Depending on the type of organisation procurement related cost (direct & Indirect) can go up to 80% of your turnover. This big chunk of your business needs to be obivously managed very well. Unfortionatly In a lot of companies the opportunities in this field are not fully are not at all utilised and procurement is mainly working on the operational proces, placing an order, expediting orders and handling complaints. These things need to be handled of course. Companies are more focussed on increasing turnover and/or decrease headcount, cut investment to control cost and have less focus on the strategic procurement side.
From my point of view the operational proces of ordering /expediting / aftercare should be highly standardised and automated in a thorough Purchase to PaY Proces and embedded in the operations. For example in most organisations their must be a sales order to be able to ship goods to customer and send out invoice to customer. this also gives transparant and complete sales information. So why not on the other hand have 100% purchaseorders for incoming goods and paying the supplier. Focus more on the strategic processes like idea generation, VAVE SESSION, specifying (functional), ESI, supPliers selection and contracting and manage the relation with the suppliers. In this area you can capture innovation, define quality & logistics demands and target TCO. If this proces is run in a good structured way the output should fit in the operational proces smoothly and the operations of your company is happy and in the end your customers.
In e.g. assembly industrie almost 100% of the production parts are bought in so it goes without saying that managing that supply and its base with all its facets in terms of Quality, Logistic Performance, Cost Leadership, Management, Innovation is a crucical succesfactor for a smooth and lean operation to in the end exceed customer expectations.
To be succesfull in a continous changing market and environment you need to have the best in class suppliers on board or develope them. To manage that Relation with suppliers is key and will in the end pay off because your performance In the market to your customer will improve.
questions to asK: - What riskprofile does the supplier have? - What contracts are in place? - How is the market they are in? - How do they fit to your company? - How do they see you as an customer? - What is their rating score? - How do you share information with suppliers? - Who is your counterpart? - How do you measure their performance and do they know that? - How do you handle the RFI/RFQ proces with your suppliers? - How do you capture visit reports? - What is the spend evolution? - What is their price evolution? - Which actions do you have? - What is their PPM rate? - What is their servicelevel performance? - What continous improvement programms are in place? - What is their technologie roadmap - etc. etc.
