The recent international BrainNet/SAP survey shows that CPO’s of leading procurement organisations are faced with three central procurement challenges.
They are: 1. To create transparency; 2. To create value; and 3. To establish efficient risk management structures.
***This article is a continuation of last month’s ‘Beyond the Hype: The International Importance and Evolution of Procurement’ article ****
The first challenge is to ensure comprehensive transparency, wherein the central and decentral management of knowledge about markets, suppliers, processes and methods needs to be optimised. What’s more, a corporate-wide, uniform spend information base on commodity groups, suppliers and contracts also needs to be built up. Planning, budget and specifications will be of particular important in this context in future.
Secondly, procurement also needs to create value by establishing effective management of the product and process costs, spotting innovations and implementing them rapidly whilst also optimising the value chain management in order to determine the perfect real net output ratio.
The third challenge is that of risk management. This management type has the task of safeguarding the competitive environment and guaranteeing the security of supply. It also implicates the identification and control of risks in terms of suppliers, commodity groups and regions within global markets. But, it also relates to sourcing governance and compliance. Here, procurement must thus ensure the observation of processes, policies and contracts.
Figure 1: Procurement Excellence Evolution Curve (BrainNet/SAP).
These three central challenges (as displayed in Figure 1) clearly illustrate that it is not possible to survive the global competition simply by squeezing the same lemon over and over again. It is time to recognise that issues like Procure2pay, RfX or catalog management show a high adoption rate and maturity and so cannot constitute strategic advantages. Moreover, it is essential to focus resources and attention on the procurement processes that will permanently shape the development of the market in the next few years; risk, knowledge, supplier and internal client management are emerging issues.
What is /needs to come next?
The overall results of the study illustrate that the face of procurement is changing in a fundamental way. This change is partly a result of changed framework conditions: tougher global competition, rapidly accelerating complexity and new legal regulations are making their mark on the industry. In addition, there is a growing awareness of the need to focus on the processes that have a strong business impact, and are primarily in a developmental stage that still permits significant increases in efficiency and competitive advantages.
Figure 2: Future Procurement trends (BrainNet/SAP).
While managing costs remains the most important priority of supplier relationship management (SRM), many procurement professionals are now beginning to see an evolution, a sophisticated blending of procurement into top-line growth.
As a result, the future lies within a company’s ability to integrate SRM with its other enterprise systems. It is therefore essential to integrate procurement with business processes upstream, into obvious areas such as R&D (where up to 80% of procurement costs are determined) and budgeting, but also into less obvious areas, such as marketing or contracting.
By wielding SRM to secure stakeholder collaboration and integrate procurement with cross-organisational business processes, procurement teams can evolve from cost cutters to top-line influencers.