My previous blog entry about procurement commandments in a down economy also made me think about whether there are different priorities for the chief procurement officer (CPO) during prosperous economic times. Or, how different are (or should be) the CPO’s strategies in good versus bad times?
Well, the CPO’s fundamental objectives do not change: procure the physical goods and services needed by the company at the best possible mix of price and performance (non-price features). The focus can shift at times from operational streamlining to new product introduction (NPI) to supplier rationalization.
In lean times, however, there will be pressure to do even more with less, postpone large expenditures, and get additional concessions from suppliers (e.g., better shipping rates, rebates, discounts, or better payment terms, etc.). Amid all of this, the CPOs must provide high-quality service guidelines to their employees to encourage the proper use of systems and policies, and to reduce maverick purchasing practices.
Universal Supply (Chain) Issues
I could think of at least the following five key issues and challenges that in turn lead to tremendous opportunities to save money, time, and bolster the bottom line of companies of all size.
Issue #1 is excessive spending for direct and indirect goods and service
—i.e., more than a company should for it needs. The opportunity here is to reduce the company’s spending by minimizing maverick purchasing practices, reducing transaction costs, and leveraging the aggregated (collective) purchasing power of the enterprise to negotiate more favorable pricing, service, and contractual terms and conditions.
Issue #2 is a lack of visibility and accountability. Many companies are not exactly sure what they are currently spending their money on. The pertinent historical and snapshot data is lacking and is likely inaccessible. Questions like, “How much are we spending? With what suppliers? On what categories? Who is spending it? How long does the approval take? Are we within the budget? What suppliers are (or are not) fulfilling orders on time? Should we rationalize our supplier base? Are there spikes or trends in our spending patterns that require action?” and so on require constantly changing answers.
The opportunity here is for all managers and executives to monitor spending (via personalized interactive analytics and alert messages) by category, location, cost center, department, project, you name it. These metrics should be known/viewed as transactions are happening, instead of only after they are booked to the general ledger (GL).
One way to solve this conundrum could be via procurement data marts that provide prepackaged spend analysis over a few dozens metrics and dimensions for fast answers to the above questions. These answers should be based on fresh (real-time, or close to real-time) data rather than on “rearview mirror.” This hindsight speed-of-thought spend analysis should measure and optimize savings via packaged buyer analytics, key performance indicators (KPIs), and proactive control and supplier collaboration.
Well, the CPO’s fundamental objectives do not change: procure the physical goods and services needed by the company at the best possible mix of price and performance (non-price features). The focus can shift at times from operational streamlining to new product introduction (NPI) to supplier rationalization.
In lean times, however, there will be pressure to do even more with less, postpone large expenditures, and get additional concessions from suppliers (e.g., better shipping rates, rebates, discounts, or better payment terms, etc.). Amid all of this, the CPOs must provide high-quality service guidelines to their employees to encourage the proper use of systems and policies, and to reduce maverick purchasing practices.
Universal Supply (Chain) Issues
I could think of at least the following five key issues and challenges that in turn lead to tremendous opportunities to save money, time, and bolster the bottom line of companies of all size.
Issue #1 is excessive spending for direct and indirect goods and service
—i.e., more than a company should for it needs. The opportunity here is to reduce the company’s spending by minimizing maverick purchasing practices, reducing transaction costs, and leveraging the aggregated (collective) purchasing power of the enterprise to negotiate more favorable pricing, service, and contractual terms and conditions.
Issue #2 is a lack of visibility and accountability. Many companies are not exactly sure what they are currently spending their money on. The pertinent historical and snapshot data is lacking and is likely inaccessible. Questions like, “How much are we spending? With what suppliers? On what categories? Who is spending it? How long does the approval take? Are we within the budget? What suppliers are (or are not) fulfilling orders on time? Should we rationalize our supplier base? Are there spikes or trends in our spending patterns that require action?” and so on require constantly changing answers.
The opportunity here is for all managers and executives to monitor spending (via personalized interactive analytics and alert messages) by category, location, cost center, department, project, you name it. These metrics should be known/viewed as transactions are happening, instead of only after they are booked to the general ledger (GL).
One way to solve this conundrum could be via procurement data marts that provide prepackaged spend analysis over a few dozens metrics and dimensions for fast answers to the above questions. These answers should be based on fresh (real-time, or close to real-time) data rather than on “rearview mirror.” This hindsight speed-of-thought spend analysis should measure and optimize savings via packaged buyer analytics, key performance indicators (KPIs), and proactive control and supplier collaboration.
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