The Benefits of Strategic Business Procurement
By Editorial Staff
Supply
& Demand Chain Executive
New white paper suggests it can actually increase profits and quality
New York — September 29, 2003 — Procurement
of goods and services supporting a company's internal operations,
such as temporary help, travel or maintenance, involve expenditures
that are often poorly managed.
Not only are millions of dollars spent needlessly,
but the quality of what's purchased is frequently sub-par, according
to a white paper titled "World-Class Procurement: Increasing
Profitability & Quality," recently published by Geller
& Co., a finance, accounting, procurement and tax outsourcing
firm.
The white paper points out that strategic procurement
is not a one time activity — it's a continuous and interrelated
process with three essential functions: expenditure analysis, strategic
sourcing and agreement management. Properly implemented, the first
two processes form the basis for identifying and creating value,
while the third ensures that value is maintained over time.
The processes are:
| • |
Expenditure analysis
performs a "deep dive" into the reality of expenditures
— to whom, for what and why. It enables a company to
extract value by developing strategies around each category
of spend. Such an analysis looks beyond dollar savings and
into potential impacts across the entire supply chain including
quality and service of goods and services purchased. |
| • |
Strategic sourcing
can help maximize the value derived from procurement by going
beyond the traditional focus on lowest price. It brings into
play a variety of tools and strategies such as catalogs, reverse
auctions, forward buying, commitments, market inventories
and supplier requirements in different operational combinations
to achieve maximum client value. It also includes ongoing
analysis of a broad range of pricing, quality and market data
such as supplier relationships, capabilities, status and technologies. |
| • |
Finally, agreement
management involves both external and internal actions. Externally,
it means managing suppliers to ensure that their performance
meets or exceeds contractual commitments. Internally, it means
monitoring compliance within the organization to ensure that
procurement benefits are fully realized. Without rigorous
agreement management, nearly 75 percent of savings gained
from strategic sourcing can disappear within 18 months. |
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