Optimising the procurement process

  • Published on: 21 May 2020
  • By: Sam Walker

Boosting sourcing efficiency in a post COVID world

The role of procurement has always extended far beyond its primary function to source goods and services in response to internal needs, but what happens as those needs are uncertain and changing? A world-class procurement function aims to optimise the entire sourcing process to deliver significant value across the organisation and this is still true but now we need to consider a post COVID world.

Sourcing optimisation has traditionally led to a number of benefits and added value to your organisation. It has ensured efficiency in your procurement process which in turn has had a positive effect on your entire organisation and across the supply chain.

This is still correct as we enter the rebound and recovery phase from the COVID-19 economic downturn and since the procurement touches every department and affects revenue directly, it is essential to keep the sourcing process running smoothly by regularly reviewing what's working well, what needs to be optimised for greater efficiency and potentially required cost avoidance.

Why do you need procurement optimisation?

Businesses will always be converting resources into profits by transforming those resources into sellable products and services. Public Sector will always be needing to do more with less, whether that is office space, people or budgets. In both cases to achieve maximum profitability, those resources must be procured in the most efficient, effective and sustainable way. Defining strategic sourcing, in parallel with every other aspect of your organisation’s strategy and operations allows for an optimised process and successful organisation.

An important benefit of procurement optimisation, especially when cash flow may be reduced, is reflected in the savings of an organisation which directly impact the bottom-line or viability. By managing strategic sourcing, an organisation is often able to make cost savings by procuring items, services and contracts under better conditions and at a more effective price. Through sourcing optimisation, procurement is able to properly take advantage of any existing warranties or rebates by leveraging organisation-wide needs and budgets to negotiate improved contracts with suppliers and take full advantage of volume-based discounts that might have previously appeared unavailable to them.

To make such improvements to the bottom-line, improve organisational efficiency and ensure viability, it is essential to provide your employees with the right tools, which will enable them to improve upon the current procurement approach.

How to effectively optimise procurement?

Maintain good supplier relationships

Now, more than ever before, procurement teams must be developing partnerships with main suppliers and ensuring stability within the supply-chain. Management of your supplier is crucial and being fair, open and transparent will deliver significant benefits. Before COVID-19, businesses were somehow neglecting Supplier Relationship Management (SRM) however, strong mutually beneficial relationships will deliver far more success, support a faster recovery and increased market share. A strong partnership with your key suppliers will allow for improved responsiveness to market changes, increased return on investment and shortened order fulfilment lead times.

Improve negotiation and analytical skills

Having good negotiators within an organisation is always a significant advantage when dealing with suppliers or securing a complex deal. Tougher conversations are likely to become the norm as we enter a far more competitive environment; reduced supply, variable demand and the power of the buyer and supplier alters.  Negotiation training is likely to improve the chance of good or better deals for the organisation, leading to cost-effectiveness. Simultaneously, up-skilling teams whilst providing them the analytical tools to engage in meaningful negotiations that continually pursue your organisation’s key objectives, will enable an effective recovery and optimised procurement.p-skill employee

Good training and development of your staff drives productivity and achievement (both personal and organisational).

Even if your team is currently furloughed, training is permitted which will positively affect your teams’ mental well-being and in turn your company's output and profitability as you start the “return to normal”. You will be setting up a competitive edge, leading to higher customer (stakeholder) satisfaction and faster growth, or sustainability. There are lots of great eLearning solutions combined with simulations, as well as bespoke training courses delivered by eXceeding, all of which your team can apply in their day-to-day jobs. Properly trained staff will ultimately lead to increased productivity, being trusted and knowledgeable employees able to make the best decisions for the organisation's advancement.

Use technology

As is the case with virtually all business functions, the future of procurement is digital and with advances in technology, organisations are able to save time and be more efficient throughout the supply chain. Procurement software and platforms will, for many small to medium enterprises (SMEs), or financially struggling Public Sector bodies, be the difference between sinking or swimming in a post COVID recovery. There are many great solutions out there and eXceeding has expertise in many and can recommend solutions based on your organisation’s needs and support the roll-out and long-term use.

What does this mean?

An optimised procurement process will positively affect your organisation's bottom line, or stretch budgets and increase engagement, efficiency and profitability. To make the most of procurement optimisation, the right sourcing strategies must be implemented, the right tools selected and your employees should be well-trained.