The Benefits of Strategic Business Procurement
By Editorial Staff
Supply
& Demand Chain Executive
New white paper suggests it can actually increase profits and
quality
New York — September 29, 2003 — Procurement
of goods and services supporting a company's internal operations,
such as temporary help, travel or maintenance, involve expenditures
that are often poorly managed.
Not only are millions of dollars spent needlessly,
but the quality of what's purchased is frequently sub-par, according
to a white paper titled "World-Class Procurement: Increasing
Profitability & Quality," recently published by Geller
& Co., a finance, accounting, procurement and tax outsourcing
firm.
The white paper points out that strategic procurement
is not a one time activity — it's a continuous and interrelated
process with three essential functions: expenditure analysis,
strategic sourcing and agreement management. Properly implemented,
the first two processes form the basis for identifying and creating
value, while the third ensures that value is maintained over time.
The processes are:
| • |
Expenditure analysis performs a "deep dive"
into the reality of expenditures — to whom, for what
and why. It enables a company to extract value by developing
strategies around each category of spend. Such an analysis
looks beyond dollar savings and into potential impacts across
the entire supply chain including quality and service of
goods and services purchased. |
| • |
Strategic sourcing can help maximize the value derived
from procurement by going beyond the traditional focus on
lowest price. It brings into play a variety of tools and
strategies such as catalogs, reverse auctions, forward buying,
commitments, market inventories and supplier requirements
in different operational combinations to achieve maximum
client value. It also includes ongoing analysis of a broad
range of pricing, quality and market data such as supplier
relationships, capabilities, status and technologies. |
| • |
Finally, agreement management involves both external
and internal actions. Externally, it means managing suppliers
to ensure that their performance meets or exceeds contractual
commitments. Internally, it means monitoring compliance
within the organization to ensure that procurement benefits
are fully realized. Without rigorous agreement management,
nearly 75 percent of savings gained from strategic sourcing
can disappear within 18 months. |
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