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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