Technology-enabled business processes are a must. Global operations, highly fragmented supply chains, and increasingly complex regulations can quickly turn the supply management processes into chaos in the absence of rigorously defined business processes supported and enforced with technology.
In The State of Strategic Sourcing 2013: Speed is Good, Agility is Better, Ardent Partners found that best-in-class supply management organizations integrate three critical solutions to drive stronger alignment and higher performance:
- Spend analysis solutions.
- E-sourcing solutions.
- Contract management solutions.
And when supplier performance management is added to the mix, there’s a significant uptick in the time to achieving success in the value contributed by the supply management organization to the business.
One more thought: We can’t talk about fundamentals without talking about performance measurement. Today, most procurement organizations focus on two deliverables for shareholder value: cost reduction and working capital. But real value comes by looking at speed to market, new product introduction and total cost of ownership, combined with all spend under management, to significantly broaden the scope of procurement’s contributions to greater value.
Let’s face it—getting the perfect order today means different things to different stakeholders. Quality matters most to product development, while time to market keeps marketers awake. In any situation, understanding what the overarching business objective is allows supply management to evaluate the inevitable trade-offs and make modifications as needed to arrive at the best possible decision for the business. With the insight into what matters most, gained through information-sharing, collaboration and transparency among all stakeholders, there’s a clear path for supply management to make the right trade-offs for the desired value—and that’s a game-changer.
Beyond the organization’s four walls, there’s a significant opportunity for procurement to increase the value it contributes as well. Facilitating collaboration between internal stakeholders and suppliers can improve efficiency, resolve quality issues, lower the risk around material specifications and drive other innovations that translate into revenue.
The Opportunity Is Now
Supply management can make powerful value contributions to the business. It’s not a short-term effort.
There’s no doubt it’s a worthwhile initiative. One technology company delivered seven points of company margin by driving supplier innovation, bringing more than 95 percent of spend under total and complete management, and emphasizing ways to improve working capital.
There is no time like now to get started. Getting on the path to significant financial performance requires:
- Taking a good hard look at where the organization is today.
- Defining where it needs to be in order to support the business tomorrow.
- Identifying what is required to get there.
- Becoming strategically aligned and delivering value to meet the business needs.
There’s a great deal of opportunity to make the kind of value contributions that move the discipline and its disciples to the front line in the race for business excellence. Grab it and make it happen.
Mickey North Rizza is the vice president of strategic services at BravoSolution.