At most organizations, the procurement and supplier management function operates under tremendous pressure to perform at a high level using limited resources.
Procurement operations form a foundational pillar for the enterprise:
- Delivering on the needs and goals of internal stakeholders
- Aligning with financial goals
- Balancing the needs of strategic suppliers
- Building relationships through collaboration, transparency, and trust
- Responding efficiently and flexibly to fluid market dynamics worldwide
Although procurement operations are vital to business growth and revenue management, the concrete gains supplier management produces may be more visible in the long-term than within a given quarter or fiscal year.
Agile leaders in tune with customer satisfaction know the secret to business growth hinges on their sourcing and supplier management. However, not all business leaders support the practice of procurement with the optimal tools to help accelerate growth.
In a recent Harvard Business Review Analytic Services survey, 60% of executives said their companies intend to accelerate the digital transformation of procurement and other non-customer-facing operations. Traditional processes based on spreadsheets, email chains, and spoken conversations are often still the norm. These processes may depend less on shared analytics and tools than on the institutional knowledge of individual employees.
When the pandemic hit, many businesses found themselves in a precarious position, unprepared to abruptly accelerate the review and ranking of critical suppliers they needed to survive an unpredictable catastrophe. Sixty-two percent of senior executives in the survey said the pandemic disrupted their supply and procurement operations.
Of those executives, 55% say their organizations include supplier management in their business continuity and resiliency planning, positioning them to pivot when necessary. Organizations that don’t include it may encounter such barriers to digital transformation as legacy systems, siloed practices, an inability to experiment quickly, and risk-averse corporate culture.
Still, 95% of respondents say they expect cloud-based sourcing and supplier management tools to replace their traditional tools, systems, and processes.
Why Strategic Sourcing Matters
When procurement’s sourcing team operates optimally, an organization and its suppliers benefit in several ways:
- Driving efficiencies. Saving costs depends on factors including demand management, consolidation, and the value of introducing products or services. Efficient strategic sourcing through automated reporting and analytics capabilities can help an organization reach its saving goals faster, potentially boosting profitability.
- Strengthening processes. Sourcing professionals’ deep market insight, negotiating expertise, and supplier relationship management spanning business lines, practices, and global regions can help an organization streamline disparate processes and practices.
- Encouraging competition. With equitable, transparent, and standardized processes, procurement can ensure fair treatment for suppliers and encourage healthy competition for the best possible bids.
- Managing supplier-related risk. While ensuring compliance with complex internal policies and external regulations is a challenge, providing a robust collaborative environment can help sourcing and procurement teams work with legal counsel to spot risk and ensure supply continuity.
Such benefits can directly improve outcomes, including faster cycle times, more timely payments, and hard- and soft-cost savings.
Supply continuity and efficiencies that result from strong sourcing relationships, standardized internal and external processes, channels of communication for collaborative problem-solving: Any and all can help an organization free its resources to invest in product development, customer service, and revenue growth.
Putting the Right Tools to Work
Procurement teams depend on having the right tools to help them provide visibility across practices, facilitate collaboration, boost efficiency, ensure continuity in supplier relationships, encourage internal and external collaboration, and strengthen transparent and fair supplier competition.
Eliminating manual and legacy tools with collaborative cloud-based technology, accessible anywhere, will keep information from getting locked up on-premises. Its simplicity to use encourages an organization’s teams, suppliers, and prospects understand and adopt it. Employing current technology is as important as upgrading from a 10-year-old mobile phone to attract and retain the critical talent that helps a business lead a sector.
The ongoing global disruption has revealed the opportunity for organizations to get more out of their sourcing and procurement technology. The potential to boost efficiency, flexibility, collaboration, analytical power, and employee retention—not to mention the bottom line—make a compelling case for such an investment.
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