Optimizing Procurement Management: Structuring for Growth
Create more streamlined and responsive procurement operations to maintain a competitive advantage. For companies that wish to create more streamlined and responsive procurement operations to maintain competitive advantage, this study is the answer. The best practices in this study were developed after the review and analysis of 10 different companies in 7 industries. Among the many benefits reported, companies utilizing these best practices have reported first-year hard-dollar cost savings approaching $350 million, 97% increase in e-procurement spending to cut costs and 96% reduction in costs related to purchase-order processing.
Business Operations > Supply Chain Management d
Industries Profiled:
Energy; Computer Hardware; Manufacturing; High Tech; Medical Device; Telecommunications
Companies Profiled:
Allegheny Energy; Apple Computer; Cogentrix; Deere; Entergy; Halliburton; IBM; Medtronic; Mirant; Qualcomm
Study Snapshot
This Best Practices Benchmarking® Report profiles a highly-regarded group of companies that have proven procurement organizational excellence in place. These companies have not only demonstrated effective operating principles and winning strategies in procurement management, but they have also enabled their procurement organizations to contribute hard-dollar cost savings that positively affect bottom-line profitability.
By studying other organizations’ best practices in procurement management, your company can better understand how to allocate budget and staffing resources, as well as predict growth needs and improve technological capabilities.
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Key Findings
The procurement management research uncovered general trends affecting corporate and business unit procurement organizations across multiple industries. Best Practices, LLC was able to identify and profile many of the tactics and most effective practices embedded in these companies winning procurement management strategies. Survey data and best practices interviews reveal the following key lessons learned:
- Companies are shifting to centralization. Benchmark data indicates that companies are shifting to more centralized procurement functions to curb maverick spending and redundant efforts. Centralized procurement organizations can more easily leverage supplier relationships and facilitate bulk purchases to create economies of scale. Companies with a decentralized corporate culture can centralize some activities, such as drafting policies and setting overall cost reduction goals.
- Buyers are becoming portfolio managers. – As the Internet facilitates easier purchasing opportunities, buyers in corporate procurement roles are taking more control over the entire buying process. Self-serve procurement programs allow buyers to manage the whole supply chain for certain contracts, from order to delivery.
- Central procurement organizations help reduce staffing and budget needs. – In comparison with benchmark partners with decentralized procurement functions, centralized procurement organizations require smaller staffs and budgets to operate. The main reason is that in a decentralized company, each business unit is responsible for similar functions.
- Tracking upcoming projects helps predict procurement needs. – Benchmark companies overwhelmingly agree that the number one indicator to predict growth needs is the number of upcoming projects planned for the year. Once projects gain final approval, procurement organizations can set timetables with key purchasing dates.
- Coordinated Procurement Activities – Benchmark partners observe the critical importance of coordinating procurement activities under a common strategy to drive procurement success. Top companies establish procurement strategies, standards and regulations centrally to maintain company-wide procurement consistency.
- Business Partner Insights – Benchmark findings suggest that top organizations recognize that business unit needs are always changing. To offer just-in-time procurement assistance to the company, top corporate procurement organizations create open lines of communication with business unit leaders and procurement professionals.
- Procurement Leadership Skills – To understand and meet business needs, procurement professionals in top organizations have a set of key leadership skills. Benchmark partners observe the importance of identifying critical leadership skills and developing hiring and development plans to meet the company’s procurement needs.
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