanced data mining and analysis technique in big data to become market leaders.

Solution

Firms offering procurement services possess the capability to analyze data from multiple sources and prioritize business processes. They help companies to recognize the equipment and applications associated with each business process and provide the needed procurement services.

Want to implement advanced techniques for extracting valuable insights from data?  Request a FREE demo below and know how our procurement services can help you.

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What is the Real Reason for Procurement Companies to Leverage Procurement Solutions?

With cost reduction initiatives becoming a top priority in 2019, most stakeholders have started to scrutinize expenditures more carefully. They are finding ways to better manage costs and expenses. According to a recent study, companies waste as much as 30% of their total expenditures. These expenditures are deemed wasteful as they add no value to the customers or companies. Therefore, it becomes imperative for businesses to have an effective procurement system in place so that they can cut the right costs through strategic reductions that don’t impede their ability to remain competitive in their respective marketplace. Strategic procurement can impact the company’s bottom line, but not every business possesses the resources and expertise to optimize their procurement capabilities. 

Some companies find it quite challenging to manage a budget when unexpected costs arise. They lack procurement strategies that can best identify the alternate approaches for them and provide a realistic assessment of risks. This not only increases the entire cost for businesses but also hampers the efficiency of organizations. Therefore, it becomes crucial for companies to leverage procurement solutions to enhance their capabilities.

At SpendEdge, we understand that procurement can be very complex and cost consuming in many large companies. So, our team of experts has highlighted three major objectives that companies should try to achieve while utilizing procurement solutions to thrive in a competitive marketplace.

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4 Tips That Will Help You Ace Energy Procurement

Prices in the energy sector are highly volatile, which makes formulating procurement strategies a difficult task for companies. The energy sector is a broad market consisting of different subsectors. While the range of activities in the energy sector is broad, two distinct features set the energy sector apart from other industries: First, the world’s energy requirements are on the rise and are expected to continue so for a long time to come. Secondly, the growing need for renewable and clean sources of energy has resulted in new regulations and statutory emission requirements to regulate the supply of power from renewable sources. The changing economic landscape has seen many projects being restructured, downsized, suspended, or abandoned altogether. While the energy sector is far from immune from the effect of economic pressures, it benefits from a series of factors, which means that its expansion and further development is assured. Here are four tips for companies to better manage their energy procurement strategies:

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Set the goal

Due to the uncertainties in the energy sector, it is vital that for companies to set the goals of procurement strategy well in advance. Since every business is unique, either due to their tolerance for risk or the budget they have available,  it is essential to tailor the strategy to fit the requirements of each organization. Throughout the procurement stages, these targets can then be referred back to for any clarification.

Market comparison

Though in most businesses loyalty is rewarded by suppliers, it is not the case in the energy sector. Therefore, when it comes to the energy sector, comparing the markets is often the best approach. Also, to avoid increased prices when re-signing contacts with a current supplier, it is advisable to check what other suppliers are offering before making the deal.  Undertaking price comparisons while creating energy procurement strategies will help companies get a broader picture of the market.

Flexible contracts

Though fixed energy contracts can offer several benefits for companies, such as avoiding risk as prices fluctuate, ease of management, and a fixed rate for a fixed contract period, many companies are now turning to a more flexible approach. Flexible price contracts offer businesses a method of procuring energy that helps them to keep them on top of market movements and eliminates the risk of fixing the price during a peak point in the market. Wholesale power can be purchased in smaller amounts, throughout the period of the contract, allowing companies to buy energy at the best times and take advantage of favorable market prices.

Analyze data

It is imperative for every company to have clear-cut data on the energy consumed by them before formulating procurement strategies. This will help businesses gain better insights on the type of energy contract that they require. Companies can resort to energy management software that can help them to monitor consumption patterns and identify potential areas for savings. By analyzing energy consumption data, businesses can also keep track of overconsumption and take corrective action to rectify this.


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An Effective Procurement Strategy is a ‘Bird in Hand’ For Your Business

Procurement is one of the key decision-making areas for business, wonder why? The answer is because it directly impacts an organization’s profitability. Therefore, a cost-effective and optimum procurement strategy is important for the sustainability of business in the long run. So how exactly do you decide on a procurement strategy that suits your business? How do you measure the extent of its effectiveness to your business? What are the things to keep in mind while formulating an effective procurement strategy? Let’s discuss.SE_Demo2

Intelligent Procurement Strategy: Go Digital

Procurement can be a complex process, but thanks to digitization and various digital procurement platforms and solutions, the procurement process is more simplified now. Digital procurement solutions cover the entire procure-to-pay value chain which enables an organization to collect huge amounts of data. This data supplemented by external data provides buyers all the information that they require for sourcing, managing and monitoring the supplier relationship from one end of the procurement value chain to another. However, to make optimum utilization of the enormous data processed with the help of digital procurement, the data must be measurable and should facilitate the procurement managers to analyze the data and draw the right conclusions to forms an optimum procurement strategy.

What Should an Effective Procurement Strategy Measure?

The main aim of procurement solutions is to help the purchasing department to obtain answers to some of the vital questions that are crucial in the company’s operation, in an intuitive and simple manner. So, what are the questions that the procurement department should keep in mind while formulating a procurement strategy?

  • Can the compliance rate of contacts be tracked?
  • How to check if the supplier has honored the terms of the contract
  • What are the payment terms? Are there any benefits associated with early payment terms?
  • Can the company’s data be benchmarked with the market?

Procurement Intelligence: Key to Business Agility

An intelligent procurement strategy and purchase decision give a company the ability to quickly act upon their market conditions and formulate effective business strategies. Systematic analysis of the plethora of data available through digital procurement can be used to formulate the right strategies and easily identify the gaps. Another key importance of digitalization of procurement intelligence to a business is that it gives valuable information on purchases to other departments. It is not just the finance department that benefits from this data, but it can also prove helpful for other departments such as R&D to make product modifications and also marketing and sales or marketing departments to undertake promotional activities.

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