How Procurement Adds Value Beyond Cost Savings
With C-suites and boards focused on maximizing shareholder value, many CFOs are optimizing business processes across all functions. This includes procurement, as finance chiefs focus on improving their company’s operating performance.
The procurement function typically has wide-ranging interactions across an entire organization. As such, many progressive CFOs are partnering with procurement professionals to help achieve the company’s profitability and cost-saving goals.
Best-in-class sourcing teams realized savings of nearly 13% over their peers, accord-ing to Aberdeen Group’s research, Supplier Performance: The Best-in-Class Approach to Drive Performance. However, nearly two-thirds (65%) of chief procure-ment officers (CPOs) give the procurement function mixed reviews as effective strategic business partners, according to The Deloitte CPO Global Survey 2016.
Streamlining the procurement process can yield significant results — es-pecially when it comes to tasks such as updating annual vendor qual-ifications, adding new suppliers, standardizing contracts, simplifying requisitions, and speeding the entire request-for-quote-to-procure cycle.
However, procurement processes have to be evaluated with the best outcome as the goal. In some circumstances, the vendor with the lowest price, or who responds most quickly, is not always the optimal choice. Add in social and political issues that are unique to the supply chain, and procurement decisions have become more complex. Purchasing is tactical, while procurement is strategic.
One challenge facing finance chiefs is that the procurement process has not been vertically integrated, making it difficult to get a handle on all of the activities surrounding purchasing. There are also issues such as safety of the supply chain and international trade agreements that im-pact procurement performance. But its lack of integration can make the procurement function fertile ground for a cloud based solution.
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