E-Sourcing Forum » Procurement under achievers?

Procurement under achievers?

September 30th, 2008 at 06:30am David Bush - Iasta

See also: red hair, not related.

SCDigest recently did a nice job discussing a study commissioned by KPMG, which found that Procurement management has taken on an increasingly strategic and important role at many companies, but in many respects still has a long way to go to reach maximum performance.

The report also mentioned - “Many organizations begin reorganizing and improving their procurement after they realize that they are not achieving maximum cost savings, and that their business units are not pleased with the procurement function,” says the report. “However, they reorganize without a clear idea of what is wrong with the function or how they want it to work once it’s been reorganized. Consequently this realignment doesn’t achieve its goals, and procurement continues to be the corporate underachiever.”

SCDigest does a nice job of asking questions and pointing out gaps between perception and reality across business leadership. They even get some quotes about the concept from Bell Canada VP Procurement, Jeff Gallant.

However, one of the things I found interesting in the article, was a comment by Corbin C. Fowler, of Supply Chain Solutions.

The focus of too many procurement functions has been to raise the profile of procurement to the CEO. The focus should be on raising profile to supply chain leadership, in order to bring value to the team of which procurement is a part.

An analogy:procurement is the fuel man in a Formula 1 team. Certainly there needs to be excellence in this activity for the success of the pit crew (operations) and for the success of the overall race team (the business.) Improving fuel delivery speed by 10% certainly would appear to be beneficial.

Interesting analogy and one that merits further discussion.

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Entry Filed under: General

2 Comments Add your own

1. Paul Gooch, The Logical Group | October 2nd, 2008 at 3:31 am

If you ask a salesman what is one of the key factors in determining whether or not he will be successful, the response will often be “the quality of the Purchasing Manager on the other side of the table”. This doesn’t mean simply getting the lowest price…rather an agreement which offers a value proposition for both parties. This will include the price:performance ratio, reliabilty of supply, engagement in S&OP processes etc etc. Hence the need to ensure that the commercial and business skills of your Purchasing organisation are as good as your own Sales & Marketing resources.
2. Joe Patterson | November 14th, 2008 at 2:31 pm

The C-level must to be more engaged in procurement strategy if it is going to deliver cost reductions that shareholders expect. They need to be open to new ways of procuring. One way is to pre-qualify suppliers by putting only those suppliers whose work you like in a bidding pool. The next step is to enter the project specifications into the same electronic/computerized system. The system then automatically matches the project with the supplier(s) capable of doing the work. An invitation to bid goes out to only those supplies in the pool that are qualified to do the work. The bids come back, and the buyer selects the winning supplier. On the surface this may sound familiar, but what makes this different are the benefits. The buyer cuts what it is spending for a customized good or service because the supplier is willing to charge less to fill idle production time. The suppliers of most customized goods and services have at least 30 percent downtime and welcome the work. It is added revenue that improves the supplier’s total revenues. Quality and delivery requirements are not compromised because the suppliers have already been pre-qualified. It’s a win-win for the buyer and the supplier. This is a tested approach. Currently, companies are saving about 40 percent on what they spend for direct mail, marketing materials, commercial print, labels and product packaging. By filling downtime, printers are improving their annual income from about 3% to 14% and sometimes more. This is all based on a patented methodology held by e-LYNXX Corporation.

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