Procurement is a core function in every single company. Whether purchasing goods or services to support the company’s product offering or purchasing goods or services to support the infrastructure and operation of the company, Procurement is key and featuring our best Procurement articles is more than appropriate.
Depending on the type of industry you are in the Procurement of goods and or services can be the largest, or one of the largest, expense areas. As such the ability to efficiently procure goods to meet all objectives of cost, delivery, quality, and more is essential for not only success, but for survival.
In this “Featuring” series article we are putting the spotlight on Procurement and Purchasing. We are presenting our Top 12 best Procurement articles with information, techniques and approaches which will have something for everyone to learn from and apply in their own situation.
1. What Exactly is Procurement? And What is Purchasing?
It is most important to start this article with a conversation about definitions. Many people use the terms Procurement and Purchasing synonymously, but others consider that they have very different meanings.
Let’s take a step back and try to provide clarity around this basic issue, which will define the platform for all future reference.
2. Manage Procurement Spend Like It’s Your Own Business!
Because the size of expenditure managed by Procurement is so large it is no longer sufficient that it is just operated as a back office function. It is more than just the organization that finds suppliers, negotiates contracts and sends purchase orders.
Procurement professionals must treat their spend like it is their own business in its own right. This means more than just trying to negotiate the lowest cost. It means managing the entire scope of the relationship and all facets of the interaction between suppliers, internal operations and customers.
3. Strategic Supplier Relationship Management – Do’s and Don’ts!
Suppliers must be managed on more than just a transactional basis. Every company and every supplier has a co-dependency for their mutual success. And failure to manage at this level will lead to dissatisfaction of one or both parties.
The strategic management of supplier relationships is central to any successful Procurement strategy. But there are many considerations in managing these relationships, both positive and negative.
In this article we cover the top “Do’s” and “Don’ts” as lessons for everyone to build into their supplier relationship management strategy.
4. What’s the Difference Between Commodity Management and Category Management?
While there is a distinction between Procurement and Purchasing within that arena there is also a distinction between organization design and responsibilities. This manifests itself in industry terminology as “Commodity Management” and “Category Management”.
In our experience both Commodity and Category management involve aspects of Procurement and Purchasing activities. But the terms also entail different responsibilities depending on which industry, and which company, may be employing these titles.
5. Supplier Relationships – Don’t Go Over to the Dark Side!
The very core of Procurement’s responsibility involves the control of sourcing decisions and the direction of expenditures. As such this amount of power and control of money can prove to be a temptation too great for those with corrupt intentions.
Maintaining ethical and lawful behaviour is absolutely essential in any professional organization. In this article we discuss the unwavering necessity for above board conduct in every single Procurement interaction with Suppliers.
We also cover this line of discussion in our article Procurement Outsourcing – Keep Your Integrity!
6. Procurement: The Spend Aggregation Obstacle Course!
One of the core tenets of being able to negotiate effectively is the ability to exercise spend leverage. But there are many forces both within and outside of a company which can make the aggregation of spend, for the purpose of creating spend leverage, extremely difficult.
Preventing rogue spending is absolutely essential for spend aggregation. In this article we touch upon the issues that need to be understood and overcome. And in the companion article, “Procurement: How to Enable Spend Aggregation” we discuss how to overcome these obstacles.
7. Commodity (or Category) Management – What is Your Buying Strategy?
Procurement, and Purchasing, when properly conducted is much more than just purchase order placement. Anybody can call a supplier, get a price, create a purchase order, and send it in.
But it takes a real professional to develop a complete and robust strategy defining all aspects of including market analysis and dynamics, the supplier landscape, commodity demands, capability requirements, relationship plans and more. A strategy defines the framework upon which all subsequent sourcing decisions will be made.
8. Indirect Procurement – It’s Time to Rise and Shine!
While the procurement of goods and services directly related to the cost of goods sold for a company usually gets the most attention an equally important area is Indirect Procurement.
No company can function without a strong Indirect Procurement team. They cover travel, supplies, I/T, MRO, utilities, equipment, services, facilities, capital, etc. This can effect every aspect of the operation of any company and it’s time for Indirect Procurement to be recognized for the great job that they perform.
9. When the Elephant in the Room is Your Supplier!
It’s one thing to be great at Procurement when your company is larger than your Suppliers. But it’s quite another thing altogether when your Supplier is larger than your company.
The Supplier is often able to decide who they want to sell their product too. And if their products are unique and in high demand they can command the terms they want for their products.
It takes a savvy professional to navigate this type of situation and bring all of their skills to bear to create successful outcomes.
10. Supplier Collaboration is a Win-Win Strategy!
There are those who think of suppliers as being adversaries and unavoidable parties to do business with. They want to beat suppliers into submission to get the terms that they want at any expense without consideration for the suppliers at all. Those people are missing out on the full value that they could be getting out of those relationships. And they are suffering for it.
But enlightened professionals know that creating a win-win relationship with Suppliers will drive the best possible outcomes. If you can help your Suppliers be successful they will in turn help you to be successful. You will achieve greater results working together than working against each other.
11. Outsourcing Sourcing! 5 Lessons From Around the Globe!
Increasingly companies, especially small to mid-sized firms, will be considering whether it makes sense to conduct Procurement internally or outsource it. There is a very real invest required in resources, skills, systems, tools and technology.
This can be out of reach for a lot of companies and as they consider Supply Chain as a Service (SCaaS) they should learn the lessons of outsourcing to ensure that they have a healthy relationship with their outsourced partner.
12. Hey Procurement! It’s Time to SELL!
Our final Procurement article relates to the perceived versus actual value of Procurement. Historically it has been viewed as a much maligned back office function placing purchase orders and dealing with pesky suppliers.
The reality is that Procurement is not only the backbone of any successful company but it is central to the development and deployment of strategies that will propel a company forward in the future.
It’s time to recognize the value both inside and outside of that organization. Procurement, while designed to buy, must now sell the value that it provides to the rest of their organization.