A new article in Supply & Demand Chain Executive magazine warns that continued improvements in procurement processes can only be achieved on the basis of accurate data.
Noting that most companies have yet to upgrade their technological sophistication, the article emphasises that the resulting absence of accurate data analytics, from overall spend analytics to tail spend management solutions, is depriving them of the relevant, accurate information necessary for procurement process enhancement.
Four key steps are proposed, each of them dependent on solid, reliable data:
- Pinpointing where real-world processes deviate from the intended ones
- Identifying strengths and weaknesses in each process
- Defining what the processes ought to be and mapping the optimal pathways for change
- Creating accurate metrics to measure results
The data, however, not only needs to be accurate but also properly analysed if process improvements are to be realised.
Procurement teams embarking on these changes must consider areas such as control weaknesses, cost leakages and inefficiencies, and then create the metrics for measuring improvements in each.
Having the capacity to readily access internal data is crucial because best practices can only realistically be crafted from fact-based comparisons.
However, with such comparisons in place, significant cost reductions can be readily achieved by, for example, eliminating non-essential or duplicate steps in procurement processes.
Purchasing can then be consolidated, the supply base can be streamlined, and negotiations for best value improved.
‘Rewiring’ procurement processes to optimise them in these ways isn’t rocket science, but it is potent.
Outcomes to expect are improved cost reductions, less wasted time and effort, substantially better visibility into operations, and the ability to measure current outcomes against past results.
Creating accurate metrics is indispensable to this project because it enables a reliable process of comparison and benchmarking, both of which enhance insight and improve decision-making with accurate information.
With these measures in place, the article concludes, companies can “reliably improve both processes and procurement, two key factors that can make or break an enterprise”.