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Procurement optimisation in the face of an economic downturn

How an optimised procurement process can positively affect your organisation's bottom line
By Aaron Bains on 2 January 2021

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

A world-class procurement function aims to optimise the entire sourcing process to deliver significant value across the organisation. This has always been the case but now, we need to consider how we optimise procurement processes as we navigate the socio-economic climate we currently find ourselves in.

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. Since 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.

So how can you effectively optimise your procurement?

  1. 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, some businesses were 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.
  2. 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. 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.
  3. Up-skill employees: 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, 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.
  4. 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. Click here to see a recent blog on this topic.

How can procurement optimisation help in an economic downturn?

Despite the uncertainty of Brexit and the impact of a global pandemic, UK organisations will still need to be able to trade globally.

But trading with the UK is going to become more complex, and indeed more expensive. So now is the time to optimise processes across your organisation. Strategic sourcing is a great way for organisations to optimise costs but also, to ensure that they are prepared for any further disruptions.

In summary…

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.

If you’d like to find out more about cost optimisation or strategic procurement transformation please contact us

 

 

Aarun Bains

Aarun is a seasoned procurement transformation consultant. Her expertise lies within end-to-end procurement transformation, procurement visioning and strategy, category management implementation and sustainable procurement.

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