Estimated reading time: 5 minutes
• Every organization aims to use its purchasing power to maximize value from its procurement undertakings. However, procurement is a complex undertaking with so many variables that affect the outcome.
• The business must remain alive to competitor actions, the regulatory environment, market price changes, and even the political environment. Internally, there are issues such as talent management and ensuring the use of industry-grade technology, which is evolving fast.
Procurement is now seen as a strategic function that can help an organization gain a competitive advantage. It can help the business position itself as being able to deliver the highest quality products and services, consistently, and at the most competitive prices. This calls for meticulous planning and execution of strategic goals with clear key performance indicators. Here are some broad smart goals examples for procurement managers aim for and why they matter.
Automation as a Goal
The procurement process involves a lot of documentation of necessity. There are purchase requisitions, purchase orders, delivery notes, invoices, payment receipts, invoice approvals, and many more depending on the nature of the organization. The goal of automation is to reduce the reliance on manual processing of these documents to reduce labour costs while at the same time improving the speed of doing business.
Imagine a situation where an organization receives hundreds of invoices each week and employees need to check each against purchase orders. This is not only expensive, but it is also likely to be subject to human error. Automation of procurement processes standardizes the quality of work.
Still, automating the collection of data from events in the procurement process allows the organization to draw important insights, such as vendor performance and departmental spending, that would otherwise have been missed. The management of an organization can have a real-time interactive dashboard from where they can get accurate information before making important decisions.
According to research conducted by IBM, the average cost of a data breach in the US is $4.24million. There are many ways to quantify including loss of business, legal costs, and reputational damage. Unfortunately, many procurement managers do not understand the nature of the cybersecurity risk that they are exposed to. A closer look though, reveals a different picture.
Procurement automation tools store and transmit sensitive information such as account information of suppliers and customers. Other crucial information includes the names and addresses of vendors whom you may have worked hard to find. Your organization may also want to protect information about your tax records, revenue, as well as clients.
Procurement organizations are common targets of ransom wear attacks, where attackers block access to an organization’s data until a ransom is paid. This is likely to cripple your operations unless you have your data properly backed up. Awareness of such threats and implementation of proper protection measures is an important goals in procurement.
Supply Chain Resilience
Supply chain resilience refers to the ability of an organization’s supply chain to withstand external factors such as logistical interruptions and vendor-non-performance.
Resilience requires the implementation of a multi-pronged strategy that should include a diligent collection of information on current and potential suppliers. This way, the organization is able to choose only the most reliable suppliers to work with.
When issuing a major contract for mission-critical products, the organization wants to ensure that a supplier has the right capacity, experience, and reputation for conforming to specifications. Supplier non-performance can easily lead to an organization losing its own customers. However, keeping proper information on other vendors means that the organization can always pivot and bring on board another vendor when required.
Resilience is also a product of visibility into the supply chain. Keeping tabs on factors that might result in disruptions or demand shocks ensures the organization can plan early to avoid costs.
Part of the procurement manager’s job is to oversee the implementation of a proper risk assessment and management strategy. An organization faces numerous risks from the choice of vendors it works with, the credit terms extended to customers, and the approvals processes it adopts, to name a few. While some level of risk is acceptable, it should not compromise the long-term stability of the business. For instance, a new vendor may be offering very low prices, but they do not have a proven history of delivering high volumes. Entrusting them with a major contract may be too much of a risk. Instead, the business might decide to give them a small volume of business and gradually increase this based on performance.
Getting the people with the right talent in procurement is never easy. Keeping them once you have them is also fundamental. With so much data available today, you need people who can absorb information quickly, think analytically, and are always ready to learn new skills and technologies. These people will ascend to leadership roles in the company if you can keep them within the company long enough.
Part of the procurement goal is therefore to acquire and nurture the right talent at the company.
Ethics, social responsibility, and governance are emerging as essential areas of priority for businesses. Companies want to operate and be seen as operating sustainably and ethically. This priority extends to their procurement decisions, especially when it comes to the choice of vendors to work with. Businesses want to be sure that vendors do not pose a reputational risk. A good image from an ESG point of view is great when the company serves customers who make conscious choices about the brands, they spend their money on.
As your business chases its procurement goals, it needs the right tools for automation and analytics. Procureport is the world’s leading provider of e-procurement tools. Check out our list of products and schedule a call with us for a free consultation on your e-procurement needs.